In June 2021, the US government issued a National Security Study Memorandum which defines corruption as a major threat to US national security. Considering that bribery and corruption have a negative impact on the world’s GDP by 2% to 5%, the current US administration is willing to raise corruption to a major stake, not only for national security, but also for other rule-of-law-based democracies.
The objective is clear: by effectively preventing and countering corruption, the US wants to secure a critical advantage. To achieve this, the US President authorized an interagency review process which should lead to a reinforcement of sanctions against corruption, money laundering and illegal financing by early 2022.
There is no doubt that the application of the Foreign Corrupt Practices Act (FCPA) as well as the Office of Foreign Assets Control (OFAC) sanctions will be extended. Current legal tools also include the Global Magnitsky Human Rights Accountability Act (Global Magnitsky Act). Indeed, in June 2021, the US Department of the Treasury announced that it sanctioned three Bulgarian individuals for their extensive roles in corruption in Bulgaria, as well as their networks encompassing 64 entities. Since 2016, the scope of application of the Global Magnitsky Act – initially including human rights violations – has been extended to corruptive actions.
With this memorandum, we can expect to see an extension of the extra-territoriality of US anticorruption laws in the next few years. The question is: who will be the next Airbus or Ericsson? Will EU companies be further fined and monitored by the US government, potentially impacting competitive advantages in strategic sectors such as aerospace, energy or telecommunications?
The Council decision (CFSP) 2020/1999 of 7 December 2020 concerning restrictive measures against serious human rights violations and abuses allows a person (physical or moral) to be sanctioned independently of their nationality or the country in which the violations took place. However, the Union did not create any independent council to appoint those persons. Indeed, the list must be approved by the European Council unanimously, which obviously limits the application of such measures. What’s more, in July 2021, the European Parliament adopted a resolution inviting the Commission to prepare legislation extending the sanctions on corruption acts.
There is no doubt that the EU will have to reinforce its anti-corruption legal capabilities if it wants to remain sovereign and be able to counteract the extension of the extra-territoriality of the US law, which might put the EU’s strategic interests in danger.
It also means that anti-corruption policies and compliance frameworks are more important than ever. The last few decades have shown that no one is immune to potential prosecution and that this is unlikely to change any time soon.
Want to know more? KPMG Luxembourg offers technology-driven, human-powered forensic, anti-fraud, anti-bribery and corruption services. Get in touch to see how we can help!