The New FCPA Era Arrives

Well, the Justice Department has published its much-anticipated guidelines for future enforcement of the Foreign Corrupt Practices Act — and honestly, they’re a bit anticlimactic. Nothing in the new policies should surprise anyone who’s been paying attention, and nothing in them should change your compliance program all that much.

The policy changes came in two announcements. First, deputy attorney general Todd Blanche released a four-page memo he sent to the department’s Criminal Division, outlining how Blanche wants prosecutors to pursue FCPA cases in the future. The head of the Criminal Division, Matthew Galeotti, then expounded on those new enforcement priorities in a speech he gave Tuesday at an anti-corruption compliance conference in New York. 

Let’s start with Blanche’s memo. It lists three factors that prosecutors will now consider as they decide whether to pursue an FCPA violation:

• Whether the violation somehow involves drug cartels and other transnational criminal organizations;
• Whether prosecution will help to “safeguard fair opportunities for U.S. companies;” 
• Whether prosecution will help to advance U.S. national security interests. 

OK, fair enough, but let’s not lose sight of the enforcement forest through the factorial trees here. The Trump Administration wants fewer FCPA enforcement actions, and actions that can be resolved more quickly and with less disruption to companies. Blanche can dress up that goal in however many factors he wants; the goal is still less enforcement with easy-peasy consequences for corporations. 

The more telling quote from his memo might be this: 

Effective today, prosecutors shall focus on cases in which individuals have engaged in criminal misconduct and not attribute nonspecific malfeasance to corporate structures; proceed as expeditiously as possible in their investigations; and consider collateral consequences, such as the potential disruption to lawful business and the impact on a company’s employees throughout an investigation, not only at the resolution phase. 

That sounds like a Justice Department ready to go far easier on FCPA enforcement than we’ve seen in the last 20 years. Always keep that context in mind no matter how much we take a closer read of Blanche’s specific enforcement criteria. 

The Specific FCPA Enforcement Criteria

The most interesting line in Blanche’s memo is where he says FCPA enforcement will work to “safeguard fair opportunities for U.S. companies” — except, it’s interesting because it’s ambiguous. 

On one hand, Blanche gives a great description of the pernicious effect that bribery and corruption can have on countries and companies alike:

In addition to distorting markets and undermining the rule of law, companies that bribe foreign officials to obtain business can put their law-abiding competitors, including U.S. companies, at a serious economic disadvantage. By bribing foreign officials to obtain lucrative contracts and illicit profits … corrupt competitors skew markets and disadvantage law-abiding U.S. companies and others for many years. 

Terrific statement; I support it entirely. But how will the department apply that standard in practice? 

For example, people could interpret those words to mean that prosecutors will target foreign companies bribing their way to success in overseas markets, and therefore boxing out U.S. competitors. 

Blanche’s memo expressly says that’s a wrong reading of things: “The department’s FCPA enforcement will seek to vindicate these interests not by focusing on particular individuals or companies on the basis of their nationality, but by identifying and prioritizing the investigation and prosecution of conduct that most undermines these principles.”

So does that mean that if an American company bribes its way to success in a foreign market, boxing out other American companies from an equal shot at success, the department would pursue enforcement? Logically one would assume the answer is yes; I’m just hard-pressed to believe Blanche and his lieutenants in the Criminal Division will take such enforcement in practice. 

I say that because another section of the Blanche Memo talks about national security interests. When President Trump announced the FCPA pause back in February, his executive order specifically mentioned “companies gaining strategic business advantages whether in critical minerals, deep-water ports, or other key infrastructure or assets.” So how does that priority intersect with safeguarding fair opportunities for U.S. companies? 

For example, does it mean the Justice Department will pursue any FCPA enforcement in those sectors, or only pursue enforcement when foreign companies are the offenders? 

The Blanche Memo says this on the subject:

When this corruption occurs in sectors like defense, intelligence, or critical infrastructure, American national security interests may be harmed. FCPA enforcement will therefore focus on the most urgent threats to U.S. national security resulting from the bribery of corrupt foreign officials involving key infrastructure or assets. 

Again, that’s ambiguous. One could interpret it as a signal that the department won’t pursue U.S. companies engaging in corruption in those sectors, such as to win mineral extraction rights in the Congo or to secure development rights for a strategically important canal. But that corrupt U.S. company is then denying fair opportunities to other U.S. (and foreign) companies — so what happens then? 

Then again, I suppose that ambiguity is the goal, because it leaves more power in the hands of Blanche and other Justice Department officials to pursue enforcement targets as they (and Trump) see fit.

The Compliance Program Response

OK, so the Blanche Memo signals a retreat from FCPA enforcement. What does that mean for corporate compliance officers at large enterprises and the compliance programs you run? 

As I’ve said before, perhaps not much. Even if the threat of FCPA enforcement is reduced (and clearly it is), that doesn’t mean your company can now embrace corruption with abandon and send you into the layoff line.

First, the statute of limitations for the FCPA is long, and extends well beyond the end of the Trump Administration in 2029. Violations some rogue employee commits today could well cost you a fortune sometime in the 2030s. 

Second, no sane executive wants corruption coursing through his or her enterprise anyway. If your internal controls are weak enough to allow unchecked bribery, they’re probably also weak enough to allow embezzlement, sanctions violations, or lord knows what else. Whether the issue is a business risk (like embezzlement) or some other regulatory enforcement headache (like sanctions or corruption violations enforced by some other country), a competent and serious management team will still want an effective compliance program to combat those threats. 

Both of those things were true before Trump 2.0 arrived. They are still true now, and will continue to be true after Trump 2.0 is gone.

Will the Blanche Memo change how your company interacts with the Justice Department, especially in conjunction with the other new enforcement priorities announced by Galeotti at the Criminal Division not long ago? Yes, absolutely — but that’s “outbound” FCPA compliance, after you already identify a violation that needs attention, and more a matter for outside counsel and the legal team. That’s different from the “internal” compliance behaviors you want from employees and third parties, which depend on an effective compliance program.

More to come in future posts, but let’s keep our eye on the ball that matters.