Over the past few blog posts, I have been discussing the Statement issued last week by President Biden equating the international scourge of corruption as a national security threat to the United States and President Biden’s directive that countering corruption is “a core United States national security interest.” President Biden followed this up with his Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest. Under this Memorandum, the Biden “Administration will lead efforts to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”
This is a most welcome announcement from a US President, correctly equating the security interests of the United States with this international fight. Every compliance practitioner appreciates this statement as it validates the long-recognized intersection of corruption begets crime which begets terrorism. More importantly, it provides every compliance professional with this now recognized US security interest in what we all do each and every day, the furthering of compliance. In this final blog post of this series, I want to consider what President Biden’s Memorandum means for the corporate compliance practitioner.
The role of the US in this will lead with enforcement of anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA). The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) will no doubt take the lead in enforcing the FCPA. However, there will now be other agencies involved as well. I would expect the Commerce Department, State Department, Homeland Security Department, Department of Defense, the Department of Treasury and a number of agencies such as the Office of Foreign Assets Control (OFAC), the Commodity Futures Trading Commission (CFTC), the Inland Revenue Service (IRS) and other agencies. The Memorandum makes clear that these Departments and agencies are to “Modernize, increase, coordinate, resource, and otherwise improve the ability of key executive departments and agencies (agencies)..to promote good governance and prevent and combat corruption”; “Hold accountable corrupt individuals, transnational criminal organizations, and their facilitators”, “through criminal or civil enforcement actions”; “Work with international partners 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”.
All of this means that enforcement, both in the US and abroad, will ramp up. Alexandra Wrage said in the FCPA Blog, “Countering corruption as a comprehensive, whole-of-government priority, executive agencies and Congress are likely to be unified in holding multinational companies to higher ethical standards through policy and accountability. This effort will gain momentum with an influx of resources, staffing, and budget for legal enforcement agencies—presumably leading to more enforcement.” Wrage went on to note, “Companies should respond by revisiting and updating their compliance programs and ensuring adequate budget, staffing, and resources.”
The Memorandum specifically sets out a role for public and private corporations, through the promotion of partnerships with the private sector and civil society to advocate for anti-corruption measures and take action to prevent corruption; and the establishment of “best practices and enforcement mechanisms such that foreign assistance and security cooperation activities have built-in corruption prevention measures.”
Where should you as a corporate compliance professional begin? I would first bring both the Statement and Memorandum to the attention of your senior management and Board of Directors. If you have not done specific Board of Director training on the FCPA and the Board’s role in oversight of compliance under the evolving Caremark standard, now might be a most propitious time to do so. From there, you should perform a risk assessment. Literally every company across the globe’s risks changed over the past year. It started when the work from home regime kicked in and now there will be a return to work regime in some form for most companies. It could be hybrid; it could be multiple days per week or something else but your risk profile has definitely changed. What about your Supply Chain? Once again, the Biden Administration is leading the charge to bring Supply Chains back onshore to the US, for both economic and national security reasons. Yet this change brings a change in your risk profile. When was the last time you visited your conflict of interest policy and tested its performance? Have you ever done so?
Next, I would turn to staffing and resources. Do you have enough resources, both in funding and head count, to adequately perform compliance at your organization? The days of ‘we spent all we could’ have past, if they ever existed. Furthermore, when was the last time you actually evaluated what you needed to execute on a best practices compliance program using data analytics to determine what resources you need and where to deploy them? Along these same lines, have you performed a gap analysis of your internal compliance controls against the Hallmarks of an Effective Compliance Program, Six Principles of Adequate Procedures under the UK Bribery Act or the compliance requirement under Sapin II?
You should do so, as the Memorandum also makes clear that enforcement is not limited to simply US enforcement. The Memorandum stated that the US would “Assist and strengthen the capacity of domestic (including State and local) authorities and institutions, as well as partner and other foreign governments at all levels, to implement transparency, oversight, and accountability measures, which will counter corruption and provide their citizens with accessible and usable information regarding government programs, policies, and spending”.
Wrage concluded her piece by stating, “As the White House memo explicitly states, the private sector has an enormous role in preventing corruption from happening in the first place, and all signs point to robust anti-bribery enforcement, increased accountability, and high expectations for multinational companies’ compliance programs.” I could not agree more. The President could not have been more clear in his Statement and Memorandum. The international scourge of corruption is a direct threat to the national security of the US. Every compliance professional is now a part of this great crusade.
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