Proposed FARA Rule Complicates Compliance Analysis and Suggests Aggressive Enforcement Trend Will Continue

On December 20, 2024, after signaling for years that significant changes were coming to the Foreign Agents Registration Act, the Justice Department released a Notice of Proposed Rulemaking that moves the FARA Unit one step closer to implementing a new regulatory regime that dramatically expands FARA’s already broad scope. Companies and individuals should use this occasion to carefully reassess their policies and practices for a wide variety of business activities to ensure compliance with the statute. 

Coming three years after the Justice Department released an Advance Notice of Proposed Rulemaking in December 2021, the proposed rule alters key exemptions that companies and individuals most frequently rely on, including (1) the “commercial” exemption, (2) the exemption for persons whose activities do not predominantly serve a foreign interest, and (3) the exemption for persons qualified to practice law. The proposed rule also adds several new requirements for handling “informational materials,” including by requiring foreign agents to more frequently and conspicuously disclose their agency status (such as on websites, broadcasts, and social media), even when performing such innocuous acts as scheduling meetings with members of Congress or other U.S. officials. 

While the Justice Department’s stated purpose for many of these changes is to “update and clarify” ambiguities and to “modernize” the regulations, the proposed rule—if finalized without revision—is likely to inject (rather than remove) ambiguity into FARA registration obligations for a wide swath of potential registrants. 

For example, rather than drawing bright lines about what relationships and conduct require registration, the proposed rule introduces a new “totality of the circumstances” test for the most commonly used exemption—the “commercial” exemption—that would now require potential agents to balance several factors in order to determine whether the activities predominantly serve a foreign or domestic interest. For those who are uncertain about how to balance these factors and whether the exemption applies, the Justice Department suggests that such individuals or entities should seek an advisory opinion—a time-consuming process that can take weeks or months to receive a final answer and that often results in the FARA Unit concluding that registration is required in close-call situations. While the ostensible goal is to provide clarity to potential registrants, using a balancing test in effect provides greater leeway for the FARA Unit to determine what conduct is registrable and makes the registration obligation more ambiguous for companies and individuals assessing their compliance obligations. 

The proposed rule is equally notable for what it does not change: (1) the rule leaves intact the Lobbying Disclosure Act exemption without revision, (2) it declines to clarify the definition of an “agent” or codify the Justice Department’s FAQ on the “scope of agency” that the FARA Unit published in 2020,¹ and (3) it declines to address whether non-attorney professionals or other legal support staff acting for or in the interest of a foreign principal are required to register under FARA. The FARA Unit thus leaves some of the ambiguities in these areas unresolved, despite previously signaling that these issues would likely be addressed in any proposed rule and despite requests for clarity from the regulated community.

More significantly, the proposed rule appears to affirm that the Justice Department’s aggressive enforcement of FARA will continue, solidifying a trend that has transformed a once rarely enforced statute into a routine subject of inspections, letters of inquiry, civil litigation, and criminal prosecution. Even with a change in administration occurring during the sixty-day notice-and-comment period that expires on March 3, 2025, that trend is unlikely to change. Instead, we expect the Justice Department will continue to aggressively enforce FARA, although its focus may shift from countries like the Gulf nations and Russia to other nations such as China and Iran. 

I. What Is FARA and Who Has a Registration Obligation?

Enacted in 1938 to address Nazi propaganda in the wake of World War II, the Foreign Agents Registration Act is a notice statute (subject to increasing enforcement) that imposes a registration obligation on any person or entity acting within the United States as an agent of a foreign principal and engaging in certain enumerated activities. It does not prohibit any conduct—it only requires disclosure of one’s agency status via registration. See 22 U.S.C. § 612(a). The Justice Department can choose to enforce FARA violations through the statute’s various civil authorities or even bring criminal charges where there is evidence of willful noncompliance. See 22 U.S.C. §§ 618(a),(f). 

FARA’s registration obligation extends to any person or entity who “acts as an agent, representative, employee or servant [of a foreign principal] or . . . [who] acts in any other capacity at the order, request, or under the direction or control, of a foreign principal or of a person any of whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized in whole or in major part by a foreign principal and who directly or through any other person,” and within the United States engages in one of four enumerated activities:

• (1) engaging in “political activities” on behalf of a foreign principal;
• (2) acting as a foreign principal’s public relations counsel, publicity agent, information-service employee, or political consultant;
• (3) soliciting, collecting, disbursing, or dispensing contributions, loans, money, or other things of value for or in the interest of a foreign principal; or
• (4) representing the interests of the foreign principal before any agency or official of the U.S. government. 

