White House Announces Effort to Develop a Presidential Strategy to Combat Domestic and International Corruption

Expanding Anticorruption Efforts

Framing anticorruption efforts as a “national security interest” sends a message that President Biden considers the fight against corruption to be a core concern of his administration. However, the effect of the memorandum will also be to force greater coordination among the disparate intelligence, legal, military, and financial agencies within the government that historically may not have collaborated or focused on combatting corruption.

Additionally, in the opening paragraphs of the memorandum, President Biden speaks of “authoritarian leaders” who “undermine democracies” and “oligarchs [who] flout the rule of law” and specifically calls out the “opaque financial systems[] and professional service providers [that] enable the movement and laundering of illicit wealth, including in the United States.” As a result, the administration appears poised not only to target corrupt foreign government official themselves but also to increase focus on the financial systems that allow those officials to move and benefit from illicit funds.

New Enforcement Partnerships and Tools

To achieve these goals, the memorandum calls for “robustly implementing Federal law requiring United States companies to report their beneficial owner or owners to the Department of Treasury” and “reduc[e] offshore financial secrecy.” This “robust” implementation of federal law almost certainly refers to recent efforts by the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to implement the Corporate Transparency Act (CTA), including the creation of a beneficial owner disclosure program, discussed here. The CTA defines “beneficial owner” as “an individual who, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise” “exercises substantial control over the [reporting] entity” or “owns or controls not less than 25 percent of the ownership interest of the entity.” The reports from this program will not be publicly available but likely will be available to other government agencies.

With the implementation of the CTA, FinCEN is expected to increase coordination with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), which, as the principal historical mechanisms for antibribery and anticorruption enforcement, will likely be major components of any concrete recommendations stemming from the interagency review. Armed with FinCEN’s new reporting requirements and the President’s directive to coordinate with international anticorruption partners, DOJ and SEC will have an opportunity to expand their reach and scope. For example, while many Foreign Corrupt Practices Act (FCPA) matters currently arise out of an internal whistleblower or a voluntary corporate disclosure, an increase in interagency cooperation may lead to new sources of potential cases for the DOJ and SEC’s FCPA units.

Additionally, the memorandum’s focus on targeting both corrupt foreign government officials as well as the financial institutions that facilitate their illicit acts may result in increased cooperation within the DOJ itself, including among the DOJ’s Public Integrity Section, the Money Laundering and Asset Recovery Section, and the Market Integrity and Major Frauds Unit. Nevertheless, as a result of the increased scrutiny and coordination envisioned by the memorandum, it will be vital for corporations and financial institutions to continually improve and enforce their compliance controls in order to mitigate exposure to the enhanced corruption enforcement efforts highlighted by President Biden.