Cross-border implications of the new US strategy on countering corruption

On December 6, 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 US 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 US financial system from being used to launder the proceeds of crime. The US government commits 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:

1. 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
2. A commitment to strengthening enforcement mechanisms in order to hold those who engage in corruption accountable and
3. 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 Organization 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 US 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:

1. Modernizing, coordinating and resourcing US government efforts to better fight corruption
2. Curbing illicit finance
3. Holding corrupt actors accountable
4. Preserving and strengthening the multilateral anti-corruption architecture and
5. 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 US 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 US government begins to put the strategy into operation:

a. Enhanced anti-money laundering (AML) regulations

The strategy aims to address deficiencies in the existing US anti-money laundering regime and states the intention to work with private and public partners to do so. Key focus areas include procurement, real estate, investment advisors, private equity funds, tax and offshore centers, 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 US, the strategy aims to proactively disrupt corruption through enhancements to US 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.

b. 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 seeing 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 US government’s ability to identify and recover stolen assets linked to foreign government corruption that are held at US 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.

c. Mandating stronger internal compliance programs

The strategy specifies that the US 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 programs, and a renewed focus in many jurisdictions including the UK and France on emphasizing the importance of compliance programs.

d. Whistleblower protections

The strategy recognizes 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 December 17, 2021, which requires businesses operating within the European Union to meet a certain minimum threshold in respect of whistleblower protections.

e. International cooperation

The strategy explicitly recognizes the importance of global cooperation in fighting corruption and bribery and refers to the need to work with international organizations to coordinate responses, as well as the need to encourage other jurisdictions to criminalize and prosecute bribery. The strategy approaches this goal with both cross-border enforcement and diplomatic strategies that emphasize prioritizing 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.

Takeaways

The strategy indicates a renewed effort by the US government to combat bribery and corruption globally. International companies operating in, or with links to, the US should ensure their ABC compliance policies and procedures are robust and meet US 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).