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First-Ever US Strategy on Countering Corruption Has Significant Implications for Companies Operating in the US, the UK, and Around the Globe

First-Ever US Strategy on Countering Corruption Has Significant Implications for Companies Operating in the US, the UK, and Around the Globe
Written by publishing team

Shortly after taking office, President Biden declared in his National Security Study memorandum dated June 3, 2021 that corruption is not just a priority but a “essential national security interest.” On December 6, 2021, as a follow-up to that memo, the Biden administration released the first-ever US anti-corruption strategy ( Strategy Report), which describes how US government agencies “accelerate and amplify” enforcement through new strategic priorities, new interagency approaches, and expanded international partnerships. We expect these enhanced efforts to 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 series of increased anti-corruption efforts in key jurisdictions – and should plan accordingly.

The strategy report is the latest sign that despite last year’s lull, the Biden administration is preparing to dramatically increase anti-corruption enforcement efforts in the year ahead. As described by Freshfields in previous posts, the Supreme Department of Justice (Ministry of Justice) Officials publicly warned that the department was “working to increase resources” for corporate enforcement, and later announced significant policy changes, including more scrutiny of past corporate misconduct, broader expectations for corporate disclosure regarding individuals, and greater reliance on corporate oversight. The strategy report is based on the findings of an interagency review conducted across 15 US agencies over the previous six months. According to the June 3, 2021 Memorandum Framework, it contains five pillars that review strategic priorities and implementation strategies:

  • Curbing Illicit Financing
  • Accountability of corrupt actors
  • Updating, coordinating and resourcing anti-corruption efforts
  • Improving bilateral engagement and utilization of external assistance resources
  • Maintaining and strengthening the multilateral structure to combat corruption

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 to companies operating in the United States and abroad. We also identify some of the areas in which US enforcement priorities overlap with those of the UK, and the implications of these approaches for multinational corporations.

Reducing illicit financing

Despite significant anti-money laundering updates in the United States (AML(Laws in the National Defense Authorization Act of 2021)Nada), the strategy report describes persistent “deficiencies” in the US enforcement system. It calls for “strict enforcement action, including related tax enforcement” under “existing authorities” and “new legislation that expands substantive criminal law as needed.” These statements reflect similar concerns about deficiencies in anti-money laundering in other jurisdictions; For example, a Chatham House report issued on 8 December 2021 urges the UK authorities to address “enforcement and enforcement failures” of anti-money laundering laws. Furthermore, civil society groups often criticize the way UK systems and assets are being misused by those intent on making the proceeds of crime.

The strategy report identifies several anti-money laundering enforcement priorities that have also received attention in other jurisdictions in recent years. Specifically, it targets high-risk business sectors, including digital asset transfers, real estate transactions, and government purchasing decisions. It also targets high-risk actors, including offshore financial centers, investment advisors, and private equity funds, as well as other financial “gatekeepers” who facilitate transactions, such as lawyers, accountants, and corporate and credit service providers. Relatedly, the strategy report highlights ongoing efforts to implement the beneficial ownership registry, which aims to bring greater transparency and scrutiny to “anonymous shell companies” with US ties.

Accountability of corrupt actors

The strategy report calls on enforcement agencies to hold corrupt actors accountable using “proven tools” and proposes new legislation. It stresses the need to “vigorously” enforce the FCPA while combating the “demand side” of bribery by working with foreign partners to prosecute foreign officials and affiliates who demand improper payments. Separately, he highlights a new task force – the National Crypto Enforcement Team – that will enable the Department of Justice 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” to corrupt actors, including the State Department-led Democracies Against Safe Harbors initiative, which would “amplify the impact of US sanctions and visa restrictions” by increasing Lobbying corrupt actors through coordinated action It also advocates for the private sector to adopt effective anti-corruption policies and, where appropriate, to share “actionable information” with law enforcement authorities.

This anti-corruption call, as well as some specific pressure points, is once again resonating in the UK law enforcement scene. The 2021 National Strategic Assessment on Serious and Organized Crime published by the UK’s National Crime Agency confirms that the risk of bribery, corruption and evasion in the UK has increased more than any other area of ​​serious and organized crime since 2020. In January 2020, the Conduct Authority introduced Some crypto assets are included within the UK’s anti-money laundering regulatory regime, and in April 2021 the Foreign and Commonwealth Office of Foreign Affairs and Development introduced a new global anti-corruption sanctions regime, under which people involved in serious corruption could be added to its financial sanctions lists.

