We are exploring the recently released the United States Strategy on Countering Corruption (the “Strategy); subtitled “Pursuant To The National Security Study Memorandum On Establishing The Fight Against Corruption as a Core United States National Security Interest”; in response to President Biden’s prior declaration of corruption as a national security issue of the United States. Over this 5-part series I will be delving into the Strategy and considering how it will impact the compliance professional. Yesterday, we considered Pillar 1, modernizing, coordinating, and resourcing US government efforts to fight corruption. Today we take up Pillar 2, curbing illicit financing.
Today, we also pay tribute to New Orleans native Anne Rice who died over the weekend. Rice is best known for her first novel, Interview with the Vampire, which was published in 1976. According to her New York Times obituary, “Ms. Rice was a largely unknown writer when she turned a short story she had written in the late 1960s into “Interview With the Vampire,” her first published novel. It features a solitary vampire named Louis who is telling his life story to a reporter, but Ms. Rice said the tale was her story as well.” She went on to state, “I really got into the character. For the first time, I was able to describe my reality, the dark, gothic influence on my childhood. It’s not fantasy for me. My childhood came to life for me.” The book became a bestseller. Rice “found herself with a considerable fan base, which she proceeded to entertain with a series of follow-up novels that became known collectively as the Vampire Chronicles. The books, more than a dozen in all, are widely credited with fueling a revival of interest in all things vampiric.” So, farewell to many a gothic, chilly and scary night, all courtesy of Anne Rice.
The fight against illicit financing is extraordinarily significant. The Strategy noted, that in “today’s globalized world, corrupt actors bribe across borders, harness the international financial system to stash illicit wealth abroad, and abuse democratic institutions to advance anti-democratic aims. Emerging research and major journalistic exposés have documented the extent to which legal and regulatory deficiencies in the developed world offer corrupt actors the means to offshore and launder illicit wealth. This dynamic in turn strengthens the hand of those autocratic leaders whose rule is predicated on the ability to co-opt and reward elites.”
It is most interesting to highlight that the US government is pointing to “major journalistic exposés” as a major source of information on illicit financing, providing wrong all the naysayers who criticized publication of the Panama Papers, Paradise Papers and the Pandora Papers. This pointing to the public releases of information on illicit financing also should end the calls for these types of releases to criminalized. But more than simply the monies involved, “corrupt actors and their financial facilitators have taken advantage of vulnerabilities in the U.S. and international financial systems to launder their assets and obscure the proceeds of crime. Similarly, corrupt actors amass ill-gotten wealth through illicit gains of other resources, including minerals and wildlife.”
The Strategy recognizes the US role as the pre-eminent leader in global banking and financing. The Strategy outlines what it calls ‘Lines of Effort’ or LOEs which will add more “human resources to synchronize anti-corruption work as a core domestic and foreign policy priority”. The US also commits to working in “coordination with global partners to magnify” to both expand and magnify the US efforts. The next two lines from the Strategy speak directly to the compliance professional. “We will seek to foster and learn from governmental and non-governmental partners pioneering innovative solutions. And we will dedicate and steward financial resources by matching appropriate means to critical ends.” This means more information will be collected from actors in the private sector such as public and private corporations.
There are several Strategic Objectives to guide this initiative. First, the US will address deficiencies in the current Anti-Money Laundering (AML) regime. This will include additional work in beneficial ownership transparency, in US government procurement, real estate transactions, sources of private equity funds and investments, gate keepers, offshore and tax havens, digit assets and arts and antiquities. Most interestingly, while the places and strategies of money-laundering are well known and have begun to be addressed, this is the first real push against gatekeepers.
Many professionals and service providers, including lawyers, accountants, trust and company service providers, incorporators, and others, have been used as registered agents or who act as nominees to open and move funds through bank accounts. This is usually with little to no understanding of the underlying source of the funds, the character of the actors involved or even who is behind the curtain. All basic due diligent inquires by the compliance professional. When you add these advisors to create “opaque corporate vehicles” you can see why “complicit professionals are often sought by criminal organizations to facilitate their illicit activities.” Yet even while law enforcement “has increased its focus on such facilitators, it is both difficult to prove “intent and knowledge” that a facilitator was dealing with illicit funds or bad actors, or that they should have known the same.”
This same type of effort will be made at the international level. The US will expand its level and presence with key international players such as “the Europe-based Camden Asset Recovery Interagency Network and its regional bodies, and the International Anti-Corruption Coordination Center, which has multi-country membership and observers.” The US will act with what it calls “Proactive disruption” to “prevent the establishment of new safe havens for corrupt actors and their ill-gotten gains.” Finally, the US “will work with allies and partners to push key gatekeepers and facilitators to tighten ways in which corrupt actors move money.”
Many of these initiatives are processes which compliance professionals are currently doing. Moreover, the basic information generated through due diligence and other investigative skills will be of great use for the government’s efforts. Finally, any information that the government generates to unmask UBO’s will benefit the greater compliance community.
Join us tomorrow where we pay honor to Dave Campbell and consider Pillar 3 – Holding Corrupt Actors Accountable.