In December 2021, the White House issued the United States Strategy on Countering Corruption (the Strategy). The Strategy was issued pursuant to a June 3, 2021 National Security Study Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest (the NSSM).
Although the issue of corruption has been linked to national security in the past, the NSSM’s pronouncement that the fight against corruption represents a “core” national security interest, and the investing of responsibility for coordinating a strategy to deal with the issue in the National Security Council, elevated the issue well beyond any previous statement or activity, and potentially opened the door to resources and initiatives that, without such linkage, would not have been available.
The Strategy announced by the White House has five so-called “pillars”:
- Modernizing, Coordinating and Resourcing the US Government Efforts to Better Fight Corruption
- Curbing Illicit Finance
- Holding Corrupt Actors Accountable
- Preserving and Strengthening the Multilateral Anti-Corruption Architecture
- Improving Diplomatic Engagement and Leveraging Foreign Assistance Resources to Advance Policy Objectives
Each pillar delineates specific strategic objectives, or “lines of effort,” which seek to integrate anti-corruption efforts into government policy-making across the board.
The Strategy is concerned about the effects of corruption on democracy, human rights and the rule of law, governance, and other conduct, particularly from a transnational rather than a purely domestic perspective. Kleptocracy, which it defines as “a government controlled by officials who use political power to appropriate the wealth of their nation,” and can include state capture, receives significant attention, as does “strategic corruption,” defined as “when a government weaponizes corrupt practices as a tenet of its foreign policy.” The Strategy also focuses on transnational organized crime. The Strategy also makes clear that private sector actors are understood as playing a key role in combating corruption, stating that the United States will seek to enlist the private sector as a “full-fledged partner in the fight against corruption,” and that private sector actors are expected to play their part by, inter alia, engaging in robust self-regulation and development of compliance programs.
The Strategy details concerns about the effects of corruption, focusing on particular types of activities and actors, including various types of service providers and intermediaries, that may represent current systemic weaknesses or threats:
- Financial institutions and other financial actors involved in promoting money laundering and other illicit activities
- High-value commodities trading and trafficking by corrupt elites and non-state armed groups
- Real estate investment service providers
- Shell companies and other opaque corporate structures
- Under-regulated professional service providers and gatekeepers
- Logistics and transportation providers
- Authoritarian regimes and their proxies, including state-directed cross-border investments (the so-called “weaponization” of corruption)
Implications to the private sector
From a private sector commercial perspective, the following “lines of effort” from the five pillars appear to be the most noteworthy:
- FCPA and Related Law Enforcement. The Strategy promises vigorous enforcement by the United States of the FCPA, anti-money laundering laws, and related legal authorities (including tax enforcement, kleptocracy asset recovery, and forfeitures).
- It expresses an intent to do more to gather and share information, including through intelligence efforts that will receive increased prioritization in this area, increasing law enforcement resources, and other methods.
- The use of cryptocurrency in connection with corruption is targeted for increased enforcement attention by the Department of Justice, through a newly established Task Force, the National Cryptocurrency Enforcement Team.
- It also indicates an intention to work with partner governments to enforce foreign bribery laws and to enhance their ability to respond to evidence requests and to restrain and recover stolen assets.
- New Rules to Combat Illicit Finance. The Strategy, under this second pillar, highlights the likely emergence of a number of new regulatory reporting requirements in a variety of areas where deficiencies are perceived to exist:
- Ensuring that regulations implementing the provisions of the Corporate Transparency Act (CTA) passed by the United States in January 2021 as part of the Anti-Money Laundering Act of 2020, issued in proposed form the day after the Strategy’s release, result in the effective collection of beneficial ownership information on those controlling anonymous shell companies; requiring disclosure of beneficial ownership in government contracting; and increasing the resources available to the Treasury’s Financial Crimes Enforcement Network (FinCEN).
- Increasing transparency in real estate transactions by establishing additional reporting requirements (following the Strategy, an Advanced Notice of Proposed Rulemaking was issued by FinCEN.
