There has been significant movement recently, by both the Biden administration and Congress, to enhance the government's ability to tackle corruption. This article provides a summary of those efforts and several pillars of the Biden administration's enforcement strategy.
Since the beginning of June 2021, the Biden administration has announced a wave of initiatives to combat corruption and crack down on illicit financing. On 3 June 2021 President Biden issued his first National Security Study Memorandum (NSSM), establishing the fight against corruption as a national security interest. Just days later, on 7 June 2021, US Attorney General Merrick Garland announced initiatives that the Department of Justice (DOJ) will be taking in partnership with the Department of Homeland Security (DHS) to combat corruption and transnational human smuggling and trafficking in Central America.
These announcements coincided with Congress's announcement of the launch of its Caucus Against Foreign Corruption and Kleptocracy and the first UN General Assembly special session on corruption, which took place in the first week of June 2021. The foreign ministers from the Group of Seven (G7) countries – including the United States – and the high representative of the European Union also issued a statement supporting the aims of the special session and reaffirming the fundamental role of the UN Convention Against Corruption (UNCAC), "the only legally binding universal instrument on corruption, negotiated on the basis of consensus".
Taken together, these recent announcements elevate the extent to which the US government is fighting corruption as a policy priority. In light of this focus, and various initiatives including those discussed below, companies conducting business overseas should anticipate an assertive enforcement agenda from the Biden administration.
Biden's NSSM announced a comprehensive initiative to revamp efforts to tackle domestic and foreign corruption. According to the NSSM, acts of corruption deplete the global gross domestic product by between 2% to 5%. Although these "costs are not evenly shared worldwide, the abuse of power for private gain, the misappropriation of public assets, bribery, and other forms of corruption impact every country and community".
A White House press release stated that the "Biden-Harris Administration is committed to tackling corruption as an economic and national security priority, and has pledged to lead international efforts to bring transparency to the global financial system and close loopholes that undermine democracy".
Specifically, the NSSM directs a 200-day interagency review – consisting of more than a dozen agencies including the Department of State, the Department of the Treasury, the DOJ, the DHS and the Central Intelligence Agency – to culminate in a report with recommendations on how the government and its partners can "promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities".
These goals align with the commitments that the G7 foreign ministers and the high representative of the European Union made in their statement on the UN General Assembly special session on corruption. These commitments centred on themes such as:
- prevention of corruption and other forms of illicit finance;
- transparency in governance;
- law enforcement cooperation;
- enforcement of domestic and foreign bribery laws;
- denial of a safe haven to corrupt individuals;
- international cooperation;
- championing the role of civil society and the media; and
- targeting money laundering and asset recovery.
On 7 June 2021 Garland announced initiatives to fight corruption and combat human smuggling and trafficking in Central America. As to its focus on anti-corruption, the DOJ committed to increasing its focus on investigations, prosecutions and asset recoveries relating to corruption in Northern Triangle countries (ie, Guatemala, El Salvador and Honduras) through:
- Foreign Corrupt Practices Act (FCPA) enforcement;
- counter-narcotics prosecutions; and
- the Kleptocracy Asset Recovery Initiative, intended to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit those harmed by the corruption and abuse of power.
Further, the Office of Prosecutorial Development, Assistance and Training (OPDAT) and the International Criminal Investigative Training Assistance Programme (ICITAP), in coordination with the State Department, will work with local prosecutors and investigators to support their efforts to prosecute smuggling and trafficking networks and develop leads that can be pursued by the Kleptocracy Asset Recovery Initiative.
Congressional Caucus Against Foreign Corruption and Kleptocracy
On 10 June 2021 Congress also announced the launch of its bipartisan Caucus Against Foreign Corruption and Kleptocracy, the first institutionalised congressional body dedicated to information sharing and addressing global corruption. Helsinki Commission Chair Senator Ben Cardin commented as follows:
The fight against corruption needs to be seen as a national security priority of the highest order… This new caucus will elevate the problem of corruption so it can receive the high-level attention required to deter such corrosive activity.
Representatives Tom Malinowski, John Curtis, Bill Keating and Brian Fitzpatrick launched the caucus. A statement on the caucus's website notes as follows:
The new caucus will focus on fighting kleptocracy, an authoritarian governance model in which political leaders routinely engage in illicit self-enrichment, maintain power through corrupt patronage networks, exploit rule of law jurisdictions to conceal and protect stolen assets, and use strategic corruption as a tool of foreign policy.
