Understanding the Foreign Corrupt Practices Act and Trump’s Pause on Enforcement
The Foreign Corrupt Practices Act (FCPA), a cornerstone of U.S. anti-corruption laws since its enactment in 1977, has been a focal point of debate under President Trump’s administration. The law prohibits companies operating in the U.S. from bribing foreign officials to secure business deals. In a significant move, President Trump has paused the enforcement of this law for 180 days, directing federal prosecutors to halt new investigations and enforcement actions. This pause also mandates a review of existing cases to "restore proper bounds" on the law, which is enforced by both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). While criminal penalties under the FCPA include hefty fines and prison time for individuals, it remains unclear how this pause will affect the SEC’s civil actions, which often run parallel to criminal investigations. This decision has sparked a mix of reactions, ranging from criticism over potential increased corruption to support for leveling the global business playing field.
Why Trump is Pausing Enforcement of the FCPA
President Trump’s decision to pause enforcement of the FCPA is rooted in his long-standing criticism of the law, which he and the business community argue puts American companies at a competitive disadvantage. The White House has asserted that U.S. businesses are harmed by "overenforcement" of the law, as they are prohibited from engaging in practices that are commonplace among international competitors. This criticism is not new; during his first term, Trump attempted to dismantle the FCPA but faced resistance. However, the idea of reforming or scaling back the law has garnered bipartisan criticism, with scholars like Mike Koehler noting that many of the issues highlighted in Trump’s executive order have been debated for years. Koehler also points out that prior administrations have already adjusted FCPA enforcement, sometimes dropping cases for national security reasons. Critics argue that the U.S.’s aggressive prosecution of foreign bribery cases compared to other countries increases compliance costs for businesses, a point echoed by the New York City Bar Association in a 2011 report.
Recent Applications of the Anti-Bribery Law
In recent years, the FCPA has been enforced aggressively, with both federal prosecutors and securities regulators pursuing high-profile cases against large corporations. In 2023 alone, there were approximately 30 enforcement actions, a stark contrast to the four cases recorded in 2004. One notable case involved Goldman Sachs and its role in the 1MDB sovereign wealth fund scandal in Malaysia. The investment bank faced charges for bribing Malaysian officials to manage billions of dollars in bonds issued by the fund. A Goldman subsidiary pleaded guilty to foreign bribery charges and paid over $2.9 billion in fines and penalties, while a former Goldman banker was sentenced to 10 years in prison. In another case, SAP, a multinational software company, agreed to a $220 million settlement to resolve investigations into bribery schemes involving government officials in South Africa and Indonesia. Similarly, Deere & Company settled SEC charges for nearly $10 million over alleged bribes paid by its Thailand subsidiary. These cases illustrate the significant impact of the FCPA on global business practices.
Implications of the Enforcement Pause
The implications of Trump’s decision to pause FCPA enforcement are far-reaching, with both immediate and long-term consequences. While some pending investigations may be halted or dropped as a result of the pause, it is unclear whether ongoing cases, such as the one involving Indian tycoon Gautam Adani, will be affected. Adani, accused of bribing Indian officials and charged with fraud, has denied the allegations through his company, the Adani Group. Experts warn that this pause could lead to an increase in corrupt activity, as companies may perceive a reduced risk of prosecution for engaging in bribery. Karen Woody, a law professor specializing in securities law, criticized "heavy-handed prosecution" under the FCPA but acknowledged that a halt in enforcement could embolden companies to engage in unethical practices. She noted, however, that businesses are not entirely "off the hook," as other countries, such as Britain and Germany, have their own anti-corruption laws. Additionally, even if federal prosecutors step back, local U.S. attorneys may still pursue cases independently, potentially shifting the focus of enforcement to individuals rather than companies. Richard Donoghue, a former Justice Department official, suggested that this shift could create opportunities for businesses to argue that they should not be held liable for the misconduct of their employees.
Arguments for and Against the Pause
The debate over Trump’s decision to pause FCPA enforcement reflects broader arguments for and against the law. Supporters of the pause argue that it will help level the playing field for American businesses operating internationally, where bribery is often a common practice. They contend that the FCPA’s stringent enforcement puts U.S. companies at a disadvantage, forcing them to adhere to stricter standards than their foreign competitors. On the other hand, critics warn that relaxing enforcement will undermine global efforts to combat corruption and embolden companies to engage in unethical practices. They argue that the FCPA has been a powerful tool for promoting transparency and accountability, not just in the U.S. but worldwide. The New York City Bar Association has questioned the costs of aggressive enforcement, but scholars like Karen Woody emphasize that a complete halt to enforcement could have unintended consequences, allowing corruption to flourish. The OECD has also expressed concerns, noting that the U.S. has been a leader in global anti-corruption efforts, and any retreat from enforcement could undermine international cooperation.
Global Context and the Future of Anti-Corruption Efforts
The pause in FCPA enforcement occurs against a backdrop of heightened global scrutiny of corruption and bribery. While the U.S. has historically been at the forefront of anti-corruption efforts, other countries have increasingly adopted their own laws and enforcement mechanisms. Britain’s Bribery Act and Germany’s stringent anti-corruption laws are examples of this trend. Even if the U.S. scales back its enforcement of the FCPA, multinational companies will still face accountability under these foreign laws. Furthermore, the private sector and civil society continue to play a critical role in promoting ethical business practices. The pause in FCPA enforcement may signal a shift in the Trump administration’s approach to business regulation, prioritizing economic competitiveness over anti-corruption efforts. However, as the global economy becomes increasingly interconnected, the fight against corruption remains a shared challenge that requires international cooperation and strong legal frameworks. The long-term impact of Trump’s decision will depend on whether it leads to meaningful reforms or undermines the progress made in combating bribery worldwide.
