On 6 December 2021, the Biden Administration released its strategy on countering corruption (the Strategy) along with an accompanying fact sheet, building on President Biden’s earlier announcement that he viewed the fight against corruption as one of the core U.S. national security priorities. The five-point strategy places particular focus on a coordinated international approach to anti-bribery and corruption (ABC) and regulatory enhancements to prevent the U.S. financial system from being used to launder the proceeds of crime. The U.S. Government commits in the Strategy to devote additional human resources, financial capital, and diplomatic energy in the service of accelerating global anti-corruption efforts.
In particular, the Strategy sets out:
- an increased focus on shoring up gaps in the financial and regulatory system which can be exploited to hide assets and launder the proceeds of crime;
- a commitment to strengthening enforcement mechanisms in order to hold those who engage in corruption accountable; and
- new approaches to bolster international ABC frameworks and to encourage other countries to take a similarly tough stance on corruption.
Taken together with the recent Organisation for Economic Co-operation and Development (OECD) recommendations (see here) – which figure prominently in the Strategy – we can expect to see a renewed focus globally on anti-corruption and further law enforcement coordination between the U.S. and other countries in relation to multi-jurisdictional enforcement actions.
In this alert, we summarize the key components of the Strategy from a cross-border perspective, and highlight the implications of the Strategy for multinational companies.
The Strategy is built on five mutually-reinforcing pillars that seek to address the inherently transnational nature of corruption:
- Modernizing, Coordinating, and Resourcing U.S. Government Efforts to Better Fight Corruption;
- Curbing Illicit Finance;
- Holding Corrupt Actors Accountable;
- Preserving and Strengthening the Multilateral Anti-Corruption Architecture; and
- Improving Diplomatic Engagement and Leveraging Foreign Assistance Resources to Advance Policy Objectives.
Running through all of these concepts is a whole-of-government approach, and a recognition by the U.S. Government that countering corruption requires collaboration and coordination across domestic and global teams and government and non-government partners, such as law enforcement and financial institutions. The Strategy is thus premised on the deployment of regulatory, legal, and diplomatic solutions to address corruption where it is found and capture the proceeds of corruption where they are laundered. Consistent with the Biden Administration’s emphasis on individual accountability in white collar crime cases, there is a strong emphasis on the investigation and prosecution of not only corrupt actors, but also those “gatekeepers” who facilitate corrupt conduct and money laundering.
With this in mind, we note the following key implications for multinational companies as the U.S. Government begins to put the Strategy into operation:
1. Enhanced anti-money laundering (AML) regulations
The Strategy aims to address deficiencies in the existing U.S. anti-money laundering regime and states the intention to work with private and public partners to do so. Key areas of focus include procurement, real estate, investment advisors, private equity funds, tax and offshore centres, digital assets and arts and antiquities markets. Businesses operating in these areas should expect to be subject to increased regulatory requirements in the future.
In the U.S., the Strategy aims to proactively disrupt corruption through enhancements to U.S. AML policies, including the construction of an expansive new database of beneficial owners of shell companies. This builds upon the expansion of the AML requirements enacted on January 1, 2021 in the Anti-Money Laundering Act of 2020, and the process of enacting new regulations arising out of that statute has already begun.
The Strategy places particular emphasis on the responsibility of gatekeepers (i.e. lawyers, accountants and trust and company service providers) to prevent money laundering, and signals a strong intent to pursue enforcement actions against these gatekeepers in the future as a means of addressing their critical role in the corruption ecosystem.
2. Robust enforcement
The promise of “aggressive enforcement actions” aligns with comments earlier this year by Department of Justice (DOJ) officials that the DOJ will be increasing its enforcement resources and taking a tough stance on corruption and corporate crime more broadly (see more here). We are already seing this in practice, with nine companies having disclosed new Foreign Corrupt Practices Act (FCPA) investigations in 2021.
Financial penalties are expected to increase and a kleptocracy asset recovery rewards program is proposed to 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 aligns with the recent OECD recommendations which promoted the aggressive use of enforcement tools designed to proactively identify, freeze, seize and confiscate corrupt payments and the proceeds of corruption.
3. Mandating stronger internal compliance programmes
The Strategy specifies that the U.S. Government intends to work with “the private sector to improve the international business climate by encouraging the adoption and enforcement of anti-corruption compliance programs”. This aligns with the updated DOJ Guidance on compliance programmes, as well as a renewed focus in many jurisdictions including the UK and France on emphasising the importance of compliance programmes.
4. Whistleblower protections
The Strategy recognises the need to protect a variety of actors beyond the traditional concept of the whistleblower, including journalists and activists. Similarly the OECD recommendations specifically referenced the need for member states to expand whistleblower protections to include an expansive definition of “whistleblower” and a broader concept of workplace retaliation. This is also in line with the introduction of the EU Whistleblower Directive on 17 December 2021 which requires businesses operating within the European Union to meet a certain minimum threshold in respect of whistleblower protections.
5. International cooperation
The Strategy explicitly recognises the importance of global cooperation in fighting corruption and bribery and refers to the need to work with international organisations to coordinate responses, as well as the need to encourage other jurisdictions to criminalise and prosecute bribery. The Strategy approaches this goal with both cross-border enforcement and diplomatic strategies that emphasize the need to prioritize diplomatic relations and foreign assistance in the fight against corruption.
To this end, the Strategy includes expanding NATO’s Building Integrity Program to target corruption in finance, acquisition, and human resource functions. Such efforts also include increased investment in technological innovations to solve systemic challenges in preventing and detecting corruption. By continuously engaging with nation-states and organizations within the multilateral architecture, the Strategy plans to lend legitimacy, encourage transparency, and help hold accountable other nation-states’ anti-corruption regimes. This increased cooperation between international regulators and coordination of parallel investigations is evident in recent global enforcement actions (see, for example, the global settlement reached with Airbus discussed here). Additionally, the administration plans to re-evaluate the criteria for government-to-government assistance. These diplomatic efforts may lead to the incorporation of anti-corruption provisions in government-to-government agreements that may trickle down to regulations on private companies.
The Strategy indicates a renewed effort by the U.S. Government to combat bribery and corruption globally. International companies operating in, or with links to, the U.S. should ensure their ABC compliance policies and procedures are robust and meet U.S. and other relevant expectations, both to seek to prevent violations and to ensure the best possible outcome in relation to any ABC issues that occur (see here the results of our recent ABC survey which set out the most common areas of compliance programs requiring enhancement).