U.S.: White House launches United States Strategy on Countering Corruption and takes action across federal agencies

Last week, the Biden administration issued the first-ever U.S. Strategy on Countering Corruption and launched a coordinated slate of anti-corruption initiatives across federal agencies, including sanctions designations and proposed rulemaking. Released in the run-up to the December 9-10 Summit for Democracy, the Strategy illustrates the administration’s aspirations to comprehensively address corruption at home and abroad, marshaling the full powers of the U.S. government in cooperation with partners around the world.

The Strategy on Countering Corruption (the “Strategy”) is the result of a 200-day review initiated by President Biden’s National Security Study Memorandum (“NSSM”) earlier this year that established anti-corruption as a core U.S. national security interest. The review called on U.S. federal agencies to create a comprehensive strategy to combat corruption and better understand the measures that the U.S. can take to curb illicit finance. The resulting Strategy focuses on preventing bad actors from using the national and international financial systems to launder money and hide assets. The Strategy was a prominent part of the first of two Summits for Democracy, which brought together leaders from government, civil society, and the private sector in an effort to create a strategy for “democratic renewal” and confront the threats facing the U.S. and other democracies across the globe.

The Strategy sets out five strategic pillars, which will be benchmarked by an annual report to the President. They are:

• Modernizing, coordinating, and resourcing U.S. government efforts to fight corruption: Increasing law enforcement resources, expanding intelligence gathering, and enhancing coordination and information sharing among federal agencies.

• Curbing illicit finance: Finalizing beneficial ownership regulations, increasing regulation of real estate transactions to reveal when those dealings are pretexts for illicit finance, and targeting the gatekeepers and enablers of money laundering.

• Holding corrupt actors accountable: Establishing a Kleptocracy Asset Recovery Rewards Program; enhancing cooperation with foreign nations to improve efforts in identification, detection, and disruption of illicit finance and foreign bribery; and “continuing to vigorously pursue” corruption through enforcement of the FCPA and money laundering statutes.

• Preserving and strengthening the multilateral anti-corruption architecture: Working with the Organization for Economic Co-operation and Development, Organization of American States, and United Nations, as well as the G7 and G20, to promote and institute transparency and anti-corruption enforcement efforts across governmental levels around the globe and building a network of nations equally invested in combatting illicit finance and corruption.

• Improving diplomatic engagement and leveraging U.S. foreign assistance resources to achieve anti-corruption policy goals: Elevating anti-corruption as a diplomatic priority, bolstering public sector independent audit and oversight institutions, expanding and improving U.S. foreign assistance focused on anti-corruption, and expanding support to civil society and investigative journalism.

Given that the release of the Strategy coincided with International Anti-Corruption Day, International Human Rights Day, and the first Summit for Democracy, the administration wasted no time in implementing new anti-corruption measures. The U.S. Department of the Treasury’s (“Treasury”) Office of Foreign Assets Control (“OFAC”) issued a raft of new sanctions designations throughout the week, totaling almost 60 individuals and over 40 entities in eleven countries, with the U.S. Department of State (“State”) designating over a dozen more. The designations took place pursuant to a variety of sanctions programs, but notably included a large number of designations under the Global Magnitsky Human Rights Accountability Act. The designations were explicitly tied to anti-corruption, human rights, and the protection of democracy, signaling that OFAC and State will increasingly leverage sanctions programs to pursue these objectives.

Elsewhere within Treasury, the Financial Crimes Enforcement Network (“FinCEN”) issued a proposed rule through a Notice of Proposed Rulemaking (“NPRM”) to implement the beneficial ownership reporting provisions of the Corporate Transparency Act (“CTA”). Passed by a large bipartisan majority this past year as part of the National Defense Authorization Act for Fiscal Year 2021, the CTA requires the creation of a non-public national beneficial ownership database to store information collected under reporting requirements, to enable information sharing with law enforcement and financial institutions, and thus help to protect the U.S. financial systems from illicit use and abuse by corrupt or criminal actors. Similarly, FinCEN issued an Advance Notice of Proposed Rulemaking that would enhance reporting requirements on all-cash real estate transactions to prevent their use in money laundering and illicit finance.

This is an ambitious, perhaps unprecedented, initiative to curb corruption by the current administration, characterized by a whole-of-government effort and explicitly tied to the U.S. interests of national security, human rights, and democracy. Although it may not achieve all of its objectives, it represents a significant step up in contemplated enforcement and international cooperation, and an increase in the willingness to use all available U.S. government resources. It should make companies cautious and alert in their dealings, both internally and externally, as well as domestically and abroad. The Biden administration is re-enforcing the U.S.’s position as a leader in preventing, combatting, and punishing corruption, and raising the stakes by establishing it as nothing less than a global priority.