The United States Strategy on Countering Corruption: Digging into the Anti-Corruption Initiatives (Part III of III)
The new United States Strategy on Countering Corruption includes several important statements of interest to legal and compliance professionals.
Under the third of the five pillars, Holding Corrupt Actors Accountable, the U.S. Government specifically calls out the importance of private sector commitment to anti-corruption compliance programs “to improve the international business climate by encouraging the adoption and enforcement of anti-corruption compliance programs by U.S. and international companies.”
With respect to FCPA enforcement, the Strategy on Countering Corruption notes that the U.S. government “will continue to vigorously enforce the [FCPA] and other statutory and regulatory regimes via criminal and civil enforcement actions.”
However, the Strategy on Countering Corruption outlines the need to “update the tools available to hold corrupt actors accountable at home and abroad including by working with Congress to criminalize the demand side of bribery by foreign officials.” This statement suggests that the Administration will seek amendment of the FCPA to prohibit not only payments of bribes but extend criminal coverage to recipients of bribe payments. DOJ prosecutors have been using money laundering statutes to charge and hold foreign officials accountable for bribery schemes. By addressing this disparity in the FCPA, DOJ prosecutors could obtain a new tool to use when charging FCPA violations against bribe recipients. Both the House and Senate have pending legislation to accomplish this goal – The Foreign Extortion Prevention Act.
The Treasury Department is taking a lead role under the new Strategy on Countering Corruption. In tackling corruption issues, Treasury’s Financial Crimes Enforcement Network or FinCEN announced proposed regulations on real-estate purchases made in cash. The initiative seeks to make nationwide current reporting requirements on transactions in 12 metropolitan areas with residential property selling for more than $300,000.
The real estate sector has been a well-recognized target for increased transparency to curb corrupt officials and criminals seeking to launder proceeds of ill-gotten gains. The proposed regulations seek comments concerning the types of real estate and whether it would extend to commercial property. FinCEN noted that money launderers regularly use shell-company real estate purchases to move illicit proceeds generated by corrupt schemes, human traffickers, drug traffickers and other criminals. According to FinCEN, more than $2.3 billion was laundered through U.S. real estate between 2015 to 2020.
The Treasury Department’s Office of Foreign Asset Control (“OFAC”) also announced sanctions targeting businessman Alain Mukonda and a dozen associated companies for promoting corruption in the Democratic Republic of the Congo. Mr. Mukonda, a Congolese national, worked on behalf of Dan Gertler, a billionaire Israeli businessman who was sanctions by the United States in 2017 for his business dealings in the DRC and nearby countries. Mr. Gertler is accused of earning a fortune through mining and oil deals in the DRC with the assistance of corrupt government officials and establishing a violent kleptocracy.
The new initiative also requires government agencies to collaborate with Congress to develop new laws and use existing regulations to prevent various “gatekeepers” to the financial system, including lawyers, accountants, trust and company-service providers, to facilitate illicit finance and money laundering schemes. As part of this initiative, the Biden Administration intends to propose increased oversight and stiffer penalties for facilitation of corruption and money laundering offenses. In particular, the Strategy on Countering Corruption, suggests that the Treasury Department will impose additional customer due diligence and KYC requirements and increase professional sanctions on gatekeepers who facilitate illicit transactions.
The Treasury Department is also charged with a renewed effort to “prescribe minimum standards for AML programs and suspicious activity reporting [SAR] requirements for certain investment advisors.” In addition, and perhaps more significantly, the Strategy on Countering Corruption, suggests that the Treasury Department should expand AML standards to “private placement funds, including investments offered by hedge funds and private equity firms.”
Finally, the Strategy on Countering Corruption notes the importance of examining “digital assets” and consider appropriate regulation of criminal misuse of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.