On Anti-Corruption Day, A Look at Treasury Efforts to Counter Corruption

January 9, 2023 / Source: Treasury

By: Under Secretary for Terrorism and Financial Intelligence Brian Nelson
 

International Anti-Corruption Day spotlights the significant threats that corruption poses to the rule of law, economic development, democracy, social cohesion, and national security. On this important day, and in recognition of the Biden-Harris Administration’s U.S. Strategy on Countering Corruption—released one year ago—the Treasury Department is addressing this challenge with renewed energy and dedication. 

The risks and consequences of corruption are palpable—and perhaps nowhere are they more pronounced than in Putin’s Russia, where corruption and kleptocracy form the bedrock of his power structure. Corruption, by extension, is inexorably linked to the tragedy and bloodshed that Russia continues to inflict on the people on Ukraine.

The Treasury Department will continue to take strong action to foster accountability for corrupt actors in Russia and around the world, as we are doing today by designating over a dozen corrupt actors and entities and as we have done against an array of corrupt individuals and entities this year. Countering corruption depends not only on holding corrupt actors to account, but also on addressing the weaknesses across the U.S. and international financial systems those actors use to move and hide their ill-gotten gains.

FIGHTING CORRUPTION STARTS AT HOME

Corruption undermines public trust and weakens the integrity of our financial system when officials abuse their positions, illicit actors launder funds through U.S. bank accounts and hide their identities and wealth behind U.S.-based shell companies. Self-dealing officials use the scale and vibrancy of the U.S. economy against us, hiding their wealth and exploiting weaknesses in the United States’ anti-money laundering and countering the financing of terrorism (AML/CFT) framework to carry out their crimes.

The Treasury Department is embracing innovative approaches to identifying and recovering the proceeds of corruption, including through the Kleptocracy Asset Recovery Rewards Program, which offers rewards payments for information leading to the restraint, seizure, forfeiture, or repatriation of assets linked to foreign government corruption.

Without concerted and systematic efforts to address these weaknesses, illicit actors will continue to abuse the U.S. financial system. The stakes could not be higher as, for example, corruption remains among the primary root causes of migration in Central America, kleptocracy sustains Putin’s rule and his war machine, and years of past “state capture” ravaged key institutions and hampered economic development in South Africa.

TREASURY’S REGULATORY WORK TO COUNTER CORRUPTION

Given the scale and global interconnectedness of the U.S. financial system, the steps that Treasury takes to safeguard the U.S. economy will radiate outward—reducing the ability of corrupt actors around the world to move and stash their stolen wealth, and dampening corruption’s corrosive effects on democracy and equitable economic growth.

In line with the U.S. Strategy on Countering Corruption, Treasury is closing gaps in our regulatory armor, advancing domestic and international solutions to fighting financial crime, and shining light on the financial shadows where corrupt actors hide the proceeds of their crimes.

Over the past year, Treasury furthered its work implementing the Corporate Transparency Act, which authorizes Treasury’s Financial Crimes Enforcement Network (FinCEN) to require certain companies operating in the United States to disclose their beneficial owners—the real people who own or control them. Doing so will make it much more difficult for corrupt officials to misuse opaque corporate structures like shell companies to hide their stolen wealth on our shores.

We are also developing regulations to enhance the transparency of the real estate sector, to prevent ill-gotten gains from being stashed through purchases of property—from Miami villas to Manhattan penthouses to and mansions in the Washington, D.C. suburbs.

We know that the corrupt and the self-dealing rarely work alone. So, Treasury is also examining the roles that key gatekeepers to the financial system—like accountants, investment advisers, lawyers, and others—play in corruption and other forms of financial crime, and working with Congress in considering any potential future regulation.

MULTILATERAL EFFORTS

Corrupt actors will search the world for weak links to carry out their crimes; as long as there are financial or regulatory vulnerabilities around the world to exploit, they can and will. Treasury is working closely with international partners in the Financial Action Task Force (FATF), the G7, and the G20 to strengthen global standards and efforts to fight corruption.

In October, the FATF agreed to undertake three projects to enhance global anti-corruption efforts. These focus on effectively implementing the United Nations Convention Against Corruption (UNCAC), countering the misuse of citizenship and residency by investment (CBI/RBI) programs by corrupt actors, and reducing the ability of corrupt actors to take advantage of gatekeepers such as lawyers and trust and company service providers. These projects will help make it much harder for the corrupt and their financial enablers and acolytes to launder the proceeds of stolen funds to through the U.S. and international financial systems.

We’re also building anti-corruption efforts into new international arrangements, like the Indo-Pacific Economic Framework for Prosperity, which recognizes the key role that implementation of anti-corruption measures plays in boosting commerce, trade, and investments, and facilitating a fair economy.

Engagement with international partners, the private sector, and civil society remains vital to Treasury’s anti-corruption efforts. For example, over the last year, FinCEN issued advisories and alerts on kleptocracy and foreign public corruption to provide financial institutions with typologies and red-flag indicators to better identify illicit activities like bribery, embezzlement, extortion, and the misappropriation of public assets. We look forward to continued engagement in the new year.

The U.S. financial system is one of our country’s greatest assets. Yet, its size and reach also leaves the United States particularly vulnerable to all forms of illicit finance, including corruption. Through a combination of forward-looking regulation and strong enforcement actions, Treasury, along with our interagency and international partners, is working diligently toward making impunity an impossibility for corrupt actors around the world.