As the world continues to feel the effects of the global COVID-19 pandemic and grapple with a changing geo-political landscape, the new U.S. administration has begun to make its mark on the fight against corruption. It has announced revised policies and a renewed commitment to enforcement, as well as a sweeping anti-corruption strategy that presages an enhanced emphasis and all-of-government overhaul of anti-corruption efforts by U.S. authorities. These developments will have far-reaching implications for companies and individuals outside the United States, given U.S. enforcers’ broad assertions of legal authority over conduct involving the U.S. financial system and telecommunications infrastructure, particularly U.S. dollar-denominated transactions.
Most notably, the White House issued a National Security Study Memorandum in June 2021 that established anti-corruption as a key national security priority. It also called for an interagency review, which resulted late last year in the issuance of the United States Strategy on Countering Corruption (the “Anti-Corruption Strategy“), a far-reaching initiative that promises to re-orient key policies, remake aspects of international cooperation, and remodel important portions of U.S. agencies. It sets out five strategic pillars: modernizing, coordinating, and resourcing U.S. government efforts; curbing illicit finance; holding corrupt actors accountable; preserving and strengthening the multilateral anti-corruption architecture; and improving diplomatic engagement and leveraging U.S. foreign assistance resources to achieve anti-corruption policy goals.
The release of the Anti-Corruption Strategy, which coincided with International Anti-Corruption Day (as well as International Human Rights Day and the first Summit for Democracy), also foreshadowed the potential use of financial sanctions as additional anti-corruption measures. The Office of Foreign Assets Control (“OFAC”) issued a raft of new sanctions designations the same week, totaling almost 60 individuals and over 40 entities in eleven countries. They notably included a large number of designations under the Global Magnitsky Human Rights Accountability Act that were explicitly tied to anti-corruption, human rights, and the protection of democracy, signaling that OFAC will increasingly leverage sanctions programs to pursue these objectives (a trend the conflict in Ukraine has further intensified).
Officials in the U.S. Department of Justice (“DOJ”) have separately reiterated their commitment to prosecuting both companies and individuals for corruption offenses, including by proactively pursuing new cases rather than relying on self-disclosures. In a series of speeches and a memorandum published last October, officials have also announced changes to past policies and priorities.
With respect to individuals, officials reversed a prior policy change by explaining that in order to obtain cooperation credit for Foreign Corrupt Practices Act (“FCPA”) violations, companies must now provide all non-privileged information regarding the involvement of all individuals, regardless of position or status, not just those who were substantially involved. DOJ officials also reiterated that they will continue to focus on prosecuting individuals, even while acknowledging the difficulties inherent in doing so. Indeed, these cases have already resulted in potential restrictions of the DOJ’s ability to pursue conduct by non-U.S. citizens that takes place outside the United States. Last year, a court in the Southern District of Texas rejected the extra-territorial application of the FCPA under the DOJ’s aggressive use of agency liability, after the Second Circuit had already overturned a conviction premised on the same theory, and rejected the DOJ’s extraterritorial use of conspiracy liability. The DOJ’s future pursuit of individuals will undoubtedly result in additional court cases, and consequently, further legal developments related to conduct outside the United States.
Officials also announced changes with respect to a corporation’s past misconduct, previewing a “holistic” approach to recidivism that takes into account all prior misconduct, not just misconduct similar to that at issue. This will be applied not only with respect to determining penalties, especially with respect to the likelihood of a company receiving a deferred prosecution agreement (“DPA”) or non-prosecution agreement (“NPA”), but also to whether a company has complied with their existing DPA or NPA.
The DOJ also rescinded the previous administration’s presumption against monitorships. Where prior guidance stated that monitorships would be the exception, not the rule, the imposition of future monitors will be evaluated against the potential benefit to the corporation and public, weighed against the cost and impact on the corporation. Importantly, factors taken into account will include the adequacy, effectiveness, and maturity of an existing compliance program.
More recently, the Ukraine crisis has prompted the creation of task force “KleptoCapture” at the DOJ, aimed at enforcing recently enacted Russia sanctions and recovering proceeds of corruption. The administration has also promised to surge resources toward the prosecution of corporate crime, including by hiring substantial numbers of new DOJ prosecutors and law enforcement agents.
Anti-corruption and anti-money laundering initiatives have also become a focus in the U.S. Congress, where laws passed in 2021 will soon come into effect, and pending legislation has bipartisan support. This momentum has been motivated in no small part by revelations in the Pandora Papers, which showed the prevalence of shell companies, trusts, foundations, and low (or no) tax jurisdictions in moving and hiding substantial assets tied to foreign government officials, many of whom have been tied to corruption and other misconduct.
The Anti-Money Laundering Act (“AMLA”), passed last year, presents the most sweeping reforms to the U.S. government’s anti-money laundering (“AML”) and counter-terrorism financing measures since the PATRIOT Act in 2001, with significant impacts on financial institutions and other businesses. Among other things, it increases penalties for Bank Secrecy Act (“BSA”) and AML violations, substantially expands the whistleblower awards program, allows for sharing suspicious activity reports with foreign agencies, and expands the BSA’s reach to additional markets. It also creates a national non-public beneficial ownership registry aimed at shell companies, and allows U.S. authorities expanded abilities to subpoena records from financial institutions with correspondent bank accounts in the United States.
Pending Congressional legislation includes the “ENABLERS Act,” aimed at the so-called “gatekeepers” of corruption. This Act would subject even more industries to BSA regulation, including investment advisors, accountants, law firms, trust service providers, and those in the art and antiquities markets. Separate legislation includes several measures aimed at the demand side of foreign bribery, by criminalizing the solicitation and receipt of bribes by foreign officials.
Thus, 2022 promises to be an eventful year in U.S. anti-corruption enforcement. Recently appointed officials at the DOJ have wasted no time in revising policies and re-allocating resources. And the White House’s Anti-Corruption Strategy is an ambitious, perhaps unprecedented, initiative to curb corruption, characterized by an all-of-government effort that is explicitly tied to the U.S. interests of national security, human rights, and democracy. Companies should take the opportunity to re-examine their own policies, programs, and priorities, and assess how they can strengthen their approach to anti-corruption compliance. 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.
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