Criminal FCPA enforcement paused. Now what?

Executive Order pausing FCPA enforcement

President Trump issued an Executive Order (EO) titled “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security."² The EO directs the AG to review guidelines and policies governing FCPA investigations and enforcement actions and, in the meantime, to cease initiation of any new FCPA investigations or enforcement actions. Within a period of 180 days, which may be renewed once, the AG must issue updated FCPA enforcement guidelines that “prioritize American interests, American economic competitiveness with respect to other nations, and the efficient use of Federal law enforcement resources.”

The EO’s preamble states that the FCPA “has been systematically, and to a steadily increasing degree, stretched beyond proper bounds and abused in a manner that harms the [foreign policy] interests of the United States [in connection with] routine business practices in other nations [that] not only wastes limited prosecutorial resources . . ., but actively harms American economic competitiveness and, therefore, national security.” The EO explains that “American national security depends in substantial part on the United States and its companies gaining strategic business advantages whether in critical minerals, deep-water ports, or other key infrastructure or assets.”

FCPA investigations and enforcement actions initiated or continued after the revised guidelines are issued will require the AG’s specific authorization. The AG also may determine whether remediation is warranted for past FCPA investigations and enforcement actions in light of the updated guidelines. The form of any such remediation is uncertain, but could implicate ongoing corporate compliance monitorships or self-reporting requirements.

The Bondi Memo

On her first day at DOJ, AG Bondi issued a memorandum to DOJ employees titled “Total Elimination of Cartels and Transnational Criminal Organizations” (Bondi Memo).³ The Bondi Memo outlined an enforcement priority shift that sought to focus DOJ’s efforts “to pursue total elimination of Cartels and Transnational Criminal Organizations” (emphasis in original). The shift was to be implemented for 90 days and renewed or made permanent thereafter.

The Bondi Memo sought to provide prosecutors with “full and immediate access to the most serious and broad charges that Congress has made available” against TCOs and cartels.⁴ One of the more extensive priority shifts concerned enforcement of the FCPA and the Foreign Extortion Prevention Act (FEPA), which together tackle the supply and demand side of foreign corruption.

The Bondi Memo instructed the DOJ’s FCPA Unit to prioritize “investigations related to foreign bribery that facilitates the criminal operations of Cartels and TCOs, and shift focus away from investigations and cases that do not involve such a connection.” The Bondi Memo further enabled the U.S. Attorney’s Offices (USAOs) in each of the 94 U.S. districts to bring FCPA and FEPA cases involving TCO and cartel activity. Accordingly, Main Justice attorneys – including the attorneys of DOJ’s FCPA Unit in Washington, DC – would no longer be required to approve foreign corruption enforcement where those elements are present.

Following the EO, should companies deprioritize anti-corruption compliance?

For a host of reasons, anti-corruption compliance should remain a central pillar of corporate compliance programs.

As an initial matter, criminal FCPA and FEPA violations are subject to a five-year statute of limitations, which can be extended up to eight if foreign legal assistance is requested, suspended with tolling agreements, or extended using a conspiracy charge. The DOJ of the next U.S. administration – beginning in January 2029 – could re-examine allegations that were deprioritized under the EO and new enforcement guidelines, as far as limitations periods have not yet lapsed.

Second, the EO temporarily paused FCPA enforcement for 180 to 360 days, during which new enforcement guidelines will be developed. Once completed, FCPA investigations and prosecutions will presumably resume, even if more restricted in scope. The EO and the Bondi Memo do not alter the FCPA and FEPA statutes, which only Congress can amend; rather, they affect DOJ’s prosecutorial discretion as to which cases to pursue. Particularly during this interim period, uncertainty remains as to precisely how DOJ will handle existing whistleblower tips and pending investigations – some of which have been in progress for years.

For its part, the SEC – which retains civil enforcement authority under the FCPA – is not specifically named in the EO or the Bondi Memo. Nevertheless, given the rationale set forth in those documents, we expect the SEC to follow an approach consistent with DOJ’s.

Internationally, foreign regulators may attempt to fill in the gap in FCPA enforcement. Paradoxically, the U.S. pause in enforcement could conceivably lead to increased unofficial collaboration between U.S. career prosecutors and their foreign counterparts; U.S. and foreign prosecutors often informally collaborate through the OECD Anti-Bribery Convention’s Working Group on Bribery. At the same time, under the logic of the EO, DOJ leadership may seek to end such coordination where deemed contrary to U.S. national security or economic interests.

Further, multinational companies should continue to design their compliance programs to mitigate corruption risks globally. Depending on their international footprint, multinationals will likely fall within the scope of major anti-corruption laws such as the U.K. Bribery Act, the French law Sapin II, the Italian Decree 231, the Japanese Unfair Competition Prevention Act, Singapore’s Prevention of Corruption Act, and the Brazilian Anti-corruption law, to name a few.

What will the new DOJ enforcement guidelines provide?

It is unclear – at this point – what enforcement activity will proceed following the issuance of DOJ guidelines. Two focus areas that we expect will be reflected in the guidelines include: (i) the EO’s reference to critical minerals, deep-water ports, or other key infrastructure or assets; and (ii) the Bondi Memo’s focus on TCOs and cartels. It is also conceivable that greater leeway will be granted – either as a matter of policy, or through the AG’s case-by-case authorization – for investigations involving non-U.S. companies.

