Laurence Cockcroft, a founding board member of, and current advisor to, Transparency International, contributes today’s guest post:
The global campaign against corruption has become a cornerstone of Western foreign and development policy for the last 25 years. This campaign built on a number of earlier measures, most notably the 1977 enactment of the US Foreign Corrupt Practices Act (FCPA), which criminalized foreign bribery by companies under US jurisdiction, but the campaign really accelerated beginning in the late 1990s. For example, while European countries had resisted adopting legislation similar to the FCPA for 20 years, this changed with the adoption of the OECD Anti-Bribery Convention in 1997, which was followed a few years later by the 2002 UN Convention Against Corruption. International financial institutions like the World Bank have become more aggressive about debarment of contractors found to have behaved corruptly, and we have also seen the proliferation of corporate-level ethical codes, promoted by organizations like the World Economic Forum and UN Global Compact, designed to prevent corrupt behavior.
More recent initiatives have pushed for greater corporate transparency. For example, in the United States, the Dodd-Frank Act ended the aggregation of corporate income across countries; an EU Directive promulgated shortly afterwards imposed similar requirements. More recently, an initiative to disclose the true beneficial owners of corporations and other legal entities, pushed by former British Prime Minister David Cameron, has already taken legislative form in the United Kingdom; beneficial ownership transparency is also the subject of an EU Directive, and was being promoted by the Obama administration. And although the so-called “offshore centers” have yet to embrace similar transparency of beneficial ownership, regulatory systems in these centers have been significantly improved. There have also been a number of important sector-level initiatives, particularly in the resources sector. These include the Extractive Industries Transparency Initiative (EITI)—which requires participating governments of mineral and energy exporting countries, as well as companies in the extractive sector, to commit to a process of revenue transparency—as well as national-level laws, such as Section 1504 of the Dodd-Frank Act, which impose so-called “publish what you pay” obligations on extractive firms.
Even more encouragingly, this gradually improving regulatory environment has been accompanied by growing public opposition to corruption, as reflected in large-scale demonstrations around the world. Crowds on the streets, for example, have recently supported the proposed prosecutions of the current and past Presidents of Brazil, and opposed weakening of anticorruption laws in Romania.
But in spite of public opinion, the forces opposed to anticorruption initiatives have never gone away. The arrival of President Trump has let many of them loose both inside and outside the United States:
Regulation shaping the behavior of multinational companies is already being dismantled. Congress, with President Trump’s approval, has already revoked the publish-what-you-pay rules enacted pursuant to Section 1504 of the Dodd-Frank Act. The administration shows no desire to follow up on the issue of the beneficial ownership of shell companies, which would involve a new fight with state attorneys general. And over the weekend of March 11th, the President fired Preet Bharara, the courageous Attorney General for the Southern District Court of New York, and a key figure in the fight against financial crime.
The consequences of this are very serious. Long discredited arguments about the inevitability and even desirability of corruption in the developing world are being rehabilitated. Rex Tillerson’s Exxon was one of the most reluctant companies to sign up for the EITI program, and so it’s perhaps unsurprising that the U.S. announced earlier that it would be withdrawing from the EITI’s voluntary certification process. The FCPA has been under threat for some years from the US Chamber of Commerce and other lobbyists; FCPA opponents are now likely to be joined by President Trump who has described the FCPA as a “horrible law.”
The sight of a President setting out to undermine the gains made in rolling back corruption will resound throughout the developing world. The consequences of this include not only a more hospitable environment for corporate bribery, but also serious adverse impacts on international security. After all, perceptions of Western corruption drives support for the “radical Islam” movement that President Trump likes to condemn. The Arab Spring, and its widespread fallout, was unquestionably driven by a reaction against the corruption of the governments of the day, strongly supported by the US and EU. Similar concerns about corruption hold true for the originators (if not the current leaders) of Boko Haram in Nigeria and ISIS in Iraq and Syria. These perceptions will continue to inform opinion in countries such as Pakistan and Iran, which are crucial to international security.
In the late 1970s, the realization that corrupt practices by US corporations were hurting US national security interests by giving propaganda material to communist movements was one of the factors that drove the US to enact the FCPA; one can only hope that a similar realization will cause the Trump Administration to rethink its rollback of anticorruption efforts.