Though broad in scope, the Biden Administration’s plan to counter domestic and international corruption follows four primary lines of effort. A series of related proposals for rule-making conclude their comment period in February. Business leaders have the opportunity to respond to both in advance of enforcement.
On December 6, 2021, the Biden Administration issued the U.S. Strategy on Countering Corruption, which assesses current anti-corruption efforts and details the administration’s approach for preventing domestic and foreign corruption. It also runs down lines of efforts (LOEs) to benchmark its progress.
While the strategy is wide-ranging, four themes repeatedly appear throughout: (1) the importance of the Anti-Money Laundering Act of 2020 (AML Act); (2) increasing individual accountability for corrupt conduct; (3) the need to focus on the demand side of bribery; and (4) a commitment to international cooperation and global initiatives. This article discusses these themes and the strategy’s related LOEs, along with takeaways for companies to consider as the administration endeavors to implement a series of robust anti-corruption efforts this year and beyond.
A critical part of the US anti-corruption strategy is stopping tax evasion and avoidance at home and abroad. The US strategy follows a National Security Study Memorandum that President Biden issued to strengthen transparency for the US and international financial system.
— Eric LeCompte (@Eric_LeCompte) December 10, 2021
Theme #1: The Importance of the AML Act
The AML Act, which became law January 1, 2021, requires the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to modernize the current framework for preventing and detecting money laundering. In 2021, FinCEN engaged in a flurry of activity in an effort to satisfy the AML Act’s requirements.
A recurring theme in the strategy is how “[c]orrupt actors exploit deficiencies in anti-money laundering” processes to hide funds. Several LOEs focus on the need to “address deficiencies in the U.S. anti-money laundering regime” and reiterate the AML Act’s requirements.
- Beneficial Ownership Information (BOI) Reporting: The strategy focuses on the illicit use of anonymous shell companies to “hide the proceeds of ill-gotten wealth in opaque corporate structures,” and critiques the lack of a systemic way to track BOI. One LOE in the strategy is “[f]inalizing effective beneficial ownership regulations, and building a database of the beneficial owners of certain companies” to identify bad actors.
Under the AML Act, FinCEN must promulgate regulations requiring certain corporations, limited liability companies, and similar entities to report their BOI. On December 7, 2021, one day after the strategy was published, FinCEN announced the BOI Reporting Notice of Proposed Rulemaking (NPRM), to give the public an opportunity to review and comment on the proposed rule to implement the BOI reporting provisions. The proposed rule would require companies to identify their beneficial owner(s) and company applicant(s), including their legal name, date of birth, residential or business street address, and unique identifying number.
- Real Estate Reporting: The anti-corruption plan describes the laundering of “funds through anonymous purchases” of real estate as another AML deficiency. One LOE is to promulgate “regulations targeting those closest to real estate transactions to reveal where real estate is used to hide ill-gotten cash or to launder criminal proceeds.”
The day after the strategy was published, FinCEN also issued an advance NPRM for AML regulations for real estate transactions, soliciting public comments on potential reporting requirements for persons involved in real estate transactions. The ANPRM requests comments regarding (1) who should be subject to reporting requirements; (2) the geographic scope and transactional threshold triggering reporting obligations; (3) the types of entities required to report or disclose; and (4) the types of real estate subject to disclosure.
More on real estate in money-laundering
- AML/CFT Request for Information: The strategy contains a LOE that the United States “will continue to assess and seek to remedy identified vulnerabilities in its AML regime,” including “considering further action based on the findings of studies mandated by the AML Act.”
On December 14, 2021, FinCEN published a request for information (RFI) for Review of Bank Secrecy Act Regulations and Guidance, which relates to one such required study. The RFI “solicit[s] comment on ways to streamline, modernize and update” the AML/CFT regime, so that the requirements “protect U.S. national security in a cost-effective and efficient manner.” The RFI’s 26 topics involve regulations and guidance “that may be outdated, redundant, or otherwise do not promote a risk-based AML/CFT compliance regime,” “threats to the financial system and to national security that are not adequately addressed by BSA regulations and guidance,” and “regulatory safeguards that FinCEN should implement via regulation or guidance to better protect the financial system from such threats.”
Key Takeaways from Theme #1:
- Companies should consider submitting comments responding to the:
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- BOI Reporting NPRM (deadline February 7, 2022);
- ANPRM for Anti-Money Laundering Regulations for Real Estate Transactions (deadline February 7, 2022); and
- Review of BSA Regulations and Guidance RFI (deadline February 14, 2022).
- Companies should monitor other anticipated FinCEN activity, which may affect their compliance programs and reporting obligations. The AML Act required FinCEN to take several actions (e.g., implementing regulations for BOI reporting) by January 1, 2022; however, FinCEN has fallen short in meeting some of these deadlines. We expect another surge in FinCEN activity this year as the agency races to satisfy the AML Act’s requirements and the administration’s expectations.