Key infrastructure or assets

The EO states that national security depends in substantial part on the United States and its companies gaining strategic business advantages in critical minerals, deep-water ports, or other key infrastructure or assets. As a result, we expect that the new enforcement guidelines will account for connections with infrastructure and assets that align with the current administration’s national security objectives as part of the prosecutorial discretion analysis. Other such infrastructure and assets could include semiconductor manufacturing supply chains, digital and electrical grid infrastructure, critical transportation infrastructure, space security, and communications assets.

Another factor that the Trump administration could integrate in the enforcement guidelines under the guise of national security could be whether the target of an investigation is predominately an “American company.” That said, current enforcement metrics show that only one of the top ten FCPA enforcement actions, based on the amount of monetary penalties, has been predominately an “American company.”⁵

TCOs and cartels

The Bondi Memo also conveys a clear focus on TCO and cartel connections in foreign corruption prosecutions. Multinational companies are unlikely to knowingly transact with TCOs or cartels and bribe foreign officials in the process. However, companies may establish legitimate relationships with foreign third parties that have been infiltrated or effectively controlled by a TCO or cartel. Or companies operating in areas of the developing world may face a Hobson’s choice of making protection payments where employees or infrastructure are threatened, and there are some widely publicized cases where this has occurred. As a practical matter, it also remains to be seen how strong of a link DOJ will require before proceeding with investigations or enforcement actions allegedly implicating TCO or cartel activity.

How should companies respond?

Despite the uncertainty, companies should stay the course and reinforce third party risk management programs, continue to invest in compliance program enhancements, and, when necessary, remediate violations effectively.

Reassess TCO and cartel connections

Companies should seek to mitigate the risk of inadvertently entering into relationships with third parties that may have TCO or cartel connections. Enhanced due diligence that was previously reserved for counterparties of financial transactions with potential terrorist connections should now be considered for higher-risk third parties. These risks become particularly acute in light of the Trump administration’s efforts to designate additional TCOs and cartels as Foreign Terrorist Organizations (FTOs).⁶ Companies can face criminal sanctions for providing broadly-defined “material support” to FTOs.⁷

Enhanced due diligence entails a considerable effort that can be realistically undertaken only for the riskiest relationships and typically by expert professionals. As with typical due diligence, periodic refresh of enhanced due diligence will be necessary. Enhanced due diligence and recalibrated risk assessment should be underpinned by additional elements:

• Implement AI-powered tools that accelerate pattern and outlier identification when assessing the reasonableness of a transaction or linking information from disparate databases.⁸
• Train employees in risk-sensitive roles on the focus on TCO and cartel-related connections to remain vigilant of related red flags. Include local, on-the-ground employees in risk assessments as they are frequently aware of market intelligence that are otherwise inaccessible. Reassess or adopt an extortion payment policy and provide training to potentially targeted employees, both to ensure their safety and mitigate enforcement risk.
• Continue to thoroughly investigate reports of improper behavior, and when necessary, remediate the root causes of any violations. In addition to existing triage protocols, consider assessing the likelihood of TCO and cartel involvement.

Investigate and remediate known and new issues

Companies should continue to investigate and remediate known and new issues while the DOJ is developing the new enforcement guidelines. Robust remediation is not only a hallmark of an effective compliance program and ethical business culture that generates business and operational efficiencies; it also establishes a defensible narrative should the DOJ, SEC, or another regulator during this or a subsequent administration scrutinize the underlying corporate response. Moreover, any loosening of compliance controls under the Trump administration could prove challenging to reverse effectively under a future U.S. administration that adopts a more traditional approach to anti-corruption enforcement.

The EO states that while the new enforcement guidelines are under development, the AG shall “cease initiation of any new FCPA investigations or enforcement actions, unless the [AG] determines that an individual exception should be made.” Although individual exceptions could be made, we do not generally expect new investigations to be opened and actively pursued during this 180-day period. We also expect case development to freeze – again, subject to rare exceptions – pending completion of the guidelines.

Exceptions could be granted, including, for example, for matters that were nearing resolution prior to the EO issuance and that do not otherwise conflict with the EO’s and Bondi Memo’s core concerns about overreach and adverse impacts on U.S. companies. We also think that any tips that touch upon TCOs, cartels, or potentially at least certain non-U.S. companies may be granted an exception.

Conclusion

The long-term implications of the EO and the Bondi Memo remain uncertain, and companies should remain alert to the evolving enforcement landscape and be prepared to adjust their compliance frameworks accordingly. For now, companies should enhance their due diligence practices and risk management strategies to address TCO and cartel connections. In the long term, companies should not neglect mitigating regular foreign corruption risks because future administrations may still investigate conduct that at that time remains within the statute of limitations. Our anti-corruption team at Hogan Lovells, with our deep experience and broad geographic scope, is prepared to help global companies navigate these changes and align their compliance efforts with these emerging developments.

Authored by Stephanie Yonekura, Peter Spivack, Matt Sullivan, Lillian S. Hardy, Kush Ved, and Nikolaos Doukellis.