On June 3, the White House issued a memorandum that established the fight against corruption as a “core US national security interest.” The memo notes the staggering costs of corruption, which degrade the rule of law, economic growth, and trust in government. The global financial system often serves as a vehicle for corruption by allowing opaque transfers of illicit wealth and misappropriated assets. Establishing corruption and kleptocracy as key national security issues is therefore critical to protecting the US financial system and good governance. The whole-of-government approach to this national security threat will most likely require more comprehensive due diligence research and enhanced compliance procedures by US firms to more effectively vet potential business partners and clients, possible politically exposed person (PEP) connections, and likely connections to corrupt foreign individuals.
- The White House anti-corruption strategy includes resourcing and modernizing the ability of US agencies and departments to combat corruption and all forms of illicit finance; improving transparency and information sharing; strengthening the capacity of international institutions and establishing global anti-corruption norms; and holding corrupt individuals, criminals, and their facilitators accountable by identifying, freezing, and returning misappropriated assets.
- The Biden administration also pledges to work with international institutions on anti-corruption efforts. In the UK, the Royal United Services Institute (RUSI) has established a non-governmental task force on the Trans-Atlantic Response to Illicit Finance (TARIF) that will operate for 12 months to identify viable paths for the United States and UK to collaborate on tackling illicit finance. RUSI plans to consolidate its findings into a series of policy papers and recommendations to inform UK policy on the issue.
- Congress is also launching a Caucus against Foreign Corruption and Kleptocracy to identify ways to mobilize bipartisan efforts to curb kleptocracy. The Caucus agrees with the Biden administration that the fight against corruption needs to be viewed as a national security priority. The new caucus will allow members and staff from several congressional committees that have equities in fighting foreign corruption to collaborate with one another, hold public hearings and informal roundtables, and facilitate information sharing.
In a background call prior to the release of the White House memorandum, senior administration officials informed the press that agencies and regulators will focus on closing regulatory loopholes to limit illicit actors’ ability to exploit anonymity in real estate and offshore shell companies. The administration will also work with investigative journalists and NGOs to publicly identify those involved in corruption, as well as examine the illicit finance risks presented by cryptocurrencies.
US firms and financial institutions should engage with experts in cryptocurrency, anti-money laundering, sanctions compliance, enhanced due diligence research, and linguistic and cultural expertise to conduct enhanced due diligence in advance of possible new regulations, as well as update their compliance programs in anticipation of possible new regulations.
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