Updating, coordinating and resourcing enforcement efforts

The strategy report acknowledges that “higher priority setting and amplification of anti-corruption efforts” will require the US government to adopt modern strategies, draw on additional resources, and coordinate with domestic and foreign partners. He cites new “research, data collection, and analysis” tools, which will likely include “proactive” approaches such as “data mining” that Justice Department leaders have reviewed in recent months. As part of this process, it also highlights efforts to improve “inter-agency capacities,” which will include initiatives to “strengthen[] information sharing between the intelligence community and law enforcement.” Importantly, the Strategy Report recognizes the need to “allocate additional human resources to synchronize anti-corruption work” across enforcement agencies. On December 1, 2021, Assistant Attorney General Kenneth Bullitt emphasized that The Department of Justice will work to “increase resources” for corporate enforcement, including “more bodies” and data resources, “not just to investigate a case as soon as it goes through the door but to identify cases initially.”

Improving bilateral partnerships

The strategy report focuses on the “transnational dimensions” of corruption and pledges to “strengthen them.”[e] Partner governments’ capabilities to fight corruption in cooperation with US law enforcement.” In recent years, US authorities have been involved in numerous multi-jurisdictional judicial decisions related to corruption, including several significant cases resolved in partnership with UK authorities. In addition , US and UK authorities have strengthened information sharing through mechanisms such as the 2019 Bilateral Data Access Agreement, which makes it easier for law enforcement agencies in both countries to obtain electronic data directly from technology companies.This agreement has received particular attention in the UK following the court decision Senior UK for 2021 in R (KBR) against the director of SFOThis placed significant limitations on the UK’s 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 importance for bilateral cooperation, the strategy report generally proposes to “raise and broaden diplomatic engagement and foreign assistance” through increased information sharing with foreign regulators. For example, similar to the current FBI program, the NDAA 2021 creates a new program to send Treasury attaches to U.S. embassies and foreign regulatory partners.

Strengthening multilateral mechanisms

An international approach to anti-corruption has been a constant topic for US and UK enforcement agencies in recent years. The strategy report prioritizes implementation of obligations under the United Nations Convention against Corruption, the Organization for Economic Co-operation and Development Convention against Bribery, and the G7 Financial Working Group Standards. On November 26, 2021, with US support, the OECD updated its Anti-Bribery Recommendation and Good Practice Guidelines for the first time since 2009. Although the guide is non-binding, it provides internationally recognized best practices for corporate compliance programs. The strategy report also commits to increasing US participation in formal and informal multilateral fora such as INTERPOL, the Interagency Network for Asset Recovery, and the International Anti-Corruption Coordination Center.

How should companies prepare

The strategy report notes that the Biden administration is preparing to embark on a rigorous domestic and international enforcement agenda next year. Although the precise nature of these new priorities and implementation strategies will become clearer over time, the Strategy Report provides companies with an incentive to evaluate compliance programs for combating money laundering, bribery, and corruption. Especially:

  1. Firms should take reasonable steps to align their anti-money laundering programs with the emerging risks identified in FinCEN’s June 2020 Priorities, including in priority areas such as cybercrime. Those companies with an international footprint may find that they can import learning from their experiences in jurisdictions, including the UK, which are already beginning to target those risks;
  2. Companies should take reasonable steps to align anti-bribery and corruption programs with the Department of Justice’s revised expectations in the June 2020 Guidelines on Evaluating Corporate Compliance Programs, the July 2020 FCPA Resource Guide, and similar guidance from agencies in international jurisdictions where there may also be that be a potential exposure;
  3. International banks and other global financial institutions should reconsider their KYC policies and procedures to reasonably align them with expectations arising from the new beneficial ownership registry, which is the subject of the recently proposed FinCEN regulations; Finally
  4. All organizations should take reasonable steps to ensure that their compliance programs are operating effectively in the contemporary era of COVID-19, which may require companies to update risk profiles and stress testing programs and to adapt employee guidance to new operating procedures.

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