19-minute listen
Daniel Wendt, a member at Miller & Chevalier, came on RiskWatch to discuss the new Foreign Extortion Prevention Act (FEPA), which President Biden signed into law in December 2023. FEPA was designed to prevent extortion by foreign officials and criminalizes the act of foreign officials demanding bribes, addressing a potential gap in the Foreign Corrupt Practices Act (FCPA). Below is a summary of our discussion.
Background to FEPA
FEPA resulted from years of concern that a gap existed within the Foreign Corrupt Practices Act (FCPA) that limited the ability to go after foreign corrupt officials. Historically, FCPA focused on the ‘supply side’ of bribery (the people who pay the bribes) v. the ‘demand side’ (the people demanding the bribe) that FEPA aims to address. The gap within FCPA was intentional when it came into law out of fears that a provision to pursue foreign officials and those within their sphere of influence would overly complicate the Department of Justice’s ability to enforce FCPA actions. In the 1970s, when FCPA was passed, the government thought that the ‘demand side’ of bribery was something other countries were best suited to handle. However, since the FCPA’s enactment, it has become clear that many countries do not enforce and do not want to enforce the ‘demand-side.’ With the introduction of FEPA, foreign officials and those in their circle are no longer off-limits.
A Broader Definition of ‘Foreign Official’
While there is a lot of overlap between the FEPA and the FCPA, some essential distinctions include how the FEPA has a broader definition of who constitutes a foreign official under the prosecution statute. In addition to applying to foreign officials who would historically be prosecuted under the FCPA, FEPA also considers foreign officials to be individuals who would fall under those individuals’ circle of influence. The reasoning is that in many instances of corruption, the foreign official will attempt to shield themselves by going through an intermediary such as a close relative, immediate family members, or a close associate acting as a surrogate to facilitate bribery. This broader definition of who can be prosecuted under FEPA means that these surrogates are now subject to prosecution in the US if they travel to a country that extradites to the US.
Enhanced Due Diligence for FEPA
While introducing new aspects, FEPA does not significantly alter the risk mitigation strategies that companies have been employing to address the FCPA. This includes the enhanced due diligence they conduct on high-risk third parties. However, FEPA does shed light on potential risks that companies may face if their due diligence uncovers surrogates or family members potentially acting on behalf of government officials. This awareness can help companies strengthen their risk mitigation efforts and ensure compliance with FEPA.
Here is a link to a recent alert Miller & Chevalier published on FEPA, as well as to Daniel Wendt’s bio and contact information.
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