Biden Puts Anti-Corruption Centerstage

President Biden issued a policy memo Thursday vowing to make anti-corruption a pillar of U.S. national security — with numerous potential implications for corporate compliance programs that we can barely begin to understand right now.

First, we should be clear about exactly what the president did here. He did not issue an executive order, which typically has more urgency for executive branch regulators to take action and lasts until a new executive order supersedes the old one. Nor did he unveil any new legislative proposals or specific enforcement plans, although either of those things could come next.

Rather, Biden issued a “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest.” Essentially, he declared that fighting corruption is an important priority for the administration, and directed various agencies within the federal government to figure out ways to fight corruption more forcefully.

Such memos can make a quick, big splash politically, as this one certainly did. The legal and practical consequences for the rest of us, however, can take longer to become clear. So consider yesterday’s news with that grain of salt in mind.

Exactly what did the memo contain? Let’s take a look.

Who Will Be Involved

First, the order directs the U.S. national security adviser (that’s Jake Sullivan) to lead what’s known as an “interagency review process” that will study the administration’s current anti-corruption efforts, and develop a new presidential strategy to improve the government’s corruption-fighting capabilities.

Who else will be involved in that process? The following agencies and regulators, among others:

  • Justice Department
  • Treasury Department
  • Commerce Department
  • State Department
  • Homeland Security Department
  • Department of Defense

I chose those agencies because they’re the ones most likely to end up adopting new anti-corruption policies that might affect corporate compliance programs and enforcement against corporate misconduct. Biden’s memo names other agencies as well (not the Securities and Exchange Commission, somewhat notably), and it’s safe to say this will be a sweeping review of anti-corruption policy and practice.

The interagency review is supposed to be complete within 200 days, which is roughly the end of this year; followed by a report back to President Biden with recommendations for further action.

What the Review Will Do

Biden asked for recommendations on how the federal government can support anti-corruption efforts across a range of fronts. Among them:

Fighting all forms of illicit finance in the United States and international financial systems, including by robustly implementing federal law requiring U.S. companies to report their beneficial owner or owners to the Treasury Department;

Holding accountable corrupt individuals, transnational criminal organizations, and their facilitators, by identifying, freezing, and recovering stolen assets through increased information sharing and intelligence collection;

Bolstering the capacity of domestic and international institutions and multilateral bodies to establish global anti-corruption norms, asset recovery, financial transparency, and open government;

Strengthening the capacity of civil society, media, and other oversight and accountability actors to conduct research and analysis on corruption trends, advocate for preventative measures, and investigate and uncover corruption;

Helping domestic (including state and local) authorities and institutions, as well as partner and other foreign governments at all levels, to implement transparency, oversight, and accountability measures.

And perhaps most significantly, Biden’s memo specifically says the report should include suggestions for new legislation that might be necessary to bring those objectives to fruition.

What This Could Mean for Compliance

First, let’s again remember that it could be quite some time before we see real consequences for corporate compliance programs from this directive. It’s great that Biden planted the flag — but the flag is still planted on a hill far in the distance.

That said, compliance officers can still contemplate a few points right away.

For example, this could lead to the Justice Department prosecuting FCPA offenses and similar misconduct more aggressively. Then again, since the Justice Department has already provided extensive guidance on effective compliance programs, and adopted numerous policies to encourage corporate disclosure and cooperation — I’m curious to see how those positions might co-exist with a more aggressive enforcement posture. Like, if you run the risk of larger monetary penalties for an FCPA offense, you have more incentive to keep quiet and remediate the issue yourself.

As much as we all love FCPA talk, however, I’m more curious to see how this anti-corruption effort will intersect with the Biden Administration’s crackdown on ransomware.

Clearly ransomware is now a pressing national security issue, and the vehicle for ransomware attacks to work is cryptocurrency. So how much is this memo’s talk about illicit finance, beneficial owners, and corporate transparency also about clamping down on the runaway corruption risk that exists with cryptocurrency today? Could we see legislative or regulatory proposals for more transparency into the crypto finance world — that is, using anti-corruption as a policy bankshot to tackle a national security issue?

Lastly, could this anti-corruption push lead to more enforcement against domestic corruption here in the United States? For example, could we see legislation essentially proposing a Domestic Corrupt Practices Act, to clarify the standards for domestic corruption and give prosecutors a clearer path to enforcement?

Right now prosecution of domestic corruption is all over the map in the United States — like, literally. Any federal, state, or local prosecutor could decide to take a crack at prosecuting a local pol who takes a kickback. We occasionally see high-profile enforcement actions, such as what happened with Commonwealth Edison last year.

We also have that Supreme Court decision from 2016, McDonnell v. United States, which was a gutshot to federal prosecutors’ ability to bring corruption charges. The ruling was another one of those decisions that is correct under the law but daffy under common sense. So could we see a federal law to clarify domestic bribery? Because if we do, it will be that much more pressure on corporations to track gifts, travel, and entertainment expenses thoroughly and correctly.

So like I said, all we can do right now is speculate — but wow, we sure have a lot to speculate about.

 

By Matt Kelly, 4 June 2021

https://www.radicalcompliance.com/2021/06/04/biden-puts-anti-corruption-centerstage/