The fight against corruption, economic sanctions and national security: the new enforcement triangle?

Friday 29 October 2021

​​​​​Nicola Bonucci
Paul Hastings, Paris
nicolabonucci@paulhastings.com

Tom Best
Paul Hastings, Washington, DC
tombest@paulhastings.com

Scott Flicker
Paul Hastings, Washington, DC
​​​​​​​scottflicker@paulhastings.com

The Covid-19 pandemic provides the most recent illustration of the irreversible interdependence of the world economy. It also underscores the need for regulation of a scale sufficient to address the negative effects of this interdependence. In a globalised world that increasingly relies on a complicated web of producers throughout the supply chain, malign actors have found new ways to exploit the situation for illicit gain.[1]

Within this fluid context, one cannot fail to observe a new international approach to the fight against corruption aimed at both linking it to economic sanctions and anti-money laundering (AML) laws and elevating it to a national security issue.

This year sees national governments and other international actors such as the European Union rising to meet the challenge.

On 26 April 2021, the United Kingdom issued a global Anti-Corruption sanctions regime and related guidance.[2]

On 3 June, the President of the United States issued a National Security Study Memorandum, declaring the goal of countering corruption as a core US national security interest. The Memorandum was only the latest in a series of actions by the US government reflecting a whole-of-government orientation of US enforcement efforts against international, foreign and domestic corruption. In late December 2020 the US Congress enacted the most widespread anti-money laundering laws in the US in at least a generation. Per statutory requirement, in June 2021 the US Treasury’s Department’s Financial Crimes Enforcement Network published its AML/Counterterrorism financing (CTF) priorities for the next four years: corruption was among the nine principal priorities identified.[3]

On 8 July 2021, the European Parliament adopted a resolution welcoming the EU Global Human Rights Sanctions Regime, while calling for corruption to be included as a punishable offence.[4]

On 11 August, the US announced a ‘Summit for Democracy’, to be held on 9 -10 December, bringing together heads of state, civil society, philanthropy and the private sector around three themes: (1) defending against authoritarianism; (2) addressing and fighting corruption; and (3) advancing respect for human rights. According to the White House statement describing the event, ‘following a year of consultation, coordination, and action, President Biden will then invite world leaders to gather once more to showcase progress made against their commitments.’[5]

Each of these initiatives deserves a thorough and deep analysis in its own right but focusing on the individual pieces risks missing a bigger picture. Indeed, linking the fight against corruption to the use of economic sanctions, AML enforcement efforts and elevating the whole to a national security issue is not a trivial branding exercise. It can and should bear important and lasting consequences.

In the last 25 years, the international community has adopted a number of International Conventions on the fight against corruption starting with the effort of the United Nations and the Organisation of Economic Co-operation and Development (OECD), which successfully required member nations to strengthen international anti-corruption laws. It has also endorsed a number of ‘soft power’ instruments such as the High Level Principles of the G20 on a set of specific sub issues pertaining to corruption. As a result of these efforts, the fight against corruption is now grounded on a mature international legal system, one that even by 2006 was sufficiently developed to be recognised by an International Centre for Settlement of Investment Disputes (ICSID) Arbitral Tribunal in the case of World Duty Free v Kenya:

‘In light of domestic laws and international conventions relating to corruption, and in light of the decisions taken in this matter by courts and arbitral tribunals, this Tribunal is convinced that bribery is contrary to the international public policy of most, if not all, States or, to use another formula, to transnational public policy.’[6]

Economic sanctions have not yet reached this settled status. Apart from implementation of programmes set out by the UN Security Council, and a few examples of bilateral or multilateral cooperation on specific measures between the US, on the one hand, and the UK or the EU, on the other, economic sanctions have very much been the product of solo action of single nations, or what international law terms ‘unilateral measures’. Economic sanctions have traditionally been tools of statecraft-related foreign policy: expressing a country’s policy goals and applying coercive measures to effect those goals. Only recently have sanctions been directed at other topics such as combatting transnational corruption and other social ills. Indeed, one might say economic sanctions’ status as tools of foreign policy has not changed at all, and it is the change in importance of corruptions and AML/CTF activities to matters of national and international security which has changed instead.

Indeed, the notion of ‘national security interest’ almost by definition embodies a set of principles and considerations that are unilateral in nature. Whether actions taken on this basis can always find justification in international law has been a matter of long-standing debate. Some effort has been made to define appropriate invocation of ‘national security’ as a basis for justified action, with organisations like the OECD seeking to develop guiding principles and policies.[7]

By joining up the recognised ‘transnational public policy’ of global anticorruption efforts to more unilateral concepts of economic sanctions and national security, the recent actions by major governments can be seen as a search for a broader understanding of ‘mutual security’. This could not only strengthen the fight against corruption in a more interconnected world, but also support efforts to confront what are perceived as other existential global threats.

The object and purpose of this brief analysis is not to come to any judgment about the legitimacy and the legality of this new international approach, but to note that, should such a movement take hold, global economic actors and their advisers must be prepared for even more extraterritorial regulation by like-minded governments around the world, including more coordinated enforcement.

 

Notes

[1] UNODC, ‘The Impact of COVID-19 on Drugs and Crime’ www.unodc.org/unodc/en/data-and-analysis/coronavirus.html accessed 11 October 2021.

[2] UNODC, ‘The Impact of COVID-19 on Drugs and Crime’ www.unodc.org/unodc/en/data-and-analysis/coronavirus.html accessed 11 October 2021.

[3] UK Government, ‘UK sanctions relating to global anti-corruption’, www.gov.uk/government/collections/uk-sanctions-relating-to-global-anti-corruption accessed 11 October 2021.

[4] US Department of the Treasury, Financial Crimes Enforcement Network, ‘Anti-Money Laundering and Countering the Financing of Terrorism National Priorities’, 30 June 2021 www.fincen.gov/sites/default/files/shared/AML_CFT%20Priorities%20(June%2030%2C%202021).pdf accessed 11 October 2021.

[5] ‘Human rights: MEPs want corruption punished under EU sanctions regime’, European Parliament News, 8 July 2021, www.europarl.europa.eu/news/en/press-room/20210701IPR07516/human-rights-meps-want-corruption-punished-under-eu-sanctions-regime accessed 11 October 2021.

[6] ‘President Biden to Convene Leaders’ Summit for Democracy’, The White House Briefing Room, 11 August 2021 www.whitehouse.gov/briefing-room/statements-releases/2021/08/11/president-biden-to-convene-leaders-summit-for-democracy accessed 11 October 2021.

[7] World Duty Free Company Limited v. Republic of Kenya, ICSID case no ARB/00/7, Award, 4 October 2006 www.italaw.com/sites/default/files/case-documents/italaw15005.pdf accessed 11 October 2021.

[8] OECD Council, ‘Guidelines for Recipient Country Investment Policies Relating to National Security’, 25 May 2009 www.oecd.org/daf/inv/investment-policy/43384486.pdf accessed 11 October 2021.