Shortly after taking office, President Biden announced in a June 3, 2021 National Security Study Memorandum that corruption is not just a priority but a “core national security interest.” On December 6, 2021, as a follow up to that memorandum, the Biden Administration released the first-ever US Strategy on Countering Corruption (the Strategy Report), which describes how US government agencies will “accelerate and amplify” enforcement through new strategic priorities, novel interagency approaches, and expanded international partnerships. We expect that these enhanced efforts will also resonate with foreign authorities, including those in the UK, leading to increased enforcement efforts in many additional jurisdictions. As a result, multinational companies should expect to see a cascade of increasing anti-corruption efforts in key jurisdictions—and should plan accordingly.
The Strategy Report is the latest sign that, despite a lull over the past year, the Biden administration is poised to significantly increase anti-corruption enforcement efforts in the coming year. As Freshfields has described in previous posts, senior Department of Justice (DOJ) officials have publicly warned that the Department is “building up to surge resources” for corporate enforcement, and have subsequently announced significant policy changes, including greater scrutiny of past corporate misconduct, broader expectations for corporate disclosures regarding individuals, and increased reliance on corporate monitorships. The Strategy Report builds on the findings of an interagency review conducted across 15 US agencies over the preceding six months. Following the June 3, 2021 memorandum’s framework, it contains five pillars that preview strategic priorities and implementation strategies:
- Curbing illicit finance
- Holding corrupt actors accountable
- Modernizing, coordinating, and resourcing efforts to fight corruption
- Improving bilateral engagement and leveraging foreign assistance resources
- Preserving and strengthening the multilateral anti-corruption architecture
Given the US government’s role as a global leader in anti-corruption enforcement, the Strategy Report has important implications for both domestic and international enforcement. This post highlights key takeaways and considers what they mean for companies operating in the US and beyond. We also identify certain areas where US enforcement priorities overlap with UK priorities, and the implications of those approaches for multinational companies.
Curbing Illicit Finance
Despite significant updates to US anti-money laundering (AML) laws in the 2021 National Defense Authorization Act (NDAA), the Strategy Report describes continuing “deficiencies” in the US enforcement regime. It calls for “aggressive enforcement action, including relevant tax enforcement” under “existing authorities” and “new legislation expanding criminal substantive law as needed.” These statements reflect similar concerns about AML deficiencies in other jurisdictions; for example, a December 8, 2021 Chatham House report urges UK authorities to remedy “failures of enforcement and implementation” of AML laws. Moreover, civil society groups frequently criticize the way UK systems and assets are abused by those intent on realizing the proceeds of crime.
The Strategy Report identifies several AML enforcement priorities that have also received attention in other jurisdictions during recent years. Specifically, it targets high-risk business sectors, including digital asset transfers, real estate transactions, and government procurement decisions. It also targets high-risk actors, including offshore financial centers, investment advisors and private equity funds, as well as other financial “gatekeepers” that facilitate transactions, such as lawyers, accountants, and trust and company service providers. Relatedly, the Strategy Report highlights ongoing efforts to implement a beneficial ownership registry, which aims to bring greater transparency and scrutiny to otherwise “anonymous shell companies” with US connections.
Holding Corrupt Actors Accountable
The Strategy Report calls on enforcement agencies to hold corrupt actors “accountable” by using “proven tools” and proposing new legislation. It emphasizes the need to “vigorously” enforce the FCPA and simultaneously combat the “demand side” of bribery by working with foreign partners to prosecute foreign officials and associates who request improper payments. Separately, it highlights a new task force—the National Cryptocurrency Enforcement Team—that will enable the DOJ to conduct complex investigations into virtual currency providers and exchanges. To increase the global impact of US enforcement efforts, the Strategy Report calls for continued efforts to deny “safe havens” for corrupt actors, including a new Democracies Against Safe Havens Initiative led by the Department of State, which will “amplify the impact of US sanctions and visa restrictions” by increasing pressure on corrupt actors through coordinated action. It also calls on the private sector to adopt effective anti-corruption policies and, when appropriate, share “actionable information” with law enforcement authorities.
This call to fight corruption, as well as some of the specific pressure points, again resonates in the UK enforcement landscape. The 2021 National Strategic Assessment of Serious and Organised Crime published by the UK National Crime Agency asserts that the threat of bribery, corruption, and sanctions evasion in the UK has increased more than any other area of serious and organized crime since 2020. In January 2020, the Financial Conduct Authority brought certain crypto-assets within the UK’s AML regulatory regime and, in April 2021, the Foreign, Commonwealth, and Development Office introduced a new global anti-corruption sanctions regime, pursuant to which persons engaged in serious corruption can be added to financial sanctions lists.
