Four years ago, the United States was widely viewed as the towering, swaggering leader of global anti-corruption efforts. While other countries struggled with money-laundering banks and corrupt oligarchs bent on placing profits above patriotism, the U.S. enacted policy after policy to create the most full-throated anti-corruption regime in the entire world.
That regime now lies in shambles, collapsed within the larger detritus of Donald Trump’s presidency. All of the facets of America’s broader pro-transparency reputation stand wrecked by Trump’s misrule and through his effort to open the U.S. to any and all with a bit of dirty money burning holes in their pockets. The good news, though, is that the U.S. has been here before, decades ago, when it struggled to slough off the legacy of the most corrupt president the country had seen in a half-century and succeeded in launching an unprecedented anti-corruption reform as a result. And this time around, there’s an incoming president who—despite his history, despite his provenance—may be perfectly placed to rebuild America’s crumbled anti-corruption platform.
It’s important to come to grips with the task President-elect Joe Biden faces and the extent to which Trump demolished our reputation for anti-corruption leadership, and how swiftly he brought it low. Consider the Foreign Corrupt Practices Act, which explicitly bars Americans and American companies from bribing foreign officials and foreign entities—the undisputed linchpin of America’s anti-corruption playbook. Trump came into office having already publicly declared the FCPA a “horrible law.” Almost immediately, he set about trying to dismantle it, along with our entire suite of programs that criminalize foreign bribery. (This was perhaps predictable, given the likelihood that he participated in similar schemes in notoriously corrupt places like Azerbaijan.)
As we recently learned, in the spring of 2017, Trump told Secretary of State Rex Tillerson that he wanted the FCPA scrapped entirely: “I need you to get rid of that law.” Trump then ordered arch-nativist Stephen Miller to author an executive order to that effect, virtually eviscerating America’s pro-transparency bona fides right at the outset of his presidency.
Thanks to both the regulatory structure and broad bipartisan support the FCPA still enjoys, Trump’s efforts went nowhere. But the move was a clear shot across the bow of America’s anti-corruption standing that only foreshadowed a thousand more cuts to come. And while the FCPA remained in force, the total number of related enforcement actions declined substantially under Trump. As anti-corruption expert Alexandra Wrage recently noted, “The [FCPA] pipeline is thinning out dramatically.”
Around the time Trump was trying to get someone to rid him of this meddlesome FCPA, the president found other avenues to press his anti-anti-corruption efforts. In early 2017, he signed a formal repeal of an American commitment to disclose payments from oil and gas companies to foreign officials. The previous regulations—“a beacon of U.S. leadership in the global fight against oil and mining corruption,” as Global Witness wrote—had inspired lawmakers in Canada, Norway, and the European Union to pass similar legislation in a broad-based effort to clean up the most notoriously corrupt industry in the world. Trump’s pen snuffed out that beacon. His decision, Oxfam said, was “a handout for kleptocrats … [that] plays into the hands of corrupt politicians, compromised bureaucrats, and insider lobbyists who thrive on secrecy.”
The blows kept coming. Trump’s pro-corruption push resulted in a decision to pull the U.S. back from the Extractive Industries Transparency Initiative, or EITI, the seminal—and previously American-led—multinational group dedicated to cleaning up the entire extractive sector. “We’re walking away from something we’ve been telling other countries to do for years,” one anti-corruption activist said.
Even some of the Trump administration’s public nods to anti-corruption efforts—he had to at least look like he was fighting corruption, for appearance’s sake—fell far short of their potential. For instance, while the Trump administration initially expanded a successful Obama-era program to target anonymous real estate purchases in select cities in the U.S., the expansion stopped in 2018. That meant 98 percent of the country’s real estate remains perfectly open to any and all looking to launder their ill-gotten gains, even in major cities like Houston, Phoenix, and Philadelphia.
Not that any of this was especially surprising. Trump had spent his pre–White House years rolling through billions in dirty money, his businesses soaking up a staggering $1.5 billion from clients who fit basic money-laundering profiles. This was a president who’d spent years perfecting the art of supplying perfectly anonymous money-laundering vehicles—anonymous real estate sales to any and all shell companies that came knocking—for kleptocrats around the world.
Trump threw down the welcome mat to anyone looking to aid his presidential profiteering. There were the foreign officials—including those specifically cited by the U.S. Congress for their gobsmacking corruption—patronizing Trump’s hotels and buildings, buoying a Trump Organization willing to house kleptocrats soaked in blood money. There were the foreign finances directed toward Trump that tilted American policies in ways we’ve only just begun to learn. And there was Trump’s willingness to turn to those selfsame kleptocrats and crooked oligarchs for “dirt,” real or imagined, on his political opponents, which could be had in return for the lifting of American investigations.
On and on and on, Trump battered America’s sturdy anti-corruption legacy. In its stead, he crafted a perversion of what he’d inherited as president, erecting the most corrupt presidential legacy since Warren Harding and Teapot Dome, and leaving behind an Augean stables–size mess for the rest of us to clean up.
