“Oh baby, baby, it’s a wild world.”
-Yusuf Islam, formerly known as Cat Stevens
To assist businesses in operating in this wild world, the U.S. government tries to pass laws that it thinks will protect businesses and U.S. national security.
The Foreign Agent Registration Act (22 U.S.C. 611 et seq.; 28 CFR Part 5) (FARA) is one example of such a law recently made famous by Special Counsel Mueller and his team when they charged Paul Manafort for violating it.
To understand the harm that FARA was designed to prevent, we must go back in time.
In 1938, just before World War II ramped up, Congress passed FARA over its concerns that foreign entities were distributing Nazi and communist propaganda in the U.S. trying to influence public opinion, policy and law.
To address this harm, Congress passed FARA which requires registration with the Department of Justice (DOJ) when a U.S. person or U.S. business lobbies for a foreign entity; or engages in public relations for a foreign entity. This was done to allow transparency around these activities. FARA does not prohibit acting on behalf of foreign entity it just requires register. Failing to register is a crime.
To determine when registration may be required under FARA think about: What are you doing? Who are you doing it for?
What Are You Doing?
If what you are doing is attempting to influence U.S. law, policy or public opinion at the direction of a foreign entity, you may have to register under FARA – before you start doing it.
So, if, at the direction of a foreign entity, you are trying to influence the U.S. government on U.S. law or policy (commonly known as lobbying), you must register under FARA. Likewise, if you are representing a foreign entity before a U.S. government agency, to include merely trying to facilitate a meeting between a foreign entity and the U.S. government, you may need to register under FARA.
Similarly, if, at the direction of a foreign entity, you try to influence public opinion, that is considered public relations activities for a foreign entity and you must register. Public relations activities under FARA include advising a foreign entity on matters related to topics of interest to the public as well as advising on U.S. politics and policies.
It also includes publishing or disseminating information verbally or in writing about the benefits of a foreign entity’s political, economic, social, cultural, or any other advantages the entity may have that you promote.
Finally, soliciting, collecting or dispersing any item of value for a non-U.S. entity such as loans, political contributions, also requires registration.
You cannot get cute about registering under FARA; and, conclude that by not having a contract to undertake these activities; by doing the work for free; or by only spending an insignificant time doing the work you don’t have to register because, even if you don’t have a contract, even if you don’t get paid, or even if you spend an insignificant amount of time – you have to register.
Who Are You Doing It For?
If you undertake any of the above activities for a foreign entity – you have to register.
Under FARA, a foreign entity includes:
- Foreign countries
- Foreign political parties
- Foreign persons
- Organizations created under the laws of a foreign country,
- Organizations with a “principal place of business in a country outside of the U.S.
Again, you cannot get cute here either by claiming there is no foreign entity involved because the foreign entity’s identity is hidden behind some complex organizational or transactional structure. Even if there is a complex structure obscuring the identity of the entity, registration is still required. Likewise, even when a foreign entity indirectly controls, finances or subsidizes the activities registration is required.
Given this, it seems like a lot of U.S. businesses and organizations would need to register.
Not the case because of some exemptions:
- Practicing Law Exemption
Lawyers represent a foreign client, in their capacity as a lawyer – that is providing legal services like appearing in court – do not have to register. Lawyers acting as a lobbyist or a publicist must register because they are not providing legal services.
- Academic Pursuit Exemption
Engaging in legitimate academic, religious, scientific or fine arts work at an institute of higher education or at a think tank, for example, don’t have to register. (Word to the wise on this one: A recent DOJ report noted that perhaps DOJ is not looking into these types of exemptions with enough gusto.)
- Commercial Activities Exemption
Engaging in “private, nonpolitical” activities in an effort to further legitimate commercial transactions on behalf of a foreign entity is also an exemption to the registration requirements. This exemption applies even if the foreign entity is state-owned. This exemption gets tricky because it does not apply if the activities also benefit a foreign government’s interest.
- News Organizations Exemption
Legitimate news organizations that are at least 80% owned by U.S. citizens are generally exemption from registration.
When registering, you must provide your name (or your organization’s name), address, nationality, citizenship, occupation, the ownership and control of your business as well as a comprehensive description of your organization’s business. You must disclose similar details about the foreign entity that you are representing.
Additionally, you must provide a detailed description of what you will be doing for the foreign entity along with any contract with the foreign entity that details the work. You must disclose all financial information about the work you are doing – your budget and any income or expenses incurred. If you were not paid, you must disclose that. If you distributed any materials or information regardless of format, you must include those with your registration, along with the channels you used to distribute the information.
Examples of Registration Required Activities
Your foreign business partner asks you to host a trade show designed to show case the economic benefits of doing business in their country to include developing a social media campaign advertising the social, cultural and economic advantages of the foreign country. Most likely this would be considered public relations work for a foreign entity which requires registration.
A foreign entity asks you to get them meetings with U.S. government persons to discuss U.S. tax policy, share their ideas on U.S. tax policy and its implications for the foreign entity. You will most likely need to register because the request to help influence U.S. policy requires registration.
One final thought about FARA’s recent fame. Even before Mueller’s investigations, FARA was picking up steam. In September 2016, DOJ’s Inspector General (the Inspector General’s is like the police force of the government agency) drafted a report advising DOJ to start prosecuting FARA violations for a number of reasons to include complaints from FBI agents that prosecutors would not file FARA charges.
So, as you evaluate the risks of working internationally, be sure to consider FARA.
If Yusuf (formerly Cat Stevens) can’t convince you the world is wild and dangerous – take it from Jack Abramoff, a former lobbyist who served time for failing to compliantly interacting with governments, who said:
“Washington’s a dangerous place.”
In When the Writ Hits the Fan, I explore these issues – the intersection of law, business, criminal activity and ethics: why do some companies violate the law? what happens when they do? what is ethical? how do we get corporations to follow the law? can lawyers help and, if so, what is the lawyer’s role? Be sure to sign up for the newsletter to follow along!