Corruption is no longer the U.S. government’s persona non grata – reluctantly acknowledged and somewhat ignored outside FCPA enforcement. The President’s summer National Security Memorandum and recent U.S. Strategy on Countering Corruption place governmental and other anti-corruption activities front and center.
The Memo designates corruption as a national security priority. It states, “Corruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself. But by effectively preventing and countering corruption and demonstrating the advantages of transparent and accountable governance, we secure a critical advantage for the United States and other democracies.”
The follow-on and comprehensive Strategy specifies the government’s anti-corruption priority areas (Strategic Objectives – SOs) and ongoing and planned activities (Lines of Effort – LOEs) under the umbrella of five pillars: U.S. government efforts, illicit finance, accountability, the multilateral architecture, and diplomacy/foreign aid. Throughout the Strategy, however, there are recurrent themes that provide context and may signal the prioritization of existing and future substantive implementation (e.g., regulation and enforcement) directions.
Targeted sector specificity
As one indicia of the government’s national security-based seriousness of purpose, certain historically corruption-high-risk business sectors and sector participants are singled out – including financial services (to include hedge funds and other more opaque equity-side participants), real estate, arts/antiquities, and their related professional service “gatekeepers.”
There are LOEs in SO 2.1 “Address Deficiencies in the Anti-Money Laundering Regime” and SO 3.1 “Enhance Enforcement Efforts” that cover, among other areas: beneficial ownership transparency improvements; revised Treasury regs or reviews for cash-financed real estate transactions and certain forms of equity investments; kleptocracy; and government contractor suspension and debarment. In December, FinCEN issued separate rulemaking notices focusing on the beneficial ownership and real estate topics.
The bribery component of corruption’s harm to individuals and society is a primary Strategy theme. Accountability pillar SOs particularly emphasize anti-bribery activities. Significantly, there is long overdue recognition of the legal structural gaps on the demand side of the bribery equation. Certain SOs outline an intent to both work with Congress to amend the FCPA (SO 3.2), and to promote legal change in other countries with similarly deficient legal mechanisms (SO 3.2 and 3.3).
Leading business practices and standards
The Strategy borrows liberally from the private sector. Risk management practitioners recognize familiar leading management system anti-corruption methodologies and practices in the Strategy’s approach and LOEs.
In a sense, the overall Strategy document functions as the new national security priority’s risk assessment: it analyzes the corruption risk landscape and context from the government’s point of view.
Leadership, commitment, and planning are provided via the Memo, the interagency task force that created the Strategy, and ongoing LOEs. Resources are promised to support its operation. Metrics will be applied to measure progress across all five pillars and be included in the President’s annual strategy report.
The Strategy also shows a willingness by the government to be pragmatic. Certain operations will be monitored (See e.g., SO 5.1). There is recognition of the benefits that come from performance evaluations involving consideration of lessons learned.
Notably, all of the these concepts are risk management components found within the globally developed and applied management system standards of the Geneva-based International Organization for Standardization (ISO), including the anti-bribery standard ISO 37001.
In its use of proven risk management concepts within the Strategy, the government is taking a constructive step towards meeting its “adapt, partner and learn” goals.
The role of civil society
Similar to the Strategy’s embrace of private sector involvement, civil society’s role in effectively countering transnational corruption is prominently featured throughout the document. The government efforts, accountability, and diplomacy/foreign aid pillars each have multiple LOEs involving civil society consultation and coordination.
The number of references and degree of planned engagement is tacit recognition that civil society participation can provide critical and often unique “on the ground” anti-corruption-related information sources and assessment capabilities.
The Strategy’s 800 lb. gorilla is China — not explicitly mentioned, but omnipresent. The document’s focus on “strategic corruption” — “when a government weaponizes corrupt practices as a tenet of its foreign policy” — clearly indicates that the U.S. is targeting China’s coercive overseas development practices, such as those currently plaguing its Belt & Road Initiative.
China’s corrupt practices and implicit prominence in the document supports using ISO 37001 as a strategic Strategy-supporting tool: China was an active member of the ISO committee that created ISO 37001 and voted for its adoption. It would be that much more difficult for China to disparage or dismiss U.S. anti-corruption LOEs if they incorporated the anti-bribery standard that China helped create.
Strategy skeptics abound. Is it a “paper” strategy? Is it “packaging” and a new name for activities already underway or planned before the Memo’s or Strategy’s issuance? How will the Strategy’s numerous and ambitious LOEs be effectively directed, coordinated, and implemented? Can a divided Congress come together to amend the FCPA?
Government follow-through, prioritization, execution, and communication will be necessary to make meaningful anti-corruption impacts and produce visible results. Sectors targeted by the Strategy, government contractors, and those doing business overseas would be well-advised to recognize the document’s spirit and closely follow its implementation.