The U.S. can ill afford to allow its listing, lurching anti-corruption policies and reputation to continue. Perhaps fortunately, these are waters out of which the country has navigated in the recent past. Shortly after Richard Nixon—a man who, like Trump, maintained secret offshore accounts and gladly accepted dirty foreign money—resigned the presidency in 1974, legislators in Washington began exploring just how deep the rot of post-Watergate corruption ran. Specifically, they examined a phenomenon that, for years, had embodied the kind of backroom, greased-palm dealings that summed up Nixonian America all too well: American companies bribing foreign officials, with all the putrid profiteering along the way.
Even in those post-Watergate days, the findings were scandalous. As one Securities and Exchange Commission investigation discovered, over 20 percent of America’s largest companies were deeply enmeshed in the webs of foreign bribery. These American companies revealed that they’d paid over $1 billion, in modern dollars, to bribe a range of clientele: from foreign government officials to international oligarchs and endless shady entities in between, all promising fealty to American manufacturers and businesses in exchange for a bit of the lucre.
Legislators in Washington had uncovered a canyon-wide hole in America’s anti-corruption regime which, thanks to years of easy money and look-the-other-way payoffs, had been allowed to widen with few questions asked. It’s almost ludicrous to think this was ever the case, but there were no federal prohibitions on American companies bribing partners abroad. In fact, there wasn’t even a model for corrective legislation. No other nations had banned such activity; some, such as France, explicitly transformed foreign bribery into a tax write-off.
But amid the push for good government and pro-transparency reforms in post-Nixon Washington, legislators and anti-bribery activists realized they had the wind at their sails. Despite complaints from American companies like Lockheed Martin and Northrop Grumman that banning foreign bribery would be bad for business and place American industry at a disadvantage, Congress in 1977 passed the FCPA, which marked foreign bribery as a crime.
Signed into law by Jimmy Carter, the FCPA was a tidal shift in the global approach to countering corruption, both domestic and international; as David Montero wrote, it was “groundbreaking legislation that … sought to change how capitalism and political affairs were conducted around the world.” After decades of corporations freely glad-handing with crooked despots and their cronies, American companies were suddenly banned from such practices. “For the first time, a country made it criminal to corrupt the officials of another country,” author John Noonan added.
But it wasn’t simply that American companies, nor any company trading on a U.S. stock exchange, suddenly stood liable for bribery. The U.S. had, in many ways, planted its claim to a new title. Just as Nixon exited the stage, the U.S. transformed into the world’s leading anti-corruption jurisdiction, willing to toss its weight against crooked and corrupt actors and networks abroad, those who gouged companies, those who gutted democracies, those who garroted entire populations along the way. The U.S. successfully pressured allies to pass similar legislation and prohibitions upon the happy-go-lucky bribery systems that had existed for decades. By the turn of the century, thanks to American leadership, foreign bribery had become anathema to much of the world.
The explosion of anti-corruption efforts that followed Nixon’s exit persisted as a heartbeat in policymaking in the years that followed. American banks, following post-9/11 hearings and the passage of the 2002 Patriot Act, set the precedent for anti-money-laundering checks in the financial sector. American legislators, thanks to the 2010 Dodd-Frank Act, codified new transparency requirements in the wickedly corrupt oil and gas sector. American officials oversaw the creation of specific sanctions regimes to target kleptocrats and crooked oligarchs; a pioneering tax-sharing arrangement that cracked open the world of Swiss banking secrecy; and a successful pilot program eliminating money laundering in the real estate sector. The Department of Justice alone led the world in everything from seizing crooked officials’ assets to cracking down on money-laundering banks abroad.
Time and again, the U.S. stood at the fore of the creation and dissemination of anti-corruption processes and programs. From the inception of the FCPA to the mid-2010s, the U.S. staked a clear claim to global leadership, and a decades-long legacy, in the anti-corruption sector—as a shining city on a hill for all seeking to implement anti-corruption programs of their own.
And then, in 2016, Americans elected Donald Trump to the presidency, who quickly demonstrated that the entirety of this regime was, all this while, fragile enough to topple at the whims of a president with the mind to do so and to take down our reputation as a bastion against foreign corruption with it. If there’s a lesson to be learned from this half-century of experience, it’s that a renewed commitment to anti-corruption policies can actually be ramped up quickly, but it must be more strongly undergirded than it was before.
Thankfully, this is one area to which the incoming administration is ready, willing, and able to apply its “Build Back Better” credo and right the battered ship of American anti-corruption efforts. Biden has pledged to return America to the fore of global democratic efforts, and his incoming administration has laid out a clear slate of anti-kleptocracy policies that will restore the U.S. to a global leadership position—and even bring a range of innovation into the stale world of combating corruption, bribery, and dirty money writ large.
