BoardAndFraud

Compliance: Let’s Talk about FARA

Overview

The Foreign Agents Registration Act “(FARA”) was enacted in 1938. FARA requires certain agents (see definition below) of foreign principals (see definition below) who are engaged in political activities or other activities specified under the statute to make periodic public disclosure of their relationship with the foreign principal, as well as activities, receipts, and disbursements in support of those activities.  Disclosure of the required information facilitates evaluation by the government and the American people of the activities of such persons in light of their function as foreign agents. The FARA Unit of the Counterintelligence and Export Control Section (CES) in the National Security Division (NSD) is responsible for administering FARA.

FARA is an important tool to identify foreign influence in the United States and address national security threats.  The central purpose of FARA is to promote transparency with respect to foreign influence within the United States by ensuring that the United States government and the public know the source of certain information from foreign agents intended to influence American public opinion, policy, and laws, thereby facilitating informed evaluation of that information.  FARA fosters transparency by requiring that persons who engage in specified activities within the United States on behalf of a foreign principal register with and disclose those activities to the Department of Justice.  The Department of Justice is required to make such information publicly available.

A FARA violation can lead to criminal liability with serious consequences:  A willful failure to register, a willfully false statement of a material fact, or a willful omission of a material fact is punishable by up to five (5) years of imprisonment and a fine- See Penalties below. Determining whether registration is required necessitates understanding whether there is a “foreign principal” involved and, if so, whether there is an “agent” who is engaged in the covered activities. The next step will be to determine if one of the exemptions applies.

Political activities can encompass more than it seems at first glance. When people hear the term political activities, they may think of lobbying Congress because that has been the traditional focus of political activities. It also refers to meetings with people in the executive branch, meetings with regulators, and other activities.

Definitions

An “agent of a foreign principal” is any person who acts as an agent, representative, employee, or servant, or otherwise acts at the order, request, or under the direction or control of a “foreign principal” and does any of the following:

A “foreign principal” can be a foreign government, a foreign political party, any person outside the United States (except U.S. citizens who are domiciled within the United States), and any entity organized under the laws of a foreign country or having its principal place of business in a foreign country.  It can also include a foreign faction or body of insurgents whose legitimacy the United States government has yet to recognize.

Focus

The DOJ’s focus on FARA enforcement seems to stem from a recent surge in new registrants and foreign principals under the statute.  Actually, according to the Report to Congress, there were twice as many in 2019 compared to 2016 and nearly double the number of short-form registrants. FARA did not see much action for some time, and this new environment changes the risk landscape for entities that may be engaging in activities that require registration.

“We are not going back to the historic era that preceded this enforcement surge when there was a more relaxed enforcement posture by the department toward regulated industries,” David Laufman, a partner at Wiggin & Dana, said. “I don’t see the toothpaste going back in the tube here.”

Amy Jeffress, a partner at Arnold & Porter and former prosecutor, agreed. “I do not expect the Biden administration will be backing down on FARA.” The interest in FARA has increased among her clients recently. “We are seeing a lot of companies seeking our advice on how exactly they need to proceed to comply with FARA, whether they need to change the nature of the activities they are doing so that they do not have a registration obligation, or whether they need to register or have an agent register on their behalf,” she explained. “In the last year and a half, I have been doing more FARA presentations for clients at their request than before.”

Some Recent FARA Cases

Penalties

The penalty for a willful violation of FARA is imprisonment for not more than five years, a fine of up to $250,000, or both.  Certain violations are considered misdemeanors, with penalties of imprisonment of not more than six months, a fine of not more than $5,000, or both.  There are also civil enforcement provisions that empower the Attorney General to seek an injunction requiring registration under FARA (for applicable activities) or correcting a deficient registration statement.

Closing

The DOJ’s increased focus is real.  Why?  Brandon L. Van Grack is now leading the FARA enforcement unit,  a high-profile prosecutor who stated compliance is fact- and entity-specific. Furthermore-

It is dependent on the entity, the relationship that foreign entity has with the foreign government, the relationship the foreign entity has with the domestic entity, how the engagement will occur, the type of engagement, the purpose of the engagement and the beneficiaries of the engagement. There are so many variables that, while constructing guardrails for FARA compliance is possible, there is not a one-size-fits-all solution.

I welcome your thoughts and comments.

Best-

Jonathan T. Marks, CPA, CFF, CFE

Attribution

DOJ

Anti-Corruption Report

 

protecting-us-covert-foreign-influence (1)

 

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