The caucus will provide a forum where members and staff will be able to share perspectives and coordinate efforts to fight foreign corruption. In addition, the caucus will:
- hold periodic hearings;
- sponsor informal roundtables and briefings with leading experts;
- coordinate oversight letters and legislative initiatives; and
- facilitate information sharing across committees.
The president's strong anti-corruption agenda indicates an intent to employ all enforcement mechanisms at the administration's disposal in the fight against corruption. Three pillars of Biden's strategy stand out.
Curbing illicit financing
Biden's NSSM is clear that in order to combat illicit financing, the United States must "robustly implement Federal law requiring United States companies to report their beneficial owner or owners to the Department of the Treasury". In hand with this requirement, the administration calls for "accelerat[ing] ongoing efforts to establish a 'beneficial ownership' registry'" to prevent bad actors from hiding the proceeds of corruption, limit their ability to anonymously buy residential real estate and close loopholes in existing regulatory frameworks.
This directive builds on the sweeping anti-money laundering (AML) legislation passed at the beginning of 2021 (the Anti-money Laundering Act 2020 (AMLA) and the Corporate Transparency Act (CTA)). The AMLA updated the Bank Secrecy Act (BSA) for the first time in decades and passed numerous provisions to bolster AML and combat the financing of terrorism enforcement.(1) The CTA, a provision of the AMLA, requires non-exempted companies to report information about beneficial owners to the Financial Crimes Enforcement Network (FinCEN) and requires FinCEN to maintain a non-public database of companies' beneficial ownership information. These statutes complement the Biden administration's recent budget proposals to Congress, which contain substantially increased resources for the Internal Revenue Service to close the tax gap through increased enforcement.
Holding corrupt actors accountable
The president also called for an increased use of sanctions and criminal or civil enforcement actions, including actions under the DOJ's Kleptocracy Asset Recovery Initiative, to hold corrupt actors accountable. Biden's directive marks a significant commitment, one that the administration has already acted on. In April 2021, Biden issued an executive order calling out Russia for its role in contributing to transnational corruption and expanding the White House's authority to sanction Russia. The Department of Treasury implemented numerous sanctions against Russia pursuant to the executive order in response to the SolarWinds attack, Russia's attempt to influence the 2020 US presidential election and Russia's occupation of Crimea. An increased use of anti-corruption sanctions under the Global Magnitsky Act, which authorises the president to impose economic sanctions on and deny entry into the United States to any foreign individuals for human rights abuses and corrupt conduct, is expected.
In addition to the increased use of sanctions, there will likely be more enforcement actions from the DOJ. The DOJ has already prioritised tackling corruption and human smuggling and trafficking in Central America through the establishment of Joint Task Force Alpha and its partnership with the DHS. Garland further committed the OPDAT and the ICITAP to working with the State Department and local law enforcement to develop leads that can be pursued by the Kleptocracy Asset Recovery Initiative. As a result of this focus on Central America, there will likely be a rise in FCPA investigations and the use of AML laws.
Cooperation across agencies and with international partners
The other key pillar in the Biden administration's strategy is increased cooperation among federal agencies and coordination with international partners. The NSSM directs agencies to work together to:
- identify opportunities to pool resources;
- establish new structures;
- improve intelligence collection and analysis; and
- increase resources aimed at rooting out domestic and foreign corruption.
The NSSM also directs departments and agencies to foster partnerships and increase coordination with international partners through the United Nations, the G7 and the Financial Action Task Force. These efforts will include:
- strengthening AML provisions to close loopholes that allow bad actors to mask the proceeds of corruption;
- "identifying, freezing, and recovering stolen assets through increased information sharing"; and
- "implement[ing] transparency, oversight, and accountability measures, which will counter corruption and provide citizens with accessible and usable information regarding government programs, policies, and spending".
In short, these various initiatives confirm what observers have long predicted – that the Biden administration would bring with it a robust enforcement agenda, including in the anti-corruption space. Companies with global operations are well advised to consider further compliance enhancements – both to detect and remedy issues in the first instance and to be able to demonstrate to regulators the extent of internal efforts in the event that such a compliance issue were to come to light.(2)
Endnotes
(1) Notably, the AMLA contains significant incentives for whistleblowers, who can receive up to 30% of the total covered penalties for BSA violations, and also significantly expands the authority of the Department of the Treasury and the Department of Justice to subpoena foreign banks that maintain correspondent accounts in the United States and request records relating to those accounts.
(2) To view the sources for this article, please click here.