As he outlined in a piece in Foreign Affairs, following the election, Biden will specifically single out corruption as a core policy through line for his administration, issuing “a presidential policy directive that establishes combating corruption as a core national security interest.” To that end, he announced he will specifically target illicit tax havens—hopefully including those in the U.S., like his home state of Delaware—and expand American efforts to go after stolen and laundered assets. Structurally, Biden announced he’ll create a new federal agency, the Commission on Federal Ethics, which will not only ensure “vigorous and unified enforcement” of anti-corruption laws but will further be empowered to issue (and enforce) subpoenas and “refer matters for criminal investigation to the DOJ.” Internationally, Biden’s already singled out “weaponized corruption”—the kind that allows kleptocratic regimes to entrench, expand, and enhance malign efforts abroad—as a “nontraditional threat,” one that NATO member-states must reform in order to handle and unwind.
Biden’s postelection missive follows his earlier commitments and reinforces the consensus that his coming administration will attempt to repair the bus-size breach left in Trump’s wake. He’s already pledged to ban lobbyists for kleptocratic regimes, and pushed for an end to anonymous shell company formation in the U.S. He and his advisers are keenly aware of the ongoing national and electoral security threats that transnational money laundering poses to our interests. (Which is hardly surprising, given that Trump turned to post-Soviet oligarchs immersed in filthy money to try to drum up the “dirt” he needed on Biden.)
But Biden and his incoming administration have every reason to go further—and, like those legislators four decades ago, create an entirely new paradigm for how to build up America’s anti-corruption antibodies. For instance, the Biden administration can lend its weight to any number of the anti-kleptocracy bills still struggling in Congress: measures that will help the U.S. seize ill-gotten assets, transform American embassies abroad into anti-corruption bastions, and publicize all those persons who have been explicitly banned from the U.S. on account of their rank corruption. There’s even one bipartisan bill, the Foreign Extortion Prevention Act, that will criminalize those who demand bribes of any Americans, explicitly closing the loop the FCPA began all those years ago.
Nor should a Biden administration stop there. Thanks to “temporary” exemptions on the books since the early 2000s, American escrow agents, hedge fund managers, and private equity firms can all dodge basic anti-money-laundering and anti-kleptocracy requirements. The exceptions allow malign foreign actors to launder millions of dollars through these industries without running afoul of the law, while these intermediaries—much like the American real estate industry before them—gorge on heaping helpings of dirty money.
The Biden administration should remove these exemptions, full stop. There’s no reason these trillion-dollar industries shouldn’t be subject to basic anti-money-laundering requirements—especially now that the FBI has explicitly labeled them as kleptocratic threats that undermine global democratization efforts. Such regulations would be no different from those to which American banks are subjected—regulations that not only helped cleanse the banking sector of foreign corruption but that, as we can plainly see, have hardly impinged their growth. (Though the regulatory body overseeing American banks’ anti-money-laundering procedures should be significantly beefed up, as well.)
That also goes for anti-money-laundering programs for two other markets favored by global kleptocrats. First, there are anonymous American trusts, which states like South Dakota sell by the billion-dollar boatload, allowing purchasers—including Chinese oligarchs, who’ve recently begun flocking to the state—to remain anonymous in perpetuity. Second, there are anonymous American art vendors and auction houses, which have both spent decades allowing sanctioned oligarchs and brutal despots to launder their funds, again anonymously, building up war chests of priceless art and celebrity memorabilia along the way.
Finally, there are anonymous shell companies, the beloved tools of financial criminals and crooked figures around the world. America has acted as a global geyser for these shell companies, an Old Faithful of anonymity, with states like Delaware and Nevada and Wyoming spraying the world with anonymous tools that serve no purpose other than money laundering. Thankfully, the days of anonymous American shell companies appear numbered, but that doesn’t mean the U.S. can’t take the global lead in fighting to end these tools elsewhere, especially in places like Dubai, Mauritius, and the Seychelles or the Caribbean.
Indeed, if the post-Watergate era saw energy directed against bribery both foreign and domestic, and the post-9/11 era saw efforts directed at cleaning up the banking sector, the post-Trump era has its clear antagonist: anonymity, especially of the American variant. Anonymity in real estate, anonymity in hedge funds, anonymity in shell companies, anonymity in perpetual trusts, anonymity in high-end art: anonymity all around, all in order to launder dirty money, hide assets, pay off cronies, entrench bloody regimes, and keep the entire engine of global corruption purring right along.
Anonymity, it goes without saying, remains the kleptocrat’s favorite tool—their asymmetric advantage. Which means that transparency is the best weapon in the American arsenal. And an incoming Biden administration that already plans to restore the country’s anti-corruption bona fides needs only to take a few logical next steps to target that anonymity across the board and usher in a new golden age of transparency and integrity.
As with so many parts of our civic fabric that Trump spent years unraveling, it won’t be enough to simply return to the status quo ante. His unruly administration revealed cracks that need more than mere patching to be sturdy and whole. It was from the wild world of kleptocrats that Trump emerged: those supply-side industries of modern corruption, those vendors and profiteers selling anonymous tools to all the grifters looking to launder their ill-gotten gains. Absent these aforementioned reforms, it will be from that world that the next Trump emerges. Should such a person ever come to power again, one can reasonably wager that they’ll not just smother American anti-corruption efforts, they’ll also make sure there will be no second chance to rebuild what’s lost.