John P. Carlin, David A. Newman, Alex Iftimie, and Peter T. Carey
National Security, CFIUS, Sanctions + Export Controls
In another indication of the U.S. Department of Justice’s increased focus on the Foreign Agents Registration Act (FARA), Assistant Attorney General John Demers announced yesterday that the Department is overhauling its FARA enforcement unit and would assign a former prosecutor on Special Counsel Robert Mueller’s team, Brandon L. Van Grack, to oversee it.
The reorganization shows that the Department has shifted “from treating FARA as an administrative obligation and regulatory obligation to one that is increasingly an enforcement priority,” Mr. Demers told a white-collar fraud conference in New Orleans yesterday. “We’re being more aggressive about who we’re requiring to register and we’re confronting registrants who are resistant to registering,” Demers said to reporters.
Given DOJ’s stated policy that the “cornerstone of the [FARA] Registration Unit’s enforcement efforts is encouraging voluntary compliance,” Van Grack’s appointment is notable in light of his background as a high-profile prosecutor. Van Grack was on the prosecution team in the case against former Trump campaign chairman Paul Manafort, which included FARA violations, as well as the case against former national security advisor Michael Flynn, for making false statements in connection with the FBI’s investigation into coordination between the Trump campaign and Russia’s efforts to interfere with the 2016 presidential election. Van Grack is now a deputy chief in the National Security Division’s Counterintelligence and Export Control Section, which, among other things, oversees investigations and prosecutions of espionage statutes. Tapping him to lead the team focused on FARA enforcement signals that the Department will not shy away from criminal investigative tools, in addition to FARA’s various administrative functions, in order to enforce the Act.
FARA is a disclosure statute that requires persons acting as agents of foreign principals in political or quasi-political capacity to register with DOJ and make periodic public disclosure of their relationship with the foreign principal, as well as activities, receipts, and disbursements in support of these activities. The purpose of the law is to protect the national defense and foreign relations of the United States, ensuring that the American public and its lawmakers know the sources of information intended to sway U.S. public opinion, policy, and laws.
Historically, there were few criminal prosecutions under FARA: between 1966 and 2015, the Department only brought seven prosecutions for FARA violations. For decades FARA remained largely below the radar of the public and business community – and its scope was not well understood. That changed in the aftermath of the 2016 election, amid concerns about Russian interference and FARA-related charges stemming from the Special Counsel’s inquiry. Most prominently, 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. Manafort’s associate, Richard Gates, also pleaded guilty to FARA-related charges. Altogether, the Department has charged at least six cases involving FARA since 2017.
But the number of criminal prosecutions is just one measure of FARA enforcement. In January, the Department secured the largest-ever settlement in connection with an alleged FARA violation – a prominent international firm agreed to pay $4.6 million to settle a Justice Department investigation into whether work it did on behalf of the Ukrainian government violated FARA. It also agreed to develop robust policies and procedures for ensuring FARA compliance and responding to government inquiries.
Last November, the Department also announced that it would seek to use FARA and related criminal and civil tools as part of the Department’s China Initiative, which, among other things, seeks to create transparency around Chinese influence on the U.S. government policy, academic institutions, and the media. One notable aspect of this Initiative has been to put the business community on notice that acting at the behest of the Chinese government to influence persons in the United States could trigger obligations to register under FARA.
The number of FARA registrations has also surged in recent years as individuals and businesses became more aware of their obligations under the law. Whereas there were only 276 active registrants at the end of 2013, that number ballooned to 446 by March 6, 2019 – an increase of more than 60 percent. These recent registrations, ranging from foreign, state-aligned television networks, including a U.S. contractor for Russia’s RT and the U.S. division of China’s CGTN, to highly regarded U.S. professional services firms with foreign clients, illustrate the breadth of FARA’s registration and disclosure obligations. There has also been a marked uptick in the number of advisory opinions provided by the FARA Unit in recent years, a signal that more individuals and companies are aware of their potential obligations under FARA and are taking steps to ensure they understand which of their activities might require registration.
It remains to be seen what tools the Department will deploy as part of its renewed focus on FARA enforcement. An uptick in criminal investigations may be one outcome of the increased attention being paid to FARA, but, in light of the FARA Unit’s focus on encouraging voluntary compliance, a more significant aspect of DOJ’s strategy is likely to involve more aggressive efforts to identify potential registrants and persuade them to register in appropriate cases. Although DOJ’s FARA Unit does not have subpoena authority, it can and frequently does send inquiry letters to persons it believes may have an obligation to register. Failure to respond and cooperate with such voluntary requests may result in a referral to the FBI for investigation of possible criminal violation where there is sufficient credible evidence of a willful disregard of a registration obligation. Even in cases where there is not a willful violation of FARA’s registration requirement, DOJ can pursue civil action to enjoin a person from acting as an agent of foreign principal.
In addition to being more aggressive about identifying potential registrants, DOJ also could make greater use of FARA’s books and records provisions, which permit DOJ and the FBI to conduct unannounced inspections of registrant’s records related to their work on behalf of a foreign principal, to ensure that existing registrants are adequately and accurately meeting their registration and disclosure obligations under the law.
FARA is an expansive law, and, as we’ve written before, its scope has not been widely understood. As a result, companies and individuals working with foreign clients too often are not in strict compliance. Companies and individuals who work with foreign clients should consider FARA anytime their activities might be seen as intended to influence the U.S. government or public, or if their work involves advising foreign clients on how to so. The steady drumbeat of developments related to FARA make clear that enforcement of the statute will not soon wane, and that FARA will need to be incorporated in corporate compliance programs.
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