19-minute listen
Daniel Wendt, a member at Miller & Chevalier, came on RiskWatch to discuss the new Foreign Extortion Prevention Act (FEPA) that was signed into law by President Biden 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 was the result of years of concern that a gap existed within the Foreign Corrupt Practices Act (FCPA) that limited the ability to go after foreign corrupt officials. The FCPA historically has been 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 the 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 the FCPA was passed, the government’s thinking was that the ‘demand-side’ of bribery is something that other countries were best suited to handle. However, with the passage of time 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 FEPA and the FCPA, there are some important distinctions, one of which is how FEPA has a broader definition of who constitutes a foreign official under the statute of prosecution. 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 behind this 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 and more expansive 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
FEPA should not significantly change what companies have been doing to mitigate their third-party risk regarding the FCPA, including any enhanced due diligence they conduct on high-risk third parties. However, FEPA does help bring into focus the potential risks a company faces if enhanced due diligence uncovers surrogates or family members potentially acting on behalf of government officials.
Here is a link to a recent alert that Miller & Chevalier published on FEPA as well as a link to Daniel’s bio and contact information.
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