The Biden-Harris Administration is making the fight against global corruption a key policy objective. Through its new United States Strategy on Countering Corruption, released on December 6, 2021, the Biden-Harris Administration is pushing for stronger enforcement of current anti-corruption and anti-money laundering laws as well as seeking to pass new legislation and regulations focused on transparency of certain financial and real estate transactions. Included in this more aggressive enforcement approach is holding key gatekeepers, such as accountants and lawyers, accountable. Clients should proactively review their compliance programs to make sure they follow current best practices and pay close attention to the Biden-Harris Administration’s anti-corruption initiatives and how new regulations may affect businesses going forward.
In June 2021, President Joe Biden, for the first time, identified the fight against corruption as a core U.S. national security interest. In support of that effort, President Biden directed his national security team to lead the creation of a comprehensive strategy that would improve the U.S. Government’s “ability to prevent corruption, 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.”[1] In accordance with the President’s directive, the Administration released the first-ever United States Strategy on Countering Corruption (the “Strategy”).[2] The Strategy outlines its approach to elevating the fight against corruption, placing particular emphasis on better understanding and responding to the threat of corruption’s “transnational dimensions,” including by taking additional steps to reduce the ability of corrupt actors to use financial systems to hide assets and launder the proceeds of corrupt acts.[3] The Strategy marks a new chapter in the U.S.’s efforts to curb the harmful effects of corruption and will require that federal departments and agencies report annually to the President on progress made in support of the Strategy’s objectives.
The Strategy organizes U.S. Government efforts to fight corruption under five “mutually-reinforcing” pillars. The five pillars are:
- Modernizing, coordinating, and resourcing U.S. Government efforts to fight corruption, which includes prioritizing intelligence collection and analysis on corrupt actors and their networks. This pillar also seeks to “[i]ncreas[e] law enforcement resources and bolster[] information sharing between the intelligence community and law enforcement.”[4]
- Curbing illicit finance by addressing deficiencies and gaps in the U.S.’s own regulatory system and working with the U.S.’s allies and partners to do the same. This pillar is based on the recognition that corrupt actors and their facilitators rely on vulnerabilities in the U.S. and international financial systems to obscure ownership of assets and launder proceeds of illicit activities.
- Holding corrupt actors accountable by vigorously enforcing the current anti-corruption and anti-money laundering regimes and working with partner countries as well as nongovernmental entities to enforce anti-corruption and anti-money laundering laws.
- Preserving and strengthening the multilateral anti-corruption architecture. Under this pillar, the U.S. will seek to bolster existing anti-corruption institutions and implementation of existing frameworks such as pushing partners to live up to their obligations and holding accountable those who fail to do so. Under this pillar, the U.S. will also push for anti-corruption measures in multilateral fora.
- Improving diplomatic engagement and leveraging foreign assistance resources to advance policy objectives. This pillar focuses on assessing the U.S.’s assistance dollars and ensuring that those assistance efforts fully align with the U.S.’s broader policy goals. The U.S. will also expand its anti-corruption focused U.S. assistance and monitor the efficacy of that assistance. Additionally, the U.S. will elevate corruption as a diplomatic priority in a manner tailored to local conditions.
Increased Enforcement
A prominent aspect of the new Strategy is increased enforcement efforts. The third pillar of the Strategy focuses specifically on holding corrupt actors accountable. Those who choose to engage in corruption will be held accountable by the U.S. Government, which will do so by “[e]levating diplomatic and development efforts to support, defend, and protect civil society and media actors, including investigative journalists who expose corruption”; “[l]aunching a new initiative to engage partner countries on detecting and disrupting foreign bribery”; “[e]stablishing 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”; and “[w]orking 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.”[5]
Relatedly, under the second pillar – which focuses on curbing illicit finance – the U.S. Government will aim to address deficiencies in its regulatory system by, among other things, “[w]orking with the Congress and within existing regulations to make it harder for certain gatekeepers to the financial system – including lawyers, accountants, and trust and company service providers – to evade scrutiny.”[6] Gatekeepers often find themselves under the microscope given the nature of their roles, and the Strategy confirms that future enforcement actions will take a hard look at their involvement should allegations of corruption arise.
New Legislation and Regulations
The Biden-Harris Administration has also committed to “[e]nacting first-of-their-kind regulations that target those closest to real estate transactions to reveal when real estate is used to hide ill-gotten cash or to launder criminal proceeds” and “[i]ssuing beneficial ownership transparency regulations that help identify bad actors hiding behind opaque corporate structures.”[7]
The FY 2022 President’s Budget Request included a significant increase in resources in support of Financial Crimes Enforcement Network authorities to build a new beneficial ownership data system. A main goal of the second pillar is to address deficiencies in the anti-money laundering regime. Specifically, the U.S. will publish regulations and build a beneficial ownership database to implement the Corporate Transparency Act. These new regulations will collect information on the true owners of certain shell companies that are often used to launder illicit proceeds of corruption. Additionally, the U.S. Treasury will issue regulations that will impose reporting requirements on those with information regarding real estate transactions that are also often used to hide illicit proceeds.
