New Trump Take on Anti-Bribery Rules Eases Low-Dollar Scrutiny

As the Trump administration shifts the focus of its foreign bribery enforcement, white-collar defense attorneys are telling clients to spend more time vetting vendors, and less time fretting over entertainment expenses.

Trump froze enforcement of the Foreign Corrupt Practices Act, a 1977 law, in February. The Department of Justice said in a memo last week it was restarting FCPA cases, but with different priorities: It’s looking at cases involving national security interests, payments to cartels, and foreign companies that disadvantage their US competitors through bribery. A spotlight is on businesses operating in Latin America and industries like critical minerals, intelligence, and defense—with less attention elsewhere.

Off the DOJ’s radar, for now, is what the administration described as “routine business practices” involving low-dollar transactions. And foreign companies will likely get far more attention than US ones.

Lawyers are urging their clients to turn more resources to scrutinizing vendors, a move from how companies traditionally complied: through close audits of their entertainment expenses.

“Many companies spend, I would say, a disproportionate amount of their time and compliance dollars focusing on gifts, travel and hospitality, and not sufficient time looking at some of these big transactions or a third party where there is a potential risk for significant corruption,” said Nathaniel Edmonds, a partner at DLA Piper and former DOJ prosecutor who focused on FCPA. “It takes a lot of steak dinners to get to a million-dollar technical adviser who may not be providing work.”

Staffing cuts at the Justice Department—about 4,500 employees have accepted the Trump administration’s offer for a deferred resignation, according to new budget documents—mean FCPA attorneys are also expecting fewer enforcement cases. But lawyers warned that dropping corporate anti-bribery programs would be foolish, even for US companies that appear to be well outside the new enforcement targets: The law has a five-year statute of limitations. Other governments could crack down on bribery. And paying bribes gets expensive.

Seeking Cartel Connections

The June 9 DOJ memo said it aimed to limit “undue burdens” on US companies operating abroad, and to target enforcement against “conduct that directly undermines US national interests.” The memo also described links to cartels as a “primary consideration” in the department’s decision to pursue an FCPA investigation.

While the statute targets bribery payments to foreign officials, FCPA can be used to go after payments to transnational criminal organizations and drug cartels if prosecutors view the cartel as acting in the place of a government, or if it’s a middleman in a payment to a government official, Edmonds said.

Companies doing business in regions the administration is focused on, like Latin America, “really have to look at the ties to their counter-parties, and what kinds of payments they’re making,” said Stephanie Yonekura, global head of the investigations, white collar and fraud practice at Hogan Lovells.

For example, businesses can run into FCPA trouble for paying protection fees to a cartel to ensure safe passage to trucks driving through a particular area, she said.

If a client knows a payment is going to a cartel, Yonekura said, the lawyer’s advice will likely be, “Don’t do it.” But untangling a payment’s tie to a cartel will likely be trickier, she added.

Lawyers advise clients to carefully document the services they’re getting in exchange for payments to lower FCPA risk.

The DOJ also said it will focus on sectors the administration sees as crucial to national security, including critical minerals, deep-water ports, infrastructure, defense, and intelligence.

Companies doing work adjacent to those industries should be alert, Edmonds said. That includes, for example, construction or concrete companies involved in building projects for ports, or chip technology companies linked to intelligence.

Overlooking Gifts, Dinners

The DOJ said it won’t focus on misconduct that involves “routine business practices” and “generally accepted business courtesies” for low-dollar amounts that weren’t specified.

That “routine” category could encompass payments for work visas, and speeding up sanitation or building permits, Yonekura said.

Routine business practice is “not a term of art in FCPA,” said Rachel Brewster, a Duke University School of Law professor who writes about international corruption. “It might be routine in some of these countries, but it is not legal to bribe.”

Attorneys are also expecting the DOJ to pay less attention to entertainment costs, particularly at US companies.

“In the past, entertainment and gifts have been a key driver as it relates to FCPA enforcement,” Yonekura said. But those expenses probably fall under the low-value or routine expenses the DOJ said it wouldn’t prioritize, she said.

Chief compliance officers and general counsel will look to redirect resources, Edmonds said. Instead of an internal audit team checking meal receipts, for example, it will audit the finances of third-party vendors, looking for payments to officials or links to cartels.

Companies may look to back off FCPA compliance in the wake of the memo—but Yonekura urged them to keep safeguards in place, even if they’re not auditing lower-risk expenses as closely.

“I think there will be some pressure on compliance officers to loosen the controls on gifts, travel, and entertainment,” said James Tillen, practice co-lead for FCPA and international anti-corruption at Miller & Chevalier.

“That comes with some risks,” he added, including potentially violating domestic anti-corruption laws in that country and running up higher entertainment costs.

The law’s statute of limitations also means anything a company does today could be prosecuted under the next administration. And with the US backing off enforcement, California Attorney General Rob Bonta (D) and some foreign countries have said they’ll step up.

Meanwhile, uncertainty around what’s considered legal under the new guidance—including what constitutes “low-dollar” or “routine"—is “a huge challenge for companies,” Tillen said.

“On its face, it may seem like an olive branch, or something business-friendly,” he said. “But without more specificity, it is still a judgment call by these companies.”