United States: Senior DOJ Official Discusses The Department's Renewed Focus On FARA: What Companies Need To Know

During a Tuesday event at the Center for Strategic and International Studies in Washington, D.C., Assistant Attorney General of the National Security Division John Demers highlighted the renewed focus of the Department of Justice (Department or DOJ) on the Foreign Agents Registration Act (FARA). He described the law as an elegant solution to the problem of foreign influence in U.S. politics, bringing transparency to the foreign actors behind political activities in the United States without restricting those activities.

The Department has engaged with law firms and the broader business community as part of its renewed efforts to promote compliance with the statute, and Assistant Attorney General Demers cited the Department's decision last year to release redacted versions of its advisory opinions as part of an effort to help companies and individuals better understand where the lines are when it comes to FARA. His remarks serve as a strong signal that the recent uptick in FARA-related enforcement is not an anomaly; there is a concerted, sustained effort at DOJ to police foreign influence in the United States, and companies that engage in activities potentially covered by FARA need to understand their obligations and the risks of noncompliance.

FARA is a U.S. law that requires "agents of foreign principals" who undertake certain types of activities to file a public registration with DOJ unless an exemption is applicable. The registration statement must disclose certain details about the relationship between the registrant and foreign principal, and the statement becomes publicly available on the DOJ website. Originally enacted in 1938 in response to concerns regarding Nazi, Communist, and other propaganda in the United States, FARA has largely been below the radar of the public and the business community for much of its existence—and its scope has not been well understood.

FARA has garnered significantly greater public attention in the aftermath of the 2016 election, however, amid concerns over Russian interference and in the context of the Special Counsel inquiry. Last year, former Trump campaign chairman Paul Manafort pleaded guilty to conspiracy to defraud the United States in connection with his failure to register under FARA and to making various FARA-related false statements and misrepresentations to DOJ. Importantly, Manafort's guilty plea was just one of several FARA-related convictions secured by the Department over the past year. DOJ has also begun releasing guidance to the public that provides greater clarity on how FARA has been interpreted and applied—including concrete illustrations of circumstances in which DOJ has said registration is required.

Against this backdrop, several established, sophisticated entities have decided to file registration statements and many companies and individuals are taking a closer look at their approach to FARA compliance and examining whether their activities on behalf of foreign clients are covered by the statute. Even as FARA is receiving greater attention, a number of misconceptions remain.

Misconception #1: FARA prohibits acting as agents of foreign powers. FARA does not prohibit representation of foreign interests or other related activities—and does not establish registration as a punitive measure. Instead, the law serves to enhance transparency regarding foreign influence in the U.S. political process by imposing disclosure and recordkeeping obligations in connection with certain political and quasi-political activities undertaken on behalf of foreign principals.

If an agent of a foreign principal is not covered by an applicable exemption, compliance requires the agent to promptly file with the Department an initial statement and to file supplemental statements every six months, to appropriately mark and file informational materials distributed on behalf of the foreign principal, and to preserve and make available for review by the Department records related to the agent's activities on behalf of the foreign principal.

The Department maintains a publicly available database of filed registration statements and informational materials, providing the government and the American people with information to evaluate the statements and activities of registrants in light of their function as foreign agents.

Misconception #2: Only work on behalf of foreign governments or state-owned enterprises can trigger FARA's registration requirement. While FARA originated as a response to foreign government propaganda, its reach is broader. FARA imposes disclosure obligations not just on agents of foreign states or foreign state actors, but also on "foreign principals" more broadly. That term includes most individuals outside the United States and entities organized under the laws of a foreign country or having their principal place of business in a foreign country. While, as discussed below, FARA exemptions may be available for common types of commercial work performed on behalf of foreign private sector entities, all companies that do business overseas, even for foreign private entities, should be aware that certain political or quasi-political work on behalf of a foreign principal may potentially implicate FARA.

Misconception #3: Any work on behalf of a foreign principal requires an agent to register under FARA. FARA broadly defines what it means to be an "agent of a foreign principal," but it also includes several exemptions that significantly limit the scope of activities that trigger the registration requirement. The so-called commercial activities exemption provides that FARA's registration requirements do not apply to any agent of a foreign principal engaging "in private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal."

Another exemption is available even if an agent's work for a foreign principal falls squarely within the statute's definition of political activity, provided that the political activity does not "serv[e] predominately a foreign interest." The Department's regulations further define this statutory exemption: "a person engaged in political activities on behalf of a foreign corporation, even if owned in whole or in part by a foreign government, will not be serving predominately a foreign interest where the political activities are directly in furtherance of the bona fide commercial, industrial, or financial operations of the foreign corporation, so long as the political activities are not directed by a foreign government or foreign political party and the political activities do not directly promote the public or political interests of a foreign government or of a foreign political party." While what qualifies as activity "directly in furtherance" of bona fide commercial activity and "directly promot[ing]" public or political interests will frequently be fact-dependent, the regulations reflect DOJ's view that at least some forms of political activity on behalf of state-owned enterprises and other foreign corporations should be exempt from registration where the activity is being undertaken for a commercial purpose and not to promote a foreign government or political party.

Misconception #4: DOJ is principally focused on bringing criminal enforcement actions for FARA violations. The recent uptick in FARA-related prosecutions makes it clear that DOJ will bring criminal charges in appropriate cases where there is evidence of a willful violation of the law. We expect to see more of these cases in the future as the Department looks more closely at potential violations. But as DOJ has long advised, "[t]he cornerstone of [its FARA] Registration Unit's enforcement efforts is encouraging voluntary compliance." Assistant Attorney General Demers' comments focused on such efforts to promote compliance, citing the Department's collaboration with the legal and business communities about FARA and its decision to publicly release the Department's advisory opinions.

The Department's advisory opinion procedure can be a valuable tool for companies unsure of their obligations under FARA. Companies may confidentially request DOJ's opinion regarding whether a particular activity or transaction would require registration and disclosure under the law, and whether an exemption may apply. Provided that a company follows the Department's procedure for requesting an opinion and makes a true, correct, and complete disclosure with respect to the contemplated activity or transaction, the company can rely upon the opinion and avoid a situation where making the wrong decision about whether to register and disclose under the law can expose the company to potential criminal liability.

Companies taking a closer look at their potential obligations under FARA face a challenging task—but DOJ through its actions has signaled that they need to do better. The applicability of FARA—and the availability of exemptions in particular—can be a very fact-dependent analysis that changes based on the client and nature of work. Accordingly, companies should consider policies and procedures to identify and address FARA-related risks alongside existing compliance programs designed to address other legal risks associated with doing business abroad. While anticorruption, sanctions, and export controls compliance may be more familiar to legal and compliance teams, Assistant Attorney General Demers' comments make it clear that FARA needs to be part of the risk analysis when working on behalf of foreign clients.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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