See 22 U.S.C. § 611(c); 28 C.F.R. § 5.100. 

FARA’s definition of a foreign principal is similarly broad. It is not limited to foreign governments or foreign political parties. Instead, a foreign principal can also include any foreign person or foreign entity (such as a foreign company, a foreign university, or even just a citizen of another country). See 22 U.S.C. § 611(b); 28 C.F.R. § 5.100.

Even if an entity or individual satisfies those definitions, FARA contains eight statutory exemptions from its registration obligation, such as for individuals who are engaged in purely humanitarian activities or individuals who are already registered under the Lobbying Disclosure Act (as long as no foreign government or foreign political party is the principal beneficiary of the lobbying activities). See 22 U.S.C. § 613; 28 C.F.R. §§ 5.300-5.307. 

The most commonly used exemption—the “commercial” exemption—was designed to prevent individuals and companies who are engaging in purely commercial activities (i.e., bona fide trade or commerce) from coming within FARA’s broad registration mandate. See 22 U.S.C. § 613(d); 28 C.F.R. § 5.304. Another common exemption is the legal representation exemption, which exempts from registration a person qualified to practice law who engages in the legal representation of a disclosed foreign principal in the ordinary course of that representation. See 22 U.S.C. § 613(g); 28 C.F.R. § 5.306.

It is these latter exemptions that are the focus of the most significant changes in the proposed rule, as well as other key changes to the treatment of “informational materials.”

II. Summary of Key Changes to FARA Regulations in Proposed Rule

FARA’s implementing regulations have not received an update since 2007—the year Apple released the first iPhone, Netflix streaming had just started, and Facebook and Twitter went global. Although the Justice Department and regulated community agree that significant changes are needed to modernize and clarify ambiguities, the proposed rule released last month achieves only some of those objectives. It also may complicate the analysis of some of the most frequently relied on exemptions in the statute, making it more difficult for companies and individuals to assess their compliance obligations.

A. Changes to “Commercial” Exemption

The “commercial” exemption is two-fold: it exempts from registration any person who engages or agrees to engage only in “(1) private and nonpolitical activities in furtherance of the bona fide trade or commerce of [a] foreign principal” or “(2) in other activities not serving predominantly a foreign interest.” See 22 U.S.C. §§ 613(d)(1) and (d)(2). While distinct, these two exemptions are often collectively referred to as the “commercial” exemption.

Under existing regulations, the Section (d)(1) exemption permits an agent of a foreign principal not to register if the activities are in furtherance of the “bona fide trade or commerce” of a foreign principal, “so long as the activities do not directly promote the public or political interests of [a] foreign government.” See 28 C.F.R. § 5.304(b). Political activities, such as lobbying, are not covered by this exemption. The Section (d)(2) exemption covers political activities that 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.” See 28 C.F.R. § 5.304(c).

The “commercial” exemption is the most widely used and the most frequent subject of the FARA Unit’s advisory opinions. It also faces the most dramatic changes under the proposed rule.

For the Section (d)(1) exemption, the proposed rule would delete the word “directly” in the phrase “directly promote,” purportedly to remove ambiguity by clarifying that the exemption does not apply when an agent’s activities—directly or indirectly—promote the interests of a foreign government. But the practical reality is that in many parts of the world, foreign governments and foreign government officials are inextricably intertwined with commercial business. For example, foreign government officials in the Gulf nations are also businesspeople involved in significant business transactions or relationships. The degree to which those individuals play a role in the operation or direction of those businesses varies widely. By removing the word “directly” from the phrase “directly promote,” the FARA Unit expands the groups of individuals and entities who would no longer be able to take advantage of the exemption, while muddying the line over exactly who and exactly what activities fall within the exemption.

For the Section (d)(2) exemption, the proposed rule makes changes that are much more significant, entirely replacing the old framework with a new two-phase inquiry. First, the proposed rule creates four categorical exclusions for individuals or entities seeking to use the exemption when:

• (i) the intent or purpose of the activities is to benefit the political or public interests of a foreign government or political party;
• (ii) a foreign government or political party influences the activities;
• (iii) the principal beneficiary is a foreign government or political party; or
• (iv) activities on behalf of a state-owned enterprise (or an entity that is directed or supervised by a foreign government or political party) promote the political or public interests of that foreign government or political party.

