The FEPA: Taking US’ Anti-Corruption to the Next Level?

The US Foreign Corrupt Practices Act, together with the UK Bribery Act (UKBA) and the French Sapin II, are probably the most well known anti-corruption laws in the world. Interesting about the FCPA is that, although its enforcement reaches far outside of US boarders, the scope itself is rather limited. With the new Foreign Extortion Prevention Act the United States significantly ups their anti-corruption game by expanding their anti-corruption scope to also include the demand side of bribery.

On 14 December 2023, the US Congress passed a landmark anti-corruption law: the Foreign Extortion Prevention Act (FEPA). The FEPA prohibits foreign officials to demand or accept a bribe from an United States individual or company, or from any person while in the territory of the United Sates. This applies to bribes in connection with obtaining or retaining business. The FEPA complements the current US anti-corruption law: the Foreign Corrupt Practices Act (FCPA), which targets US individuals and businesses, instead of foreign officials. Business in this case is a very broad term and for example also includes entities from other countries with a US nexus. We will go into a bit more detail, but first some background on the FEPA.

Scott Greytak (Director of Advocacy for Transparency International US) stated the following on the FEPA: “It is arguably the most sweeping and consequential foreign bribery law in nearly half a century“.

Tackling the Demand Side of Bribery

The FEPA is part of the annual defense spending bill, known as the National Defense Authorization Act (NDAA). The NDAA is a federal law that specifies the budget, expenditures, and (foreign) policies of the US Department of Defense. Passed annually, the NDAA is important in determining military and defense funding. Furthermore, it provides guidance for foreign policy issues such as corruption. The FEPA is expected to be signed into law by Biden, as it aligns with the Biden Administration’s emphasis on making anti-corruption enforcement a matter of national security and to work with United States Congress to criminalise the “demand side” of foreign bribery.

Targeting the “demand side” is nothing new. In 2018, the Organisation for Economic Co-operation and Development (OECD) published a report “Foreign Bribery Enforcement. What Happens to the Public Officials on the Receiving End?“. The OECD explored the extent to which public officials in foreign countries, who are on the receiving end of bribery, are actually held accountable. The research included 55 cases between 2008 and 2013. The report reveals that while investigations occurred in 30 of the demand-side countries, only about 20% resulted in sanctions against the officials. The report further highlights a slow information flow with substantial delays between ‘supply-side sanctions’ and ‘demand-side awareness’. It also points out that the media plays a significant role in detection, and that sanctioning officials comes with the same challenges as in prosecuting bribers, such as insufficient evidence or statutes of limitations. Finally, the OECD suggests that more needs to be done to hold public officials accountable for bribery and that given disciplinary actions under administrative law are rare, the focus should be on criminal law for anti-corruption efforts.

With the passing of the FEPA, the United States becomes more aligned with existing anti-corruption laws of the UK, France and other European countries.

FEPA Complementing the FCPA

As noted before, the FCPA (in short) makes it unlawful for certain US persons and entities to make ‘payments’ to foreign government officials to assist in obtaining or retaining business. This means that the FCPA only targets so called ‘active bribery’ and seeks it rather close to home as the individuals and entities need to have a certain link to the US, i.e., a US nexus. The FEPA will establish a new federal criminal offense in terms similar to the FCPA’s anti-bribery provisions. However, the FEPA has an almost contrary approach as it targets the foreign recipient, more specifically the foreign official (to be). See below a snippet of the text of the FEPA. With this, the FEPA complements the existing FCPA and further strengthens the US’ capabilities to fight corruption.

Considering this paragraph, there are a few things that stand out. First of all, the FEPA is not only applicable to foreign officials, but also to individuals who are ‘selected to be’ an official. From a corruption-perspective, this is a strategic and proactive approach. It helps with prevention, setting high ethical standards and maintaining the integrity of public office as well as reinforcing international anti-corruption efforts. After all, it discourages those with corrupt intentions from pursuing positions of power. Furthermore, the scope of the term ‘foreign official’ is rather broad. The FCPA only covers individuals acting in an official capacity for, or on behalf of, a government, department, agency, or instrumentality (..), while the FEPA also covers individuals acting in an unofficial capacity for such agencies or entities. This means that even if an official’s corrupt activity is not directly tied to their official duties or position, it could still fall under the purview of FEPA.

The foreign officials found liable under the FEPA can face a fine of up to USD 250.000, or three times the equivalent of the bribe (whichever amount is larger). Furthermore, they could receive a prison sentence of up to 15 years. 

The Bigger Picture

Although we agree that also targeting the ‘demand side’ of bribery is a positive step, it is to be seen how the FEPA will be enforced in practice to define its impact. For example looking at a similar anti-corruption law covering corrupt public officials like the UKBA, the Serious Fraud Office barely targets public officials. The same applies to the enforcement of the Sapin II and the Dutch Penal Code.

It’s understandable that enforcing laws like the FCPA, Sapin II (and also in the future the FEPA) is challenging, given a few practical challenges. Firstly, gathering evidence of bribery is complex, as it often involves covert dealings, making it difficult to find a ‘smoking gun’. This is also the reason why in many FCPA cases, organisations are fined for accounting violations rather than direct bribery. Secondly, legal jurisdiction issues arise when dealing with foreign officials, complicating the legal process. Thirdly, the absence of extradition treaties with certain countries can hinder the pursuit of foreign officials involved in bribery. Finally, diplomatic and political considerations may also impede legal actions, as prosecuting foreign officials could strain international relations. These factors collectively contribute to the challenges prosecutors face in targeting foreign officials for bribery.

Regardless of the before mentioned obstacles, the FEPA is indeed a significant development in anti-corruption. As noted in our earlier article on the Monaco Memo, corporate crime enforcement is changing. The passing of the FEPA shows how, in this case the US, is upholding more parties to higher values. US corruption enforcement not longer limits its impact to individuals and companies paying bribes, but is also tackling the demand side. We believe this is a positive development as corruption is a two-way-street. If those with corrupt intentions are being discouraged from pursuing positions of power and the companies’ trade-offs to bribe are becoming more negative, we might be able to take a stand against corruption.

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