Fighting Corruption

The Background

Global corruption and related threats to the rule of law have emerged as an important national security challenge. In a number of U.S. partner states, mineral revenues have contributed to corruption, leading to poverty, hunger, and instability, with consequences for American national security.

When Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, it included a provision developed by Senators Richard Lugar and Ben Cardin that required oil, gas, and mining companies listed on U.S. stock exchanges to disclose to the Securities and Exchange Commission (SEC) all payments made to the U.S. and foreign governments. The bipartisan Cardin-Lugar anti-corruption provision, also known as Section 1504 of Dodd-Frank, was a major step forward in U.S. efforts to combat corruption. U.S. leadership addressing the increasingly prevalent issue of corruption led 30 other countries to pass similar laws. As explained in a January 2018 analysis by Oxfam, “Cardin-Lugar set a worldwide example for disclosures, and the EU and Canada enacted similar legislation following its passage in the US.”

On June 27, 2016, the SEC issued a final rule implementing Section 1504. Following the SEC’s ruling, Senator Cardin explained, “Transparency is the enemy of corruption, and today the United States has sent a clear message to government officials who seek to siphon off public funds for personal gain.”

In places where the U.S. provides military and development assistance, corruption can hollow out partner militaries or lead directly to U.S. weapons and aid ending up in the hands of terrorist organizations. Corrupt governments create an opening for terrorist groups like the Taliban and ISIS to rail against their perceived illegitimacy and a failure to put citizens first. Countries with significant oil and gas resources can fall prey to the “resource curse,” where abundance of valuable natural resources paradoxically fuels authoritarianism and weak economic growth. Corruption can also spawn criminal networks that span the public and private sectors and undermine the rule of law far beyond national borders.

Transparency efforts, like Publish What You Pay, can make an important difference in weeding out corruption. Global investors rely on the disclosure of information required by the Cardin-Lugar provision to evaluate the risk of doing business in the often opaque oil, gas, and mining sectors. The ONE Campaign has also collected case studies from around the world citing instances of citizens using public information to fight corruption. Since it applied to all companies listed on U.S. exchanges and those based abroad, especially Chinese state-owned companies, Cardin-Lugar positioned the United States as a leader in the global fight against corruption.

With the support of the Trump administration, the 116th Congress weakened the Cardin-Lugar provision in 2017 by using the Congressional Review Act to repeal the SEC rule that implemented it.  With President Biden in office, a full repeal of the Cardin-Lugar provision is no longer an immediate threat. However, there is more work to be done to restore the United States’ anti-corruption leadership. In addition to the Cardin-Lugar reversal, the Trump Administration moved further from global anti-corruption efforts in its withdrawal as an implementing country of the Extractive Industries Transparency Initiative (EITI), which now consists of 51 implementing countries.

The Latest

On January 1, 2021, Congress voted to override President Trump’s veto of the annual National Defense Authorization Act (NDAA), allowing the Corporate Transparency Act to become law. This historic, bipartisan anti-corruption legislation, negotiated by Sens. Mike Crapo and Sherrod Brown, and Reps. Maxine Waters, Patrick McHenry, and Carolyn Maloney, requires companies to disclose to law enforcement information on the individuals who own and control an entity at its point of formation.

Anonymous companies are “the vehicle of choice for the criminal and the corrupt to launder illicit funds,” according to the Financial Accountability and Corporate Transparency (FACT) Coalition, a leading anti-corruption organization. The Corporate Transparency Act will make it harder for rogue nations and corrupt officials to evade sanctions for their financial crimes