Last week the White House announced a new anti-corruption strategy — the United States Strategy on Countering Corruption, which believe it or not represents the country’s first comprehensive blueprint for reducing “the ability of corrupt actors to use the U.S. and international financial systems to hide assets and launder the proceeds of corrupt acts.”
Like the Federal Bureau of Investigation used financial crime (tax evasion) as a tool to bring down the notorious gangster Al Capone, the just released anti-corruption strategy will be a tool with which the U.S. government goes after foreign actors who attempt to interfere with American democratic institutions and mechanisms.
Yes, international businesses have known for decades about the Foreign Corrupt Practices Act, but as China-savvy businesspeople know, heaven is high and the emperor is (usually) far away, as the saying (天高皇帝远) goes.
Last week’s announcement suggests the emperor (in this case, President Biden) will be using all his resources – the Departments of State, Treasury (including CFIUS), and Commerce, along with USAID – to “more effectively combat illicit finance, better hold corrupt actors accountable, and strengthen the capacity of activists, investigative journalists, and others on the front lines of exposing corrupt acts.”
The Anti-Corruption Strategy outlines five “mutually reinforcing pillars” that will (if things go as planned) allow government agencies to coordinate their efforts in pursuit of corrupt actors who are deemed a threat to national security. You can read the entire Anti-Corruption Strategy document here, but in brief, the five areas of focus are:
- Modernizing, coordinating, and resourcing U.S. Government efforts to 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 achieve anti-corruption policy goals
The agencies charged with executing the Anti-Corruption Strategy will focus first on identifying targets (i.e. threats to U.S. democracy and national security, such as the ransomware attack on Colonial Pipeline in May 2021) and building cooperative infrastructure among government agencies, which are generally not known for their propensity to cooperate with one another.
To “follow the money” (as was done with Al Capone), the government says it plans to require increased transparency in the ownership of “opaque corporate structures” and real estate that may have been acquired in order to launder criminal proceeds. The government also says it will work with Congress to update regulations in order to make it harder for financial services providers such as lawyers and accountants to facilitate transactions deemed corrupt. And U.S. agencies will build relationships with foreign counterparts in support of trans-national intelligence gathering, investigation and prosecution.
The trans-national element is important, and the Anti-Corruption Strategy prioritizes detecting and disrupting foreign bribery, as well as “establishing a kleptocracy asset recovery rewards program that will enhance the U.S. Government’s ability to identify and recover stolen assets linked to foreign government corruption that are held at U.S. financial institutions.”
This capability already exists, and we have seen it exercised in the context of sanctions the U.S. has levied over the past 40 years against various autocratic regimes and their leaders (e.g. Iraq, Libya, Myanmar, Syria, Zimbabwe), but the new Anti-Corruption Strategy promises that “ill-gotten gains” will be a priority (and, the government hopes, a deterrent).
The Strategy also says the government also plans to work with the private sector “to improve the international business climate by encouraging the adoption and enforcement of anti-corruption compliance programs by U.S. and international companies.” Again, this suggests that “foreign corrupt practices” will receive far greater scrutiny than in the past.
In keeping with President Biden’s efforts to shore up U.S. alliances and standing in multilateral global bodies, the Strategy outlines the U.S. Government’s commitment “to strengthening the international anti-corruption architecture, which includes multilateral initiatives, commitments, and standards that push countries to make real improvements in countering corruption.” This is one component where the U.S. has and continues to lead where the Chinese government often uses anti-corruption campaigns to simultaneously make systemic improvements and weed out Party members deemed problematic by Xi Jinping.
These efforts by the U.S. will include working closely with allies and G7 and G20 nations (including China) to implement strong transparency and anti-corruption measures, building and expanding “accountable, effective, and resilient security institutions to target corruption in finance, acquisition, and human resources functions” and” reinvigorating U.S. participation across a number of initiatives, including the Open Government Partnership and Extractive Industries Transparency Initiative.”
The United States Strategy on Countering Corruption is a clear extension of President Biden’s overall effort to reposition the U.S. as a leader in a global coalition of democratic nations that are facing an existential threat and are under attack from authoritarian regimes. A significant priority of this initiative will be diplomatic engagement and the development of global programs and networks that identify corruption as an important source of funding for anti-democratic forces.
In announcing the Anti-Corruption Strategy, the White House said, “Corruption is a cancer within the body of societies—a disease that eats at public trust and the ability of governments to deliver for their citizens. The deleterious effects of corruption impact nearly all aspects of society. It exacerbates social, political, and economic inequality and polarization; impedes the ability of states to respond to public health crises or to deliver quality education; degrades the business environment and economic opportunity; drives conflict; and undermines faith in government. Those that abuse positions of power for private gain steal not just material wealth, but human dignity and welfare.”
And if you’re wondering “what’s in it for me?”, back in June when he directed his national security team to develop the Strategy announced last week, President Biden said, “[B]y effectively preventing and countering corruption and demonstrating the advantages of transparent and accountable governance, we can secure a critical advantage for the United States and other democracies.”
Over the years we have written about the Foreign Corrupt Practices Act, mostly in the context of conducting business in China, and many times we have reminded readers that telling the court your local partner said “this is the way things are done here” is not a sound legal defense in most countries.
Over the coming months the White House and other U.S. government agencies will undoubtedly announce specific measures that will be a part of the United States Strategy on Countering Corruption, and we look forward to benefiting from the fruits of the administration’s efforts to protect and support the millions of companies that play by the rules at home and abroad.