For decades, U.S. anti-corruption law focused primarily on the person or company offering or paying a bribe. The Foreign Extortion Prevention Act (FEPA) changed that approach by creating potential federal criminal liability for foreign officials who corruptly demand, seek, receive or accept something of value under certain circumstances.
For U.S. companies operating in Guatemala, investors and local businesses connected to U.S. capital, this legislation adds another layer to anti-corruption compliance and risk management.
The demand itself may be enough
One of FEPA’s key features is that the company does not need to actually make the payment.
When the statutory requirements are met, the offense may be completed by the foreign official’s demand itself, provided the required U.S. nexus exists and the request is connected to an official act, a breach of legal duty or an improper business advantage.
The statute provides for penalties of up to 15 years’ imprisonment, together with fines of up to USD 250,000 or three times the value of the thing demanded, whichever is greater.
FEPA complements the FCPA
FEPA does not replace the Foreign Corrupt Practices Act (FCPA).
The FCPA continues to address the supply side of bribery, while FEPA creates potential liability for the foreign official demanding the payment.
As a result, a company that gives in to the demand and pays may still face FCPA exposure even though the official may separately face liability under FEPA.
FEPA is also not a general anti-extortion statute. Its application requires specific elements, including a foreign official, an official quid pro quo and the relevant connection to the United States.
What does this mean for Guatemala?
For a U.S. company operating in Guatemala, the relevant nexus may depend on the target of the demand.
When the improper request is directed at a covered U.S. issuer, company, parent entity or person, conduct taking place in Guatemala may become relevant to U.S. federal authorities.
For a Guatemalan official, the potential exposure may therefore extend beyond local law. The demand itself may generate U.S. criminal exposure even when the company refuses to pay.
Local businesses dealing with U.S. partners, parent companies or clients should also understand that an improper demand may have implications beyond Guatemala.
How should a company respond?
When faced with this type of demand, companies should respond through a structured process.
Key measures may include:
- do not pay or promise payment;
- immediately document who made the demand and under what circumstances;
- preserve communications and supporting evidence;
- escalate the matter internally to legal or compliance teams;
- assess the appropriate reporting channels; and
- obtain legal advice before taking further action.
Improvising in these situations may increase legal exposure. Companies with international operations should therefore have internal protocols for identifying, documenting and escalating potentially improper requests.
Compliance across borders
FEPA reinforces an important reality for multinational companies: corruption risks may simultaneously trigger laws in more than one jurisdiction.
For U.S. companies operating in Guatemala — and for local companies working with U.S. capital — compliance programs should address not only the prevention of improper payments, but also how employees should respond when foreign officials make improper demands.
Early identification, proper documentation and clear escalation procedures can be essential to preventing an improper request from becoming a broader legal contingency.
Author:
Juan Pablo Carrasco de Groote
Partner – CENTRAL LAW in Guatemala
At CENTRAL LAW in Guatemala, we advise companies and investors on anti-corruption compliance and dealings with public authorities, assessing sensitive situations with the confidentiality and legal analysis they require.
Disclaimer: This content is for informational purposes only and does not constitute individualized legal advice. The application of the legislation discussed to any specific matter will depend on the facts and the particular nexus with the United States.
