Closing the Loophole: The Foreign Extortion Prevention Act

By Omer Er

On December 14, 2023, a significant stride was made in the battle against global corruption when the U.S. Congress passed the Foreign Extortion Prevention Act (FEPA). This landmark legislation addresses a critical gap that has long existed within the framework of the U.S. Foreign Corrupt Practices Act (FCPA).

The FCPA, a cornerstone in the fight against corruption, prohibited U.S. companies and individuals from engaging in the act of offering bribes to foreign officials. Despite its broad scope, a glaring omission was evident: it did not tackle the demand side of bribery, leaving a loophole that could be exploited. This contrasts sharply with the anti-corruption laws of other nations such as the UK, France, Germany, and Switzerland, which address both sides of the bribery equation.

FEPA has now boldly stepped in to criminalize the demand side of bribery, marking a watershed moment in legal and ethical standards for international business operations.

The Jurisdictional Reach of FEPA

FEPA extends its jurisdictional arm to cover bribery demands made by foreign officials directly to issuers of U.S. securities, U.S. domestic concerns, or any person on U.S. soil. These demands could be in exchange for any act or omission in their official capacity that confers a business-related benefit. This broad reach ensures that FEPA has the muscle to tackle corruption head-on, regardless of where it occurs.

Who Counts as a Foreign Official?

Under FEPA, the definition of a 'foreign official' is both detailed and expansive, building on the foundation laid by the FCPA. It includes not just officials of foreign governments and public international organizations, but also individuals acting in any official capacity on their behalf. Furthermore, it encompasses senior foreign political figures, their family members, executives of government-owned businesses, and even those acting unofficially for or on behalf of foreign entities. Despite certain challenges due to diplomatic and other immunities, this broad definition is a crucial tool in the U.S. prosecutors' arsenal, allowing them to address a wide range of corrupt practices.

The Consequences of Violating FEPA

The stakes for violating FEPA are high, with the law imposing severe penalties. Individuals found guilty of breaching its provisions face up to 15 years in prison, alongside a hefty fine that could reach $250,000 or three times the value of the bribe involved. These stringent consequences underscore the U.S. government’s fight against international corruption.

Implications for Businesses

The enactment of FEPA signifies a clear commitment to combating international corruption. This development necessitates that companies revisit and, if necessary, update their FCPA compliance programs to align with the new legal landscape. It is imperative that businesses educate their employees about FEPA’s provisions to ensure full compliance and avoid the severe repercussions of law breaches.

A New Chapter in the Fight Against Corruption

FEPA represents a bold step forward in the global fight against corruption. By closing a critical loophole in existing legislation, it strengthens the hand of those working to maintain integrity in international business practices and foster a corruption-free world.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.