CCI’s Archives: Read More About AML
Theme #2: Increasing Individual Accountability for Corrupt Conduct
The anti-corruption plan stresses individual accountability, particularly for gatekeepers and facilitators of corrupt activity. It includes a LOE to “vigorously pursue the enforcement of foreign bribery cases through the FCPA, money laundering charges and forfeitures for promoting corrupt schemes and laundering corruption proceeds as appropriate,” which echoes Deputy Attorney General Lisa O. Monaco’s instruction to prosecutors in October 2021 to enforce the law “vigorously.” The Deputy Attorney General warned companies that individual accountability for criminal conduct is “unambiguously this department’s first priority.”
The strategy notes the difficulty of proving the “intent and knowledge” element of certain laws that can be used to prosecute corruption, and states that the administration will use “existing authorities, and work[] with the Congress to expand authorities where necessary, to make sure that key gatekeepers to the financial system—including lawyers, accountants, and trust and company service providers—cannot evade scrutiny.” Indeed, challenging legal questions continue to arise in individual Foreign Corrupt Practices Act (FCPA) prosecutions, making convictions more difficult to achieve. For example, in 2020, a district court overturned a foreign national’s FCPA convictions, finding prosecutors failed to prove the individual was an agent of the international company’s US subsidiary or could otherwise be held liable under the language of the FCPA.
In the meantime, the Department of Justice (DOJ) is increasingly – and successfully – using money laundering laws to prosecute individuals for conduct that would traditionally fall under the FCPA. For example, the eldest son of a former Panamanian president recently pled guilty to money laundering conspiracy – and not a FCPA violation – for laundering bribes paid to foreign officials through offshore bank accounts.
Key Takeaway from Theme #2:
- The administration’s emphasis on individual accountability should strongly encourage management and those in “gatekeeper” roles at companies to proactively evaluate their companies’ compliance programs and promptly remediate identified issues.
Theme #3: The Need to Focus on the Demand Side of Bribery
Another theme of the strategy is prosecuting those who demand bribes. One LOE is “working with allies and partners on enacting legislation criminalizing the demand side of bribery, and enforcing new and existing laws.”
As noted above, the DOJ is increasingly using money laundering laws to prosecute individuals for bribery offenses. The DOJ must sometimes rely on those laws to charge individuals who demand bribes, in light of the fact that the FCPA, unlike foreign anti-bribery statutes such as the U.K. Bribery Act, only prohibits paying or agreeing to pay bribes—not soliciting or accepting bribes. Bipartisan groups of legislators previously have proposed legislation to fill that gap (e.g., the Foreign Extortion Prevention Act in August 2019), which, if passed, would have provided a mechanism for the DOJ to prosecute foreign officials who demanded bribes. These efforts have not yet gained traction, but the strategy suggests that the administration is interested in pushing them forward.
Key Takeaway from Theme #3:
- Companies should consider the DOJ’s use of existing laws to combat those who demand or solicit bribes, and monitor potential legislation that would enact new laws in this area.
Theme #4: A Commitment to International Cooperation and Global Initiatives
Several LOEs discussed in the strategy involve international cooperation and global initiatives, including:
- Expanding NATO’s Building Integrity Program to “target corruption in finance, acquisition and human resources functions”;
- Pushing “the G20 and G7 to implement strong transparency and anti-corruption measures”;
- Strengthening international anti-corruption architecture in organizations like the United Nations;
- Committing to implementing the UN Convention Against Corruption and the OECD Anti-Bribery Convention;
- Adding anti-corruption provisions to trade agreements; and
- Launching an interagency initiative to coordinate international enforcement efforts.
While some of these LOEs are less concrete than others, they reflect the administration’s commitment to international cooperation and global initiatives. FCPA resolutions often involve cross-border settlements, or, at a minimum, coordination with and assistance from foreign authorities.
Key Takeaway from Theme #4:
- Companies should consider the ever-increasing cooperation, coordination and information sharing between U.S. and foreign regulators when conducting internal investigations, including when considering privilege issues and assessing whether to self-disclose to a regulator.
We expect significant anti-corruption activity in 2022 as the administration attempts to fulfill the strategy and its related LOEs. Companies should keep a close watch on its progress.
Sarah E. Paul is a partner in the Litigation Practice Group at Eversheds Sutherland and US Head of Corporate Crime and Investigations. Her practice spans all areas of white-collar defense, with a particular focus on government, internal, and cross-border investigations, tax controversy, and cybersecurity and privacy law.
Andrea L. Gordon, counsel in Eversheds Sutherland’s Litigation Practice Group, advises clients on white collar, compliance, SEC and FINRA matters. She has extensive experience conducting internal investigations, evaluating and developing corporate compliance programs, and representing both corporate and individual clients in regulatory inquiries, administrative proceedings and complex commercial litigation. She specializes in matters involving the Foreign Corrupt Practices Act (FCPA) and anti-money laundering.
Dane N. Sowers, an associate in Eversheds Sutherland’s Litigation Practice Group, advises clients on all aspects of complex business and commercial litigation matters, including securities, energy, and labor and employment disputes.