If any of these categorical exclusions are present, the exemption is unavailable. If none of these categorical exclusions are triggered, the proposed rule adopts a totality-of-the-circumstances test where a prospective agent needs to balance five non-exhaustive factors to guide whether the activities predominantly serve a foreign or domestic interest:

• (i) whether the public and relevant government officials already know about the relationship between the agent and the foreign principal;
• (ii) whether the commercial activities further the interests of the domestic commercial entity more or less than the foreign commercial entity;
• (iii) the degree of influence (including through financing) that foreign sources have over domestic non-commercial entities such as nonprofits;
• (iv) whether the activities concern laws and policies applicable to domestic or foreign interests; and
• (v) the extent to which any foreign principal influences the activities.

No single factor is dispositive. Instead, the proposed rule places the burden on a potential registrant to determine whether, given the totality of the circumstances, the predominant interest being served is domestic rather than foreign, such that the exemption should apply. 

This new test is ambiguous and somewhat subjective, and it is likely to generate more questions than answers about who needs to register and for what activities. Indeed, the FARA Unit’s commentary in the proposed rule makes clear that it “expects that advisory opinions and enforcement actions will clarify how these factors apply to a range of activities.” See Amending and Clarifying Foreign Agents Registration Act Regulations, 90 Fed. Reg. 40, at 45. It also raises questions about past advisory opinions, including the amount of weight those opinions still deserve if the rule is finalized without revision given that the analysis in those opinions predate the new totality of the circumstances test. 

B. Changes to “Legal Representation” Exemption

The proposed rule makes important changes to the legal representation exemption as well. Under existing regulation, the legal representation exemption is triggered once a person who is qualified to practice law engages or agrees to engage in the legal representation of a disclosed foreign principal before any court or agency of the United States. See 22 U.S.C. § 613(g); 28 C.F.R. § 5.306. 

In response to comments from the regulated community, the proposed rule codifies existing FAQs published by the FARA Unit to clarify that an attorney of record in any covered proceedings, investigations, or inquiries can also provide certain information about the activities to others, such as the press, without losing the exemption. The rule also clarifies that political activities under FARA do not fall within the exemption, so an attorney could not qualify for the exemption while seeking to persuade persons not involved in the proceeding, investigation, or inquiry (such as the public or Congress) to adopt or change foreign or domestic U.S. policy.

The FARA Unit’s commentary declines to address how this rule applies to non-attorney professionals or other legal support staff, suggesting instead that such non-attorneys working at an attorney’s direction should seek an advisory opinion based on the unique facts of a given representation.

C. Changes to Treatment of “Informational Materials”

The proposed rule also makes four notable changes to the treatment of “informational materials”:

• First, the rule creates a definition for “informational materials” (which was not previously defined by the statute or existing regulations) that is consistent with the statutory definition of “political activities.” If finalized, “informational materials” will include “any material that the person disseminating it believes or has reason to believe will, or which the person intends to in any way, influence any agency or official of the Government of the United States or any section of the public within the United States, with reference to formulating, adopting, or changing the domestic or foreign policies of the United States or with reference to the political or public interests, policies, or relations of a government of a foreign country or a foreign political party.” 
• Second, materials that satisfy the above definition—whether in print, online (including social media), or by any other method—must not only contain a conspicuous statement that discloses that the materials are being distributed on behalf of a foreign principal but must also now include the name of the country or territory where the foreign principal is located. The labeling requirements also vary depending on the medium through which the materials are disseminated (e.g., social media versus television).
• Third, the proposed rule makes clear that when an agent requests information or advice from any agency or official of the U.S. government, those communications must contain a statement about the agent’s relationship with a foreign principal. Notably, that includes communications as benign as an email to simply schedule a meeting to discuss a request.
• Fourth, the rule will now require informational materials to be filed on the FARA eFile system, absent special circumstances to be dealt with on a case-by-case basis. These materials must be uploaded within 48 hours of distribution of the materials.

Unlike the changes to some of the exemptions, each of the above changes to the treatment of “informational materials” adds helpful clarity to what is required of a registered agent. That is a plus in a regulatory area mired in ambiguity. But these changes also add considerable new burdens for foreign agents to ensure that they remain compliant, and like some of the changes to the exemptions, they are consistent with the Justice Department’s apparent intention to expand (rather than narrow) the obligations of foreign agents. 

III. The Proposed Rule Signals Growing FARA Enforcement Trend Will Continue

Two common themes emerge from the proposed rule: it seeks to broaden FARA’s reach by narrowing common exemptions, and it adds new obligations and burdens for foreign agents. Taken together, the changes suggest that the Justice Department intends to continue a trend toward aggressive enforcement of the statute, signaling to companies and individuals the importance of evaluating their FARA compliance obligations. 

