Biden Raises Bar in Anti-Corruption – Calls on Justice Department and Other Key Agencies to Engage in Interagency Review Designed to “Prevent and Combat Corruption at Home and Abroad”



On June 3, 2021, President Biden issued a national security memorandum, “Establishing the fight against corruption as a fundamental interest of national security.”[1] The first national security memorandum of his presidency,[2] it sets out the relevant policy and strategies to be implemented, including the direction of an interagency report and recommendations on how best to strengthen the capacity of the United States government to fight corruption. The note focuses on cooperation between national and international agencies to more effectively eliminate bad actors and step up enforcement efforts to prosecute those directly involved in corruption, as well as financial and other institutions that indirectly facilitate such actions.

Politics

President Biden begins by pointing out the “mind-boggling” effects corruption has on the global economy, undermining between 2% and 5% of the world’s gross domestic product. One of the concerns that the memorandum and the administration focused on is how the proceeds of foreign corruption reach the United States through methods of anonymity – “the proceeds of corruption.” [corrupt] acts cross national borders and can impact economies and political systems far from their origin. Expressing the need to address financial institutions and other actors that allow “the movement and laundering of illicit wealth in the United States and other rule-of-law democracies,” the memorandum specifically cites concerns. to “anonymous shell companies, institutions and professional service providers. In a comment, a senior administration official added that the administration is examining the means by which the proceeds of corruption are channeled into residential real estate in the United States in order to relocate ill-gotten gains, and an accompanying statement the memorandum mentions the intention to “crack down on tax havens and illicit financing”.

Emphasizing the importance of these efforts, the memorandum goes on to examine how “[c]orruption erodes public confidence; hinders effective governance; distorts markets and equitable access to services; undermines development efforts; contributes to national fragility, extremism and migration; and provides authoritarian leaders with a means to undermine democracies around the world. Through a policy of “effectively preventing and combating corruption and demonstrating the benefits of transparent and accountable governance”, the administration seeks to “bring transparency to the United States and global financial systems; prevent and fight corruption at home and abroad; and make it increasingly difficult for corrupt actors to protect their activities. Through this, the United States aims to gain a critical advantage for the United States and other democracies.

Strategy

Biden calls for “corrupt individuals, transnational criminal organizations” and their facilitators to be held accountable, including by taking criminal action against them. In doing so, he asked the national security adviser to conduct an interagency review within 200 days and submit a report and recommendations to the president for further direct action on how to achieve these goals.

This report should seek to “modernize, augment, coordinate, finance and improve the capacity of key leaders and agencies” to combat corruption and illicit financing in the United States and in international financial systems. In doing so, it calls on the report to ensure rigorous enforcement of federal law requiring companies to declare beneficial owners, reduce offshore financial secrecy, improve information sharing and, if necessary, identify the need further reforms.

The memorandum also talks about holding bad actors accountable by freezing and recovering stolen assets and combating money laundering, illicit financing and corruption. Another great goal is the cooperation of the United States with international agencies, with national agencies, and with private actors, civil society, the media, and other oversight and accountability actors, including non-governmental agencies.

Finally, with reference to the rise of foreign actors influencing the domestic political environment of the United States, the memorandum seeks recommendations to “counter the strategic corruption of foreign leaders, foreign or affiliated state-owned enterprises, transnational criminal organizations and ‘other foreign players and their national collaborators. , including closing the loopholes exploited by these actors to interfere in democratic processes in the United States.

The memorandum serves as an appeal to all relevant departments and agencies to “improve their anti-corruption game”,[3] ask the “wider scope of what each of [the] federal departments and agencies on anti-corruption.[4]

Continuous and increased effort

The memorandum builds on many of the Biden administration’s campaign promises and policies that have already been in place, allowing the new administration to “strike[] on the ground, ”according to a senior administration official. Even before the memorandum, the Biden administration engaged in significant enforcement action against various foreign individuals using existing legal mechanisms, such as the Overseas Corrupt Practices Act, Anti-Corruption Rules money laundering and the sanctions of the Bureau of Foreign Assets Control.

As has been well documented, the enforcement of the Overseas Corrupt Practices Act has grown considerably over the past 15 years, with a corresponding increase in the amount of fines, culminating in a average settlement in 2020 exceeding $ 500 million. This trend shows no signs of slowing down; for example, in early 2021, Deutsche Bank AG paid $ 122.9 million in penalties and restitution in connection with the resolution of investigations into foreign corrupt practices conducted by the Securities and Exchange Commission and the Ministry of Justice. Likewise, early 2021 saw significant anti-money laundering measures, with hundreds of millions of penalties imposed on businesses just in the first few months of 2021. And just before the memorandum’s release on June 2 2021, the Treasury Department’s Office of Foreign Assets Control imposed sanctions on three Bulgarian individuals and their network of 64 entities for allegations of corruption, including bribes.[5]

The memorandum signals that the Biden administration intends to step up these anti-corruption efforts, with increased prioritization, funding and coordination. For example, the press appeal announcing the memorandum made specific reference to the Corporate Transparency Act, which directs the Treasury Department to establish “beneficial ownership registration” requirements for entities domiciled in the United States, as well as foreign entities that operate in the United States. active in hiding the proceeds of corruption behind anonymous shell companies, in combating money laundering and other financial crimes. He then leads the creation of a federal database to house the collected beneficial ownership information, facilitating cooperation between various US agencies in the investigation and prosecution of financial crimes, including money laundering and violations. of the law on corrupt practices abroad. The memorandum specifically calls for the report’s recommendations on strategies to “vigorously implement” this law, and recently Biden requested an additional $ 60 million budget proposal for the initiative, an increase of about 50%. compared to what was enacted last year.

The administration is also looking to build on other initiatives, such as the Justice Department’s Kleptocracy Asset Recovery Initiative, which since 2019 has recovered $ 1.5 billion in stolen assets, and the money laundering 2020, which was passed last year. a presidential veto and expanded the bank secrecy law to include other entities such as virtual currency traders, and established a new whistleblower reward program at the Treasury Department, providing voluntary whistleblowers with violations of the law on bank secrecy a reward of up to 30% of funds recovered over one million dollars.

Carry

This emphasis on increased coordination, cooperation and enforcement in conjunction with Congress’s increased emphasis on anti-corruption and anti-money laundering issues is a clear signal that an increased and highly coordinated effort to Law enforcement is on the horizon, with prosecutions of those involved in corruption and crimes following close behind. Anticipating increased scrutiny, companies, boards of directors and senior executives should act now to review and improve their anti-corruption compliance programs and continue to press compliance controls, re-examine high-risk relationships and increase due diligence in acquisitions of entities operating in countries prone to corruption. .


[1] The White House, Memorandum on Establishing Anti-Corruption as a Core United States National Security Interest, June 3, 2021, available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/06/03/memorandum-on-establishing-the-fight-against-corruption-as-a-core-united-states-national- security interest /.
[2] See The White House, Context Appeal to the press by senior officials of the administration on the fight against corruption, June 3, 2021, available at https://www.whitehouse.gov/briefing-room/press-briefings/2021/06/03/background-press-call-by-senior-administration-officials-on-the-fight-against-corruption/.
[3] Username.
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[5] Treasury Department, Treasury sanctions influential Bulgarian individuals and their extensive networks for involvement in corruption, June 2, 2021, available at https://home.treasury.gov/news/press-releases/jy0208.



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