Today’s guest post is from Lucinda A. Low and Shruti Shah, respectively Acting Chair and President of the Coalition for Integrity, a U.S. based non-governmental organization focused on fighting corruption. The opinions expressed here are those of the authors, and should not be attributed to the organization..
The United States has a long history, across administrations of both parties, of showing leadership internationally in the fight against corruption. The passage and enforcement of the Foreign Corrupt Practices Act (FCPA) has served as an example for other countries to adopt their own transnational anti-bribery laws. Additionally, the United States has championed international anti-bribery efforts in multilateral organizations and worked to build coalitions to root out all types of corruption. For the last several years, however, U.S. has faltered. In order to reestablish the U.S. as a global leader against corruption, and to get its own house in order, the Biden Administration and the new Congress should embrace an ambitious agenda that includes the following elements:
First, with respect to the multilateral international anticorruption architecture, the United States must lead from the front by promoting and supporting the following efforts:
- The Biden Administration should work to strengthen the OECD Anti-Bribery Convention, which has proved to be one of the most effective “supply side” instruments in combating bribery in international business transactions. Part of this effort will involve working to maintain the effectiveness of the OECD Convention’s peer review system, while also developing additional tools to facilitate cooperation among countries and improve multi-jurisdictional enforcement. The Administration should also press major economic competitors, such as China and India, to become parties to the Convention and be subject to strong implementation standards. This is not a trivial undertaking, as it involves the submission to peer review, and membership of these countries should not be pursued if it puts at risk dilution of those standards.
- The Administration must also support efforts to strengthen the effectiveness of the United Nations Convention Against Corruption (UNCAC), particularly by supporting efforts to focus the UN’s anticorruption efforts in areas where that body can be most effective, potentially including issues of the “demand” side of bribery as well as asset recovery.
- The Administration should also take steps to improve cooperation with other countries in eliminating safe havens for illicit financial activities. A number of countries, including (finally) the U.S., have adopted laws requiring more transparency regarding the beneficial owners of companies, but effective law enforcement is likely to be undermined by the slow and patchy implementation of beneficial registers globally. The lack of clear and comprehensive international standards requiring countries to maintain beneficial ownership registers means that corrupt actors may still find jurisdictions in which to remain anonymous. Addressing these loopholes should be a high priority for the administration.
- With respect to fighting global corruption in the extractive sector, the Securities and Exchange Commission should adopt a strong and effective rule to implement the “publish what you pay” requirements of the Dodd-Frank Act, which requires oil, gas, and mining companies listed on U.S. stock exchanges to publicly disclose the payments made to U.S. and foreign governments in exchange for oil, gas, and minerals. Unfortunately, after multiple attempts for over a decade the SEC issued a weak and inadequate implementation rule in December 2020; replacing that rule with a more robust rule that conforms to the letter and spirit of the Act should be a high priority. Along similar lines, the United States should rejoin the Extractive Industries Transparency Initiative and lead by example.
- The U.S. should also do more to assist other countries in rooting out domestic corruption. A promising initiative in this direction is a bipartisan bill reintroduced in Congress this session, the Combating Russian and Other Overseas Kleptocracy (CROOK) Act, which would establish and increase funding to combat corruption overseas, including by establishing a permanent fund aimed at local anticorruption reform in countries where it is needed.
In addition to these international efforts, the United States needs to do more to get its own house in order. There are a number of important issues to address on the home front. For example:
- Public procurement has always been a sensitive area from an anticorruption standpoint, and this has become even more true during the pandemic, when there can be pressures to cut corners. The Biden Administration needs to take immediate steps to ensure that public procurement rests on principles of transparency, accountability, and sound administration.
- Another key area is beneficial ownership transparency. As noted above, the U.S. finally passed the Corporate Transparency Act (CTA), which requires disclosure of beneficial ownership of companies to the U.S. Treasury Department. Such disclosure is critical to preventing the illicit activities that anonymous ownership facilitates, including corruption, money laundering, terrorist financing, and sanctions evasion. The Biden administration should ensure that Treasury’s Financial Crimes Enforcement Network (FinCEN) effectively implements the CTA’s requirements. FinCEN should also move swiftly to close loopholes currently available to gatekeepers involved in luxury goods purchases such as the real estate industry, and should require these parties to conduct due diligenceinto buyers’ identities and the sources of their funds.
- Yet another high-priority area is whistleblower protection. Good governance and accountability depend on potential whistleblowers being willing to come forward with their concerns without fear of retaliation. This is easier said than done. Even in countries that have legally mandated whistleblower protection, a whistleblower’s message is often unwelcome and a threat to established interests.
- In addition to encouraging and protecting whistleblowers, the administration should act to strengthen government oversight institutions, such as inspectors general and similar bodies that have the authority and resources to pursue accountability.
Finally, we emphasize that in pursuing an effective anticorruption agenda, domestic and international strategies intersect and reinforce one another. Indeed, they are two sides of the same coin. We therefore urge the new Administration to develop a unified anticorruption agenda, one that includes components of domestic recovery and good governance, multilateral reengagement, transparency and accountability, and international cooperation.
“For the last several years, however, U.S. has faltered.” This is interesting sentence given that FCPA enforcement has been above historical averages over the past four years, corporate settlement amounts have set records for two years straight and individual criminal prosecutions have set records as well.
Thank you, Lucinda A. Low and Shruti Shah, of Coalition for Integrity-
This is an excellent recommendation. It is reflects the experience and spirit of Transparency International (TI) and its former US-Chapter.
Perhaps you could have placed some more emphasis on the powerful role civil society organzations like the Coalition for Integrity have to play in complementing governmental and business efforts to fight corruption.
This is particularly true in countries, where political leadership against corruption “falters”.