Government Ramps Up False Claims Act Enforcement in Trade Cases, Experts Warn

Federal authorities are significantly expanding the use of the False Claims Act (FCA) in trade enforcement actions, with legal experts forecasting record numbers of settlements in the coming years, according to insights shared during a recent industry webinar.

The second Trump administration has clearly prioritized trade enforcement, establishing a dedicated Trade Fraud Task Force and opening more than 1,400 new FCA matters in 2024 alone, reflecting an aggressive approach to prosecuting customs and trade violations.

“The False Claims Act gives the government very broad investigative powers to serve what are called civil investigative demands and take depositions,” explained Jesse Witten, a health care partner who specializes in FCA matters. He noted this represents a significant legal advantage for investigators, as “this is a bit unusual” in that “the government ordinarily can’t compel a deposition” in many other types of cases.

This enhanced investigative authority allows federal prosecutors to compel testimony not only from defendants but also from third parties potentially involved in trade violations, creating a powerful tool for building cases.

Peter Baldwin, a business litigation partner, predicted that FCA enforcement will continue to accelerate, stating that “over the course of the next few weeks, you will have a number of settlements announced.” Looking further ahead, Baldwin emphasized that “2025 and 2026 are going to be record years for the FCA,” signaling sustained enforcement pressure on importers and companies engaged in international trade.

The experts clarified that Department of Justice enforcement actions aren’t targeting specific countries or industries, creating a broad risk landscape for businesses operating internationally. Baldwin specifically cautioned that companies should not assume they are immune from FCA liability based on the scale of their operations or the nature of their products.

“Companies shouldn’t think they are safe from FCA liability simply because the amount at issue is small or their product is not of strategic importance,” Baldwin warned, highlighting that even relatively minor trade violations could trigger substantial penalties under the FCA’s provisions.

The increased enforcement activity comes amid growing concerns about trade practices and customs compliance across multiple industries. The FCA, which imposes treble damages and significant penalties for those who knowingly submit false claims to the government, has traditionally been applied to healthcare fraud but is increasingly being leveraged to address customs violations, tariff avoidance, and misrepresentations in import documentation.

This shift represents a strategic enforcement approach that combines the traditional tools of customs authorities with the more punitive framework of the FCA, potentially creating substantial financial risks for companies that fail to maintain rigorous compliance programs.

The enforcement trend aligns with broader economic policies focused on protecting domestic industries and ensuring fair trade practices. As international supply chains face increasing scrutiny, businesses engaged in global commerce may need to reevaluate their compliance procedures and risk management strategies.

Industry analysts note that FCA investigations typically involve lengthy discovery processes and can result in settlements that far exceed the actual duties or fees evaded, making them particularly effective deterrents against trade violations.

For companies facing potential liability, early engagement with specialized counsel and thorough internal reviews of trade compliance systems may help mitigate risks in this intensified enforcement environment.