Two important milestones in U.S. law and international law show the strengthening of domestic and global efforts to combat corruption. December marked the 40th anniversary of the Foreign Corrupt Practices Act (FCPA) and the 20th anniversary of the signing of the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention). Together, these landmark legal reforms have and are reducing corruption in international business and development.
Yet, challenges remain, including securing consistent vigorous global enforcement and addressing solicitation, kleptocracy, and opaque offshore vehicles misused to hide illicit assets. What has been accomplished so far, and what is planned for the future in the fight against corruption in international business?
Marking these anniversaries, the American University Washington College of Law Anti-Corruption Law Certificate Program, with the co-sponsorship of the ABA Section of International Law, the OECD, and the Association of Women International Trade, held a program on November 8, 2017, to review and celebrate accomplishments to date and to assess the challenges ahead. Speakers included current and former U.S. government officials, OECD officials, and representatives of international organizations. Kathryn Nickerson, Senior Counsel at the U.S. Department of Commerce, and Shruti Shah, a Vice President at the Coalition for Integrity, moderated panel discussions.
In introductory remarks, Nancy Boswell, the Director of the Anti-Corruption Law Program at American University Washington College of Law, stated, “Public officials and private practitioners studying in our Certificate Program note the profound and positive impact of the FCPA and the Anti-Bribery Convention and are inspired to tackle today’s challenges to public and corporate integrity.”
Ambassador Stuart Eizenstat, who served as Domestic Policy Advisor to President Carter, described the arc of progress, starting from the Watergate scandal, which led to the Ethics in Government Act of 1978 and other reforms. It also revealed corporate foreign bribe payments as a common business practice, leading the U.S. to enact the FCPA.
Public officials and private practitioners studying in our Certificate Program note the profound and positive impact of the FCPA and the Anti-Bribery Convention and are inspired to tackle today’s challenges to public and corporate integrity.
Subsequent concern that the law disadvantaged U.S. companies competing with companies from countries lacking similar prohibitions and, in some cases, even permitting tax deductions for bribes, led the United States to press the OECD to help create a more level playing field. By the mid-1990s, the time was right for the adoption of the OECD Anti-Bribery Convention and for the creation of the Working Group on Bribery (WGB) peer-review monitoring process.
As a result of these legal reforms and vigorous U.S. enforcement, most major exporting countries now have foreign bribery prohibitions, and major multinational corporations have adopted or enhanced their ethics and compliance programs.
On the key question of enforcement under the Trump Administration, John Cronan, Principal Deputy Assistant Attorney General at the U.S. Department of Justice (DOJ) Criminal Division, noted that corruption disadvantages companies that play by the rules, threatens U.S. national security, and fuels organized crime.
Therefore, according to Cronan, the United States will continue to lead on enforcement, notably in prosecuting individuals, as indicated under the April 2016 Pilot Program and the Revised FCPA Corporate Enforcement Policy, issued on November 29, 2017, rewarding corporations for voluntary self-disclosure. It will also foster enforcement by other countries, particularly through more coordinated negotiated resolutions. This will also help mitigate the possibility of companies paying twice for the same conduct, according to Cronan.
Other panelists expressed support for negotiated settlements provided they are consistent across countries and transparent. The WGB is working to ensure such consistency, according to Brooks Hickman, an Analyst in the OECD Anti-Corruption Division.
Speakers noted progress across the corporate community in adopting ethics and compliance programs and training. However, Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity, cautioned that the DOJ’s emphasis on prosecution of individuals, although a powerful deterrent, risks lessening pressure on companies to create a culture of integrity. Panelists also questioned how prosecutors will assess the adequacy of corporate compliance programs in countries permitting such a defense.
The key issue of enforcement is a decidedly mixed picture outside the United States, according to Drago Kos, Chair of the WGB. He commended the United States, the United Kingdom, Brazil, and several central European countries for taking action, referring to the more than 500 ongoing corruption/bribery criminal investigations in twenty-one countries and the widespread adoption of corporate criminal liability laws, a groundbreaking change.
Nonetheless, he underscored the serious challenge presented by the twenty-two OECD members, who, after almost two decades of monitoring, are still not enforcing their laws. He also cited the major exporting nations who are not Parties to the Convention or members of the WGB. Thus, the WGB is now considering urgently needed measures, including naming and shaming, to foster enforcement among all members and to engage nonmembers to more actively engage.
Securing vigorous enforcement by all major exporters is a priority for the U.S. business community, as is attention to the demand side of corruption transactions, according to Eva Hampl, the Director of Investment, Trade, and Financial Services at the United States Council for International Business (USCIB).
While there is little sign that countries are taking action against their own officials, DOJ is taking steps on the demand side, according to Leo Tsao, Assistant Chief of the Fraud Section’s FCPA Unit. He noted charges against foreign public officials under money laundering, wire fraud, and other federal statutes. He also highlighted the need for capacity building and cooperation with foreign prosecutors in bringing cases.
Similarly, the DOJ Kleptocracy Unit has successfully tracked down and seized proceeds of foreign corruption in the United States, according to Dan Claman, the unit’s Principal Deputy Chief. Increased legal cooperation among OECD members is leading to more cases against foreign public officials and confiscation of their illicit gains. Nonetheless, Claman underscored that obstacles remain.
Among those obstacles is the lack of beneficial ownership transparency, which according to Lowe, impedes law enforcement in tracking financial flows. She cited the revelations in the Panama Papers and Paradise Papers of the role of anonymous companies in hiding corruption-related transactions and pointed to the ease of establishing anonymous companies in the United States. Given the need for greater transparency of the true owner of bank accounts and legal entities, Lowe urged congressional action on proposed U.S. legislation requiring beneficial ownership transparency, at least to law enforcement authorities. Several other countries have and are taking even stronger action, including creating public registries for beneficial ownership information.
As to the way ahead, the panelists agreed on the need for continued U.S. leadership and for G20 action on both the supply and demand side of bribery, as well as on beneficial ownership transparency.