The new FARA enforcement regime is a significant departure from its enforcement history. For its first eight decades, FARA largely sat dormant: there were few government resources devoted to its enforcement, little consequence for being out of compliance, and fewer than a dozen indicted criminal cases. That all changed after Special Counsel Robert Mueller’s investigation of Russian interference into the 2016 U.S. presidential election, which breathed new life into a statute that has since become a favored tool of the Justice Department to combat foreign influence. 

Since 2016, the Justice Department has aggressively enforced FARA, filing new criminal cases on a regular basis and ramping up its use of civil enforcement authorities to issue letters of inquiry and even seek civil injunctions. In the last year alone, the Justice Department secured criminal convictions in cases involving a then-sitting senator from New Jersey and several business associates, brought charges against a New York state official accused of acting as an agent of Korea and a Texas congressman accused of acting as an agent of companies owned and controlled by Azerbaijan, and resolved with a deferred prosecution agreement FARA violations against two political consultants acting as agents of Qatar. That followed years of bringing both civil and criminal cases against other government officials and corporate executives, including from the private equity and hospitality industries engaged in routine business activities, and including activity which most people would not necessarily think triggered a FARA registration obligation.

Given its broad, expansive interpretations of the statute, the Justice Department has also faced considerable setbacks, particularly involving corporate executives engaged in commercial activity. For example, the Justice Department charged President Trump’s former inaugural committee chairman and private equity executive Tom Barrack with violating FARA’s sister statute—18 U.S.C. § 951—for allegedly acting as an agent of the United Arab Emirates without prior notification to the Attorney General. A federal jury acquitted Mr. Barrack of all the charges.² In the civil arena, the Justice Department unsuccessfully sought to compel real estate developer and casino mogul Steve Wynn to retroactively register as an agent of the People’s Republic of China, even though the alleged activities had concluded years earlier. In United States v. Wynn, the D.C. Circuit Court of Appeals affirmed United States v. McGoff, holding that the Justice Department could not compel Mr. Wynn to register after he had ceased acting as an agent of a foreign principal.³

These setbacks have not deterred the Justice Department. Rather than adopting a more circumscribed view of FARA’s reach, the proposed rule is a clear attempt to expand its scope through regulation. For example, the changes to the “commercial” exemption, if finalized, significantly narrow the activities and categories of people and entities to which the exemption would apply going forward. That would, in turn, greatly expand the number of registrants who would have otherwise continued to take advantage of the exemption.

These changes are consistent with the Justice Department’s commentary in the proposed rule and with top DOJ officials’ recent public remarks. At the Sixth Annual ACI FARA Conference in December 2024, Deputy Assistant Attorney General Eun Young Choi made clear that FARA registrations and other enforcement activities are “robust” and remain a top priority. FARA Unit Chief Evan Turgeon highlighted that 2024 set a record for inspections and noted that money flowing from sovereign wealth funds was a major focus area. Other Justice Department officials underscored that corporate enforcement of FARA remains a top priority. 

While the Supreme Court’s decision in Loper Bright (which overturned Chevron) may ultimately impact some of the new regulations if finalized and challenged in court, the proposed rule is just the latest signal that the Justice Department intends to continue to aggressively enforce FARA going forward. That is unlikely to change in the new administration, though the global focus areas may shift from countries like Russia and the Middle East to countries like China and Iran. Regardless of geography, companies and individuals who engage with, interact with, or take money from foreign sources would be wise to evaluate their FARA policies and practices to ensure compliance in a new era for the statute. 

¹See U.S. Dep’t of Justice, The Scope of Agency Under FARA (May 2020), available at https://www.justice.gov/nsd-fara/page/file/1279836/dl.
²Rebecca Davis O’Brien, Former Trump Adviser Acquitted on Charges of Acting as Emirate Agent, NY Times (Nov. 4, 2022) https://www.nytimes.com/2022/11/04/nyregion/trump-thomas-barrack-acquitted.html
³AG of the United States v. Wynn, 636 F. Supp. 3d 96, 97 (D.C. Cir. 2024).

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Jim Bowman, an O'Melveny partner licensed to practice law in California; Mark A. Racanelli, an O'Melveny partner licensed to practice law in New York; Steven J. Olson, an O'Melveny partner licensed to practice law in California; and Jared R. Ginsburg, an O'Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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