Modernizing, Coordinating, and Resourcing Enforcement Efforts
The Strategy Report acknowledges that “further prioritizing and amplifying anti-corruption efforts” will require the US government to adopt modern strategies, leverage additional resources, and coordinate with domestic and foreign partners. It cites novel “research, data collection, and analysis” tools, which will likely include “proactive” approaches like “data mining” that DOJ leaders have previewed in recent months. As part of this process, it also highlights efforts to improve “interagency capacities,” which will include initiatives to “bolster information sharing between the Intelligence Community and law enforcement.” Importantly, the Strategy Report recognizes the need to “devote additional human resources to synchronize anti-corruption work” across enforcement agencies. On December 1, 2021, Assistant Attorney General Kenneth Polite reiterated that the DOJ will “surge resources” for corporate enforcement, including “more bodies” and data resources, “not just to investigate a case once it’s in the door but to actually identify the cases at the outset.”
Improving Bilateral Partnerships
The Strategy Report places “special emphasis on the transnational dimensions” of corruption and pledges to “enhanc[e] partner governments’ capacities to fight corruption in cooperation with US law enforcement authorities.” In recent years, US authorities have participated in numerous multijurisdictional resolutions related to corruption, including several significant matters resolved in partnership with the UK authorities. In addition, US and UK authorities have strengthened information-sharing through mechanisms like the 2019 Bilateral Data Access Agreement, which makes it easier for law enforcement agencies in both countries to obtain electronic data directly from technology firms. This Agreement has drawn particular interest in the UK after the UK Supreme Court’s 2021 decision in R (KBR) v Director of the SFO, which placed important limits on the UK Serious Fraud Office’s ability to use its existing powers under Section 2 of the Criminal Justice Act to obtain material in the hands of non-UK companies. Although the UK is poised to be a jurisdiction of particular interest for bilateral cooperation, the Strategy Report proposes more generally to “elevate and expand the scale of diplomatic engagement and foreign assistance” through increased information-sharing with foreign regulators. For example, similar to an existing FBI program, the 2021 NDAA creates a new program for sending Department of Treasury attachés to US embassies and foreign regulatory partners.
Strengthening Multilateral Mechanisms
An international approach to combatting corruption is a perennial theme for US and UK enforcement agencies in recent years. The Strategy Report prioritizes implementation of obligations under the UN Convention Against Corruption, the OECD Anti-Bribery Convention, and the G7 Financial Action Task Force’s standards. On November 26, 2021, with US support, the OECD updated its Anti-Bribery Recommendation and Good Practice Guidance for the first time since 2009. Although not binding, the Guidance provides internationally recognized best practices for corporate compliance programs. The Strategy Report further commits to increasing US involvement in formal and informal multilateral fora like INTERPOL, the Asset Recovery Interagency Network, and the International Anti-Corruption Coordination Center.
How Companies Should Prepare
The Strategy Report signals that the Biden administration is poised to embark on an aggressive domestic and international enforcement agenda in the coming year. Although the precise nature of these new priorities and enforcement strategies will become clearer over time, the Strategy Report offers companies an incentive to evaluate their anti-money laundering and anti-bribery and corruption compliance programs. In particular:
- Companies should take reasonable steps to align their AML programs to emerging risks identified in the June 2020 FinCEN Priorities, including priority areas such as cybercrime. Those companies with an international footprint may find they can import learning from their experiences in jurisdictions, including the UK, that have already begun to target those risks;
- Companies should take reasonable steps to align their anti-bribery and corruption programs with revised DOJ expectations in the June 2020 Guidance on the Evaluation of Corporate Compliance Programs, the July 2020 FCPA Resource Guide, and equivalent guidance from agencies in international jurisdictions where there may also be potential exposure;
- International banks and other global financial institutions should revisit their KYC policies and procedures to reasonably align them with the expectations arising from the new beneficial ownership registry, which is the subject of recently proposed FinCEN regulations; and, finally
- All organizations should take reasonable steps to confirm their compliance programs operate effectively in the contemporary COVID-19 era, which may require companies to update risk profiles, pressure-test programs, and adapt employee guidance for new operating procedures.
Freshfields will continue to monitor implementation of the Strategy Report’s priorities through its Risk and Compliance publications.