Biden Administration Issues Directive for Revitalized Strategies to Combat Corruption and Financial Crime, Signaling Increased Enforcement Effort

On June 3, 2021, President Biden issued the first National Security Study Memorandum of his presidency, in which he declared fighting corruption “a core United States national security interest.”^[1] The Memorandum sets out the Biden administration’s policy of promoting democracy and countering authoritarianism through enhanced efforts to root out corruption, including increased enforcement of statutes targeting financial crime.

In explaining that “acts of corruption sap between 2 and 5 percent from global gross domestic product,” the Memorandum notes that “[c]orruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself.” Through a policy of “effectively preventing and countering corruption and demonstrating the advantages of transparent and accountable governance,” however, the United States “can secure a critical advantage for [itself] and other democracies.” In a statement accompanying the Memorandum’s release, President Biden reiterated that “[f]ighting corruption is not just good governance. It is self-defense. It is patriotism, and it’s essential to the preservation of our democracy and our future.”^[2]

In terms of concrete action, the Memorandum directs the national security advisor to lead an interagency review process including over a dozen federal agencies to produce and deliver in 200 days a report with recommendations to achieve the president’s policy goals. The report will set forth a strategy drawn from the work of each of these agencies as to how the United States can modernize, coordinate and better use its resources, as well as partner with other countries to battle corruption.^[3]

As the Memorandum explains, proceeds from “the misappropriation of public assets, bribery, and other forms of corruption ... cross national borders and can impact economies and political systems far from their origin. Anonymous shell companies, opaque financial systems, and professional service providers enable the movement and laundering of illicit wealth, including in the United States and other rule-of-law-based democracies.” In seeking recommendations to combat such corruption, the Memorandum in particular seeks recommendations for relevant new legislative proposals and sanctions; ways to more strongly combat money laundering, illicit finance and bribery; means to identify, freeze, recover and return stolen assets; efforts to bolster international cooperation; and strategies to support other nations’ anti-corruption efforts and the work of NGOs to highlight foreign corruption.

The administration has indicated that specific areas of concern to be addressed by the new strategy include the increasing use of anonymous shell companies and residential real estate purchases in the United States to launder money, the growing use of cryptocurrency as a means of illicit finance, and interference by foreign actors in domestic U.S. politics.^[4] On this last front, in a clear reference to the rise of foreign actors influencing the domestic U.S. political environment, the Memorandum seeks recommendations specifically to “counteract strategic corruption by foreign leaders, foreign state-owned or affiliated enterprises, transnational criminal organizations, and other foreign actors and their domestic collaborators, including, by closing loopholes exploited by these actors to interfere in democratic processes in the United States.”

The Memorandum comes on the heels of the passage of the National Defense Authorization Act of 2021 in January, and with it the Corporate Transparency Act (CTA).^[5] The CTA establishes a database to facilitate information-sharing among law enforcement agencies, national security agencies, financial institutions and the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury to combat money laundering and other financial crimes. It does so by establishing new federal beneficial ownership reporting requirements for certain U.S. domiciled or active entities, including foreign entities that operate in the U.S., and directs the creation of a federal database to house the beneficial ownership information collected. The beneficial ownership database is a key focus of the administration. President Biden’s Memorandum seeks recommendations on strategies to “robustly implement[]” the new beneficial owner reporting requirements. The administration’s recent budget proposal sought an additional $60 million in funding for the initiative — roughly 50% above what was enacted last year. The Memorandum also seeks to build upon the Department of Justice’s Kleptocracy Asset Recovery Initiative, which since 2019 has facilitated the repatriation of nearly $1.5 billion of stolen assets to their countries of origin.

The Memorandum follows the earlier passage of the Anti-Money Laundering Act of 2020 (AMLA), an overhaul of U.S. anti-money laundering laws that establishes a new whistleblower reward program at the Department of the Treasury. To incentivize reporting of violations of the Bank Secrecy Act (BSA), the new program offers voluntary whistleblowers up to 30% of the total funds recovered by the Treasury over $1 million, if recovered through a judicial or administrative action brought under the BSA.^[6]

The Memorandum, with its clear emphasis on increased coordination, cooperation and enforcement, in conjunction with Congress’ increased focus on anticorruption issues, likely signals increased enforcement actions and prosecutions for corruption and financial crimes. Companies and their boards of directors should remain alert to creating and maintaining a culture that emphasizes anticorruption compliance and training; assessing their financial crimes risks; and assuring adherence to the full range of such laws, including foreign corrupt practices, money laundering, sanctions and anti-boycott laws. 

^[1] _{The White House, Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest, June 3, 2021, available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/06/03/memorandum-on-establishing-the-fight-against-corruption-as-a-core-united-states-national-security-interest/.}

^[2] _{The White House, Statement by President Joseph R. Biden, Jr. on the National Security Study Memorandum on the Fight Against Corruption, June 3, 2021, available at https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/03/statement-by-president-joseph-r-biden-jr-on-the-national-security-study-memorandum-on-the-fight-against-corruption/.}

^[3] _{These agencies include the Office of the Vice President, the Department of State, the Department of the Treasury, the Department of Defense, the Department of Justice, the Department of Commerce, the Department of Energy, the Department of Homeland Security, the Office of Management and Budget, the United States Mission to the United Nations, the Office of the Director of National Intelligence, the Central Intelligence Agency, the Office of the Chairman of the Joint Chiefs of Staff, the United States Agency for International Development, and the National Security Agency.}

^[4] _{See The White House, Background Press Call by Senior Administration Officials on the Fight Against Corruption, June 3, 2021, available at https://www.whitehouse.gov/briefing-room/press-briefings/2021/06/03/background-press-call-by-senior-administration-officials-on-the-fight-against-corruption/.}

^[5] _{National Defense Authorization Act for Fiscal Year 2021, https://www.congress.gov/bill/116th-congress/house-bill/6395.} 

^[6] _{31 U.S.C. § 5323.}