Despite the pause in FCPA enforcement, risks of bribery and corruption still persist

Amidst the recent executive order signed by President Donald Trump pausing Foreign Corrupt Practices Act (FCPA) actions for 180 days, there are key implications and considerations that companies and financial institutions must scrutinize. The order, directed at corporate enforcement, aims to prioritize American interests, economic competitiveness, and effective law enforcement resource allocation. However, this directive does not extend to individual prosecutions or the enforcement of the Foreign Extortion Prevention Act.

The White House asserts that the aim of the executive order is to address perceived excessive and unpredictable FCPA enforcement that allegedly puts American companies at a competitive disadvantage compared to international counterparts. This move comes after an attorney general memorandum instructing the DOJ Criminal Division’s FCPA Unit to concentrate on investigations related to foreign bribery facilitating the operations of cartels and transnational criminal activities while shifting focus away from other cases.

During this enforcement pause, ongoing investigations will be halted as the DOJ conducts a review of past and current actions awaiting guidance on FCPA matters from the attorney general. Companies must navigate the implications of continued cooperation with the DOJ and consider adjustments to their strategies concerning disclosures during this interim period.

The shift in DOJ priorities could potentially deter whistleblower reports on bribery issues to the department, leading whistleblowers to approach alternative U.S. or non-U.S. authorities or media outlets instead. While the SEC is unaffected by the order and can continue FCPA enforcement, there may be shifts in priorities, resourcing, and the pace of enforcement in the short term.

Post the attorney general’s deliberation and guidance, DOJ FCPA enforcement may resume with a focus on non-U.S. companies, particularly those linked to cartels or transnational criminal activities. Both the DOJ and SEC may utilize securities or wire fraud statutes to pursue foreign companies involved in bribery seeking access to U.S. capital markets or investors. It is essential for companies to evaluate varying enforcement climates in the jurisdictions where they operate and adapt risk assessments accordingly.

Despite the pause in FCPA actions, companies and financial institutions must remain attentive to the existing five-year statute of limitations on FCPA cases, which can be extended for a total of eight years while awaiting evidence from foreign authorities. Concerns about corruption, anti-bribery laws, and corporate enforcement mechanisms persist globally and ought to be a focal point for organizations. Compliance remains crucial as reputational damage and potential civil claims by competitors, shareholders, or third parties continue to pose risks to multinational entities.