Under the Foreign Corrupt Practices Act (FCPA), foreign officials are excluded from prosecution. That’s because the FCPA is a supply-side statute: It criminalizes the person or company giving a bribe, but not the foreign officials taking those bribes. When U.S. Department of Justice (DOJ) prosecutors go after these bribe takers, they increasingly do so by applying other statutes, including the laws governing money laundering.
Over the past six years, the DOJ has pursued the prosecution of corrupt foreign officials in several FCPA cases. One of the challenges the DOJ faces is that foreign officials are generally excluded from the scope of the FCPA. Congress saw the deterrent value of such prosecutions as minimal, and not worth the trouble of all of the diplomatic, jurisdictional and enforcement headaches that would arise from going after foreign officials.
Other laws, however, can be drawn into FCPA prosecutions, including the Travel Act, RICO, mail- and wire-fraud statutes, and the Money Laundering Control Act (MLCA). In a number of FCPA cases, the DOJ has managed to draw upon the MLCA to prosecute cases that would have otherwise been beyond the FCPA statute’s reach.
Combining the FCPA and Money Laundering Laws
In 1992, the MLCA made violating the FCPA one of the possible predicate offenses for money laundering. As a result, the bribery of foreign officials became a “specified unlawful activity” that can trigger prosecution under the MLCA. The U.S. money laundering laws also generally apply extraterritorially to the acts of U.S. persons abroad and to actions taken by non-U.S. persons inside or partially inside the United States.
In 2015, for example, Haitian telecom official Jean Rene Duperval was convicted on money laundering charges based on an underlying FCPA bribery scheme. Duperval allegedly accepted approximately USD 500,000 in bribes, in violation of the FCPA. At trial, the DOJ established that the bribes offered to Duperval were proceeds of FCPA violations, laundered through the U.S. financial system -- a violation of the MLCA.
In a separate case, the U.S. Court of Appeals for the Eleventh Circuit had previously found that Haiti Teleco qualified as an “instrumentality” of the Haitian government and that Duperval qualified as a “foreign official.” In 2015, the Eleventh Circuit affirmed Duperval’s subsequent conviction, thereby approving DOJ’s use of the MLCA as a complement to the FCPA in prosecuting corrupt foreign officials.
This case illustrates how money laundering charges may be considered as a critical piece of complex and contentious FCPA prosecutions -- and a new risk to those subject to FCPA enforcement.
How the MLCA Increases Prosecution Risks for U.S. Companies
The DOJ can use money laundering charges, and the very real possibility of conviction, to convince foreign officials and others to cooperate in prosecuting U.S. companies and their executives for FCPA violations. While foreign officials don’t fall under the FCPA, and thus don’t have to cooperate, the DOJ can force cooperation by drawing on anti-money laundering laws.
MLCA violations also carry much heavier penalties than the FCPA violations alone. Under the MLCA, individuals face up to 20 years’ imprisonment and fines up to USD $500,000 for each violation, or twice the defendant’s gross gain or the victim’s gross loss. The DOJ can also file a forfeiture proceeding against a foreigner if the proceeds are in the U.S.
Under the FCPA alone, by contrast, individuals face up to 5 years’ imprisonment and fines up to USD $100,000. The longest FCPA sentence ever - 15 years in prison - was given in 2011 to telecom executive Joel Esquenazi, and driven largely by his conviction on money laundering charges.
The main point to understand is that, in prosecuting FCPA violations, the DOJ can draw on other laws to extend the jurisdiction and the people who fall under that law. Bringing in laws like the MLCA increase a company’s vulnerability to prosecutions under FCPA because there’s more leverage against them.
To mitigate these risks of prosecution, the answer is to have mechanisms in place, such as a strong compliance program combined with internal and financial controls, to detect potential money laundering breaches as well as bribery and corruption.