The FCPA And Fight Against Terrorism

by Thomas Fox
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https://jdsupra-html-images.s3-us-west-1.amazonaws.com/2bf121e6-7b8b-47ce-b1e0-e8a7d7dfcf96-bag-of-cash.jpgI admit it took me awhile to finally get it. I have long wondered what could have caused the explosion in Department of Justice (DOJ) and Securities and Exchange Commission (SEC) enforcement of the Foreign Corrupt Practices Act (FCPA). Starting in about 2004, FCPA enforcement has not only been on the increase from the previous 25 years of its previous existence but literally exploded. Of course, I had heard Dick Cassin and Dan Chapman, most prominently among others, talk and write about FCPA enforcement as an anti-terrorism security issue post 9/11, but I never quite bought into it because I did not understand the theoretical underpinnings of such an analysis.

I recently finished listening to the Teaching Company’s “Masters of War: History’s Greatest Strategic Thinkers” by Professor Andrew Wilson of the Naval War College. It is a 24 lecture series on the content and historical context of the world’s greatest war strategists. In his lecture on ‘Terrorism as Strategy” Professor Wilson explained that corruption is both a part of the strategy of terrorism and a cause of terrorism. After listening to his lecture and reflecting on some of the world events which invoked both parts of his explanation, it became clear to me why FCPA enforcement exploded and, more importantly, why the US government needs to continue aggressive enforcement of the FCPA and encourage other countries across the globe to enact and enforce strong international and domestic anti-corruption and anti-bribery laws.

Corruption as a Terrorist Strategy

One need look no further than last fall’s massacre of civilians in Kenya at the Westgate Mall to see how terrorists use bribery and corruption. Dick Cassin, who has consistently written about the connection between bribery-corruption and security did so again after the attack, in a post entitled “The Price for Impunity is Higher Than Ever”, where he pointed to the continued corruption in Kenya and how this corruption led to guns and terrorists being able to cross the border and carry out the attack. Cassin said that the border controls are so porous due to corruption in Kenya that in a prior episode involving the UK Serious Fraud Office (SFO), the UK government had banned certain Kenyan government officials from traveling to the UK, in large part because the country failed to take action against obvious cases of bribery and corruption. He said, “The visa ban followed a criminal investigation by the U.K. Serious Fraud Office into contracts between the Kenyan government and U.K. shell businesses. The contracts for passport controls and border security systems went to phantom overseas companies at prices about ten times the actual cost. Kenya refused to cooperate and in early 2009 the SFO was forced to end its investigation.”

Giles Foden, in an article in The Guardian, entitled “Kenya: behind the terror is rampant corruption”, was even more specific about the culture of crime and corruption in Kenya, when he that corruption was one of the signature factors, which led to the massacre. He wrote, “In Kenya crime and terrorism are deeply linked, not least by the failure of successive Kenyan governments to control either. These attacks are part of a spectrum of banditry, with corruption at one end, terrorism at the other, and regular robbery in the middle. Money that should have been spent on security and other aspects of national infrastructure has been disappearing for generations.”

He concluded his piece with this warning, “You can gesture at the transnational problem of Islamist terrorism all you like, but it’s just hot air unless you invest in proper security on the ground in your own country, with the right safeguards to civil liberties. For now Kenya must mourn its dead. But unless the corruption stops, and real investment is made in the social fabric, Kenya will once again be faced with systemic shocks it is hardly able to deal with.”

Professor Wilson made it clear that terrorists incorporate these concepts into their overall strategy. If a country has strong border controls and government officials, which I believe is the situation here in the US and UK, then the terrorist will seek out a country friendly to the US or UK, where the government officials can be bribed or corrupted and use those as ports of entry. Similarly, they can directly attack civilians in a country like Kenya where the border is so porous that both terrorist and arms can flow through with impunity.

Corruption as a Precursor to Terrorism

But, not only can corruption be used by terrorists, ironically, it can also be the cause of terrorism. One only need look at the Arab Spring and what started it. It was a lone fruit and vegetable seller, Mohammed Bourazizi, who doused himself in paint thinner and set himself on fire in front of a local municipal office because of the corruption of Tunisian government officials and police officers. Yuri Fedotov, head of the United Nations Office of Drugs and Crimes (UNODC) has said that the Arab Spring’s call for greater democracy was “an emphatic rejection of corruption and a cry for integrity” and that the international community must listen to the millions of people involved. At the center of the Arab Spring movement was a deep-seated anger at the poverty and injustice suffered by entire societies due to systemic corruption. Do you think there was any terrorism associated with the Arab Spring?

If one wants to look back a little further in history, I would submit that China is the most prime example of the 20th century. For all the hand wringing about “Who Lost China”, I think a clear key was the endemic corruption of the Nationalist and their allies. Their corruption helped remove the moral authority of their government and allowed the Communists to take up that mantle in the 1940s. The Nationalists were certainly defeated on the battlefield but the groundwork was laid in large part due to the corruption of their government. It really did not matter how much money, foreign aid and material that the US government provided to Chaing Kai-Shek; his cronies and his government simply stole it, sold it or gave it away for other favors.

Moving to today’s news, the government of Thailand is currently under siege by its own citizens. While economic issues are certainly a part of the problem, so is the corruption of the government. The corruption is so bad that even China has scrapped a deal to purchase some 1.2MM tons of rice from Thailand. Michael Peel, writing in the Financial Times (FT), in an article entitled “China ditches Thai rice deal over concern on corruption”, pointed out that this “is about 14 percent of [Thailand’s] annual exports.” He said “Beijing was spooked by the Thai national anti-graft agency’s probe into the rice support programme.” One Thai government official said that the Chinese pulled out of the deal because they “lacked confidence to do business with us”. Peel also wrote that this program is “soaking up $4bn a year officially and much more by other estimates.” What does it say about a country’s government that the Chinese will not do business with because they are too corrupt?

Now I understand how terrorists use corruption both as a strategy and a tool.  Moreover, when you begin to understand these inter-related theoretical underpinnings of corruption and terrorism, you can see why aggressive enforcement of anti-corruption laws such as the FCPA and UK Bribery Act is so important and is here to stay. In another blog post entitled 9/11 and the FCPA” Cassin said, “What happened that day a decade ago changed the way the world looks at corruption. The tracks of the 9/11 perpetrators and those who helped them led back to corrupt third-world countries — Afghanistan, Sudan, Somalia, Yemen, and others. Those regimes had leaky borders, weak passport control, unreliable law enforcement agencies, poor anti-money laundering programs — just what the bad guys needed.”

I do not have any insight into the discussions of the Bush Administration after 9/11 about ways to fight terrorism. But just as governments have a role to play by being part of the solution, so do private businesses. Fedotov said that preventive action was needed by Chief Executive Officers (CEOs) in their boardrooms as much as by police on the streets or civil servants in their departments: “All of us must contribute to a culture of integrity. The eyes previously closed to corruption must become the open eyes of justice and equality.” For the DOJ and the SEC this means continued enforcement of the FCPA so that companies subject to the Act will move forward to do business in a way that does not start down the slippery slope to terrorism. Simply because the FCPA was passed in the post-Watergate era does not mean that it cannot be used for today’s problem.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

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