On June 3, 2021, the Biden administration issued a National Security Study Memorandum that identifies acts of corruption as a threat to national security. In an effort to combat this growing problem, Biden has ordered an interagency review process that will lays the foundation for a new presidential strategy against corruption, to be completed by December 20, 2021.
Detailed Highlights of the Memorandum
According to the Memorandum, the fight against corruption is now considered a “core United States national security interest.” Fifteen different departments and agencies within the US Government (USG) responsible for economic and defense policy have been ordered to cooperate in a study of existing processes and recommend a new presidential strategy that will significantly enhance the USG’s ability to detect and prosecute individuals and entities engaged in corruption, both within the US and abroad.
The Memorandum identifies that anonymous shell companies, professional service providers, and opaque financial systems are enabling the “movement and laundering of illicit wealth,” including the proceeds of corruption. To empower the USG’s ability to detect, interdict, prevent, and prosecute “all forms of illicit finance in the United States and international financial systems” the Memorandum includes a provision mandating implementation of federal law requiring certain US companies to “report their beneficial owner or owners to the Treasury Department, reducing offshore financial secrecy, improving information sharing, and, as necessary, identifying the need for new reforms.” Similarly, the CTA directs the secretary of the Treasury to establish beneficial ownership information reporting requirements and a secure, non-public beneficial ownership database. Additionally, Title LXIII of the AMLA prohibits concealment of material facts that a financial transaction involves assets owned by a politically exposed person.
International and Domestic Frameworks and Partnership Goals
The Memorandum further focuses on international and domestic frameworks and partnerships. The new presidential strategy will include provisions to bolster resources focused on efforts to set international anti-corruption standards, and specifically those targeted on enhancing financial institutions’ anti-bribery and corruption (ABC) programs related to public sector finance. The strategy will also include mechanisms for the USG to tie anti-corruption measures to foreign and security assistance programs.
Aligned with the Memorandum, Title LXI of the AMLA also includes international cooperation provisions and additional resources to enhance partnership with the Financial Action Task Force, the World Bank, International Monetary Fund, and other supranational bodies.
The Memorandum highlights the intersection of AML and ABC efforts, both from the public sector and private sector. Both financial institutions and USG agencies will need to prepare for and analyze the new presidential strategy after it is published, by analyzing current processes and staffing in the areas highlighted by the Memorandum, and identifying those which may require enhancements.
How Guidehouse Can Help
Guidehouse has a team of AML and ABC experts that can help firms and agencies analyze and identify corruption exposure, including how such acts manifest throughout the financial system, and recommend steps or develop programs to help prevent and detect illicit finance related to corruption.
Special thanks to Andy Wright for contributing to this alert.