Tag: ABC

After the Russian invasion of Ukraine, the world of business will never be the same again. Deputy Attorney General (DAG) Lisa Monaco recently said that the world’s “geopolitical landscape is more challenging and complex than ever. The most prominent example is of course Russia’s invasion of Ukraine.” It is “nothing less than a fundamental challenge to international norms, sovereignty and the rule of law that underpins our society.” This is even more so in the current business climate.
Over this five-part series, I will consider how business will never again be the same and how a confluence of events of events has changed business forever. I am joined in this exploration by Brandon Daniels, Chief Executive Officer (CEO) of Exiger. We will explore the irrevocable changes in Supply Chain, trade and economic sanctions, anti-corruption, cyber-security and environmental, social and governance (ESG). In Part 3, we continue our explorations of changes wrought by the Russian invasion of Ukraine, in the realm of anti-bribery and anti-corruption (ABC) compliance and enforcement.
The World Economic Forum estimates that over $3 trillion is lost annually to the global economy due to the scourge of corruption. Corruption does more than simply steal money from the world economy. According to the United States Strategy On Countering Corruption, (Strategy), “Corruption robs citizens of equal access to vital services, denying the right to quality healthcare, public safety, and education. It degrades the business environment, subverts economic opportunity, and exacerbates inequality. It often contributes to human rights violations and abuses, and can drive migration. As a fundamental threat to the rule of law, corruption hollows out institutions, corrodes public trust, and fuels popular cynicism toward effective, accountable governance.”
Writing for the World Economic Forum, Delia Ferreira Rubio, Nicola Bonucci and Rachel Davidson Raycraft linked the fight regarding economic and trade sanctions to bribery and corruption. They connected the monies stolen by oligarchs and strongmen through a variety of strategies to bribery and corruption. Taking this connection a step further, they noted “the close relationship between corruption and conflict”, as laid out in the UN Sustainable Development Goal (SDG) 16 – Peace, Justice and Strong Institutions. As with the Strategy, UN SDG 16, “is grounded in the principles of anti-corruption, including targets such as reducing illicit finance, corruption and bribery; and developing effective, accountable and transparent institutions at all levels.”
ABC enforcement is well-known and there are two decades of the modern era of Foreign Corrupt Practices Act (FCPA) enforcement. This modern era began after the connection was established between corruption and terrorism, most notably from the events of 9/11. However, now ABC is seen as a key component of both global security and global prosperity. The Biden Administration recognized these components when it announced that ABC is now seen as a National Security Threat to the US, when it announced its Strategy in December 2021.
The Strategy laid out five pillars of the US government’s increased emphasis on ABC enforcement and compliance. Pillar 1 spoke to modernizing, coordinating, and resourcing US government efforts to fight corruption. Pillar 2 dealt with curbing illicit financing. Pillar 3 was about holding corrupt actors accountable. Pillar 4 broadened the approach beyond a US-only perspective to discuss a broader multilateral anti-corruption architecture. Pillar 5 also enhanced a more holistic approach by discussing improving diplomatic engagement and leveraging foreign assistance to advance these goals.
All of this means more information and analysis, including search and data collection, by using “information more effectively to understand and map corruption networks and related proceeds, and dynamics, and tailor prevention and enforcement related actions, as well as build the evidence base around effective assistance approaches.” The next improved information sharing within the US government, private companies and across international boundaries. It also includes holding corruption actors accountable, curbing illicit financing and bolstering international cooperation and actions.
Another key area laid out in the Strategy was the increased focus on the “transnational dimensions of corruption.” This means more than simply looking at the usual geographic areas recognized as high risks of corruption by tackling transnational organized crime through “understanding and disrupting networks, tracking flows of money and other assets, and improving information and intelligence sharing across U.S. departments and agencies, and, as appropriate, with international and non-governmental partners.”
The Strategy set the stage for changes wrought by the Russian invasion of Ukraine. Daniels said that bribery and corruption are not “lone wolf crimes”; as they do not occur in a vacuum. They are almost always associated with attempts to hide illegal payments through money-laundering and often are done in conjunction with anti-competitive crimes such bid-rigging or similar acts. Moreover, bribery and corruption leads to constraints in the marketplace through awarding of business in decidedly non-legal manners. Daniels went on to state, “We don’t think of this as a cost of doing business for two reasons. One, because it does go alongside very often autocratic governments. Two, such actions go with it, such as disinformation.”
One of the consequences of the dramatic increase in economic and trade sanctions is that corruption will be the enhanced risk of bribery and corruption. This can occur as impacted businesses and sanctioned individuals look for ways to evade sanctions through the use of bribery and corruption. Some of the ways they will try to avoid and evade sanctions will be through  smuggling, setting up shell companies, money laundering and self-dealing, all facilitated by bribery and corruption.
An unintended, but no less powerful example of the nefarious impacts of bribery and corruption, has been demonstrated by the Russian Army in the invasion of Ukraine. It has been the abject failure of the Russian Army to be able to keep a modern army functioning in the field. The Russian Army has been plagued by equipment that did not function and non-existent parts and stores which were all sold off on the Black Market by corrupt Russian government officials. In many ways, criminals simply siphoned away the stores of the Russian Army due to bribery and corruption.
Finally, as DAG Lisa Monaco stated, the role of compliance professionals as gatekeepers has dramatically changed. The Department of Justice (DOJ) clearly views corporate citizens as key allies in this fight. Rubio, Bonucci and Raycraft noted that gatekeepers “play an indispensable role in the enforcement and realization of laws and regulations that target illicit finance.” Anti-bribery and anti-corruption compliance has been forever changed by the Ukraine War as it is clear that “by controlling, distributing and managing wealth, gatekeepers control, distribute and manage global power – and, in effect, global security.” Anti-bribery and anti-corruption compliance and enforcement will never be the same again, literally on a worldwide basis.