- Expanding gatekeeper (lawyers, accountants and trust and company service providers) responsibilities, including by working with Congress as necessary to secure additional authority in this area, and considering ways to increase penalties on gatekeepers who facilitate corruption and money laundering by, for example, working with states to levy professional sanctions.
- Prescribing minimum reporting standards for investment advisors, and other types of equity funds, including private equity.
- Reviewing the risks posed by digital assets from a corruption perspective.
- Developing rules to combat money laundering, terrorism finance, and other illicit activities through the trading in markets in art and antiquities.
- Working with allies and partners to push key gatekeepers and facilitators to tighten ways in which corrupt actors move money, including in the gold and natural resource areas where key facilitators identified include transportation, logistics, and construction industries.
- Working with domestic and international stakeholders to leverage increased global interest in environmental, social, and governance investing as part of broader discussions on gatekeeping, and encouraging clean corporate governance, including by improving organizational transparency in corporate decision making, board makeup, and executive compensation.
- More Integrated Efforts of Government. In recent years there has been an increase in the variety of tools used by government agencies to combat corruption. This includes the “No Safe Haven” visa denial policy, focused on the demand side, Global Magnitsky sanctions targeting corrupt actors, and others. This trend can be expected to increase as a result of the Strategy. Various agencies, including US Departments of Treasury, Commerce, and State, and the US Agency of International Development have established or are establishing cross-cutting anti-corruption teams to develop and support their initiatives.
- The Demand Side. The Strategy envisions working with Congress to criminalize the demand side of bribery for foreign public officials. Legislation to this effect has been introduced in recent congressional sessions, including the current one, but thus far has not advanced. The Strategy also envisions the establishment of a pilot Kleptocracy Asset Recovery Rewards Program through the Treasury Department, and the continuation of the Department of Justice’s Kleptocracy Asset Recovery program.
- Multilateralism and Cooperation. The Strategy emphasizes the importance of strong multilateral engagement, in the Organisation for Economic Co-operation and Development, United Nations, Organization of American States, and other institutions. In the defense sector, it envisions expanding NATO’s Building Integrity Program to target corruption in finance, acquisition, and human resources function. It also calls for cooperation, not only among governments, but in addition through public-private partnerships with business and civil society, including investigative journalists.
- Development Assistance and Diplomatic Engagement. The Strategy aims to harness US development assistance resources in anti-corruption efforts, including proactively and reactively (when the US is confronted with so-called “strategic corruption” efforts by other countries). Corruption will be elevated as a diplomatic priority. Perhaps based on the recent Afghanistan experience, the Strategy also calls for improving security assistance and integrating anti-corruption considerations into military planning, analysis and operations. Companies involved in development and military assistance projects should be aware of the increased focus on corruption, while the increased diplomatic focus on this issue is potentially relevant to all companies doing business overseas.
Finally, the Strategy calls for annual progress reports to be made by federal departments and agencies, coordinated by the National Security Council, to the President.
The Strategy is also noteworthy for what it does not say. It does not, for example, identify any country by name, except when referencing existing pilot programs in certain countries. And yet, the various references to “strategic corruption” and state-sponsored activity leave little doubt that concerns about China and Russia have loomed large in the preparation of the strategy and the overall national security focus. References to migration and criminal groups imply other parts of the world as well, including Central America.
Many of the implications of the Strategy will require time to emerge, some more than others. Foreign actors will be watching closely to see to what extent the nationalist strains underlying the strategy may politicize anti-corruption efforts. But some things are clear at this stage: The Strategy clearly portends more regulation of certain actors and activities, more enforcement of the FCPA and related laws, perhaps more legislation, and major realignment of overseas assistance and diplomatic efforts. That said, among the implications for the private sector, these priorities and initiatives contained in the Strategy make it more critical than ever that companies have in place effective programs to prevent, detect and remediate corrupt practices within their organizations, and to develop and maintain those programs in the context of broader efforts to promote robust and transparent corporate governance.