Notably, the Biden-Harris Administration is considering additional laws that would cover key gatekeepers – such as lawyers, accountants and other service providers – and would hold these actors accountable for understanding the nature and source of income of their clients and prospective clients. Any new legislation or regulations in this area would be a significant development for these professions.
The Strategy also contemplates that the Treasury will re-examine the 2015 Notice of Proposed Rule Making (NPRM) that would prescribe minimum standards for anti-money laundering programs and suspicious activity reporting requirements for certain investment advisors. In its 2015 NPRM, the Treasury, addressing a lack of regulatory oversight, commented that it is possible for money launderers to evade scrutiny more effectively by operating through investment advisers rather than through broker-dealers or banks.[8] In addition to re-examining the 2015 NPRM, the Strategy notes that the Treasury will further consider whether to cover private placement funds, including investments offered by hedge funds and private equity firms.
Attempts to Operate in a Global Environment
Throughout the Strategy, it is apparent that the Biden-Harris Administration is intent on working with global partners to fight corruption around the world, not just within the U.S. This has been a long-standing effort through enforcement of the Foreign Corrupt Practices Act and, in recent years, increased enforcement of anti-corruption laws globally. The U.S. Government will continue to work with countries to bolster anti-corruption enforcement including by working with foreign governments to multilateralize economic sanctions and visa restriction tools. Under the first pillar, one key goal is to increase the focus on the transnational dimensions of corruption through human and financial resourcing, information and intelligence collection and analysis, as well as through foreign assistance, information sharing, and robust partnerships with the private sector, multilateral institutions, civil society, and media actors. Additionally, the U.S. is continuing to assist foreign governments seeking to enact and implement foreign bribery laws.
A key piece of legislation aimed at fighting corruption globally is the Kleptocracy Asset Recovery Initiative, through which the Department of Justice (DOJ) and U.S. Attorney’s Offices recover corruption proceeds around the world. Additionally, the U.S. Treasury is establishing a pilot Kleptocracy Assets Recovery Rewards program that will provide payments to individuals for information leading to the identification and recovery of stolen assets linked to foreign government corruption that are held at U.S. financial institutions.
Data Analytics
In recent statements and policies, the DOJ has signaled an increased focus on data analytics in terms of both tools it will use in its prosecutions and what it expects of companies as part of their compliance efforts. In line with this focus, the Strategy also emphasizes the importance of data analytics for anti-corruption enforcement. One of the strategic objectives under the first pillar is to enhance corruption-related research, data collection, and analysis.[9] This will involve, among other efforts, the U.S. Government augmenting and improving its analysis and understanding of how corruption threatens the U.S. and its allies and working toward a more comprehensive understanding of the threat, including by sharing information and data among various levels of government. In furtherance of the objectives of the second pillar, to curb illicit finance, the U.S. plans to build a database of the beneficial owners of certain companies in order to help domestic and international partners identify bad actors.[10]
As noted in one of the “spotlight” paragraphs in the Strategy, the U.S. has increasingly incorporated technology into its criminal justice reform and anti-corruption programming.[11] As technology improves and evolves, we can expect to see greater attention paid to data analytics and its use featured more prominently in the tools the government will turn to in the fight against corruption.
Conclusion
Under these five pillars, the Biden-Harris Administration is continuing a trend to broaden the fight against corruption. While the Foreign Corrupt Practices Act has been an effective tool in fighting corruption for the DOJ and Securities and Exchange Commission, it has its limits. The U.S. Government has been attempting to pass other legislation to improve and expand its anti-corruption efforts, such as the Kleptocracy Asset Recovery Rewards Act. One key area of focus we expect to see is the expansion of the existing anti-money laundering regime targeting real estate, corporate transparency, and gatekeepers. The Biden-Harris Strategy emphasizes aggressive enforcement of existing laws as well as the consideration of additional legislation.
Additionally, the Biden-Harris Administration recognizes that many anti-corruption efforts can only be successful with assistance from global partners and a willingness to work together. If the Administration can successfully implement these pillars, the result will be a global community working together to fight corruption. While it remains to be seen what new legislation and actions may be implemented as a result of this Strategy, clients should ensure that they have developed and implemented robust anti-corruption policies to address existing legislation and that they stand ready to implement new legislation that may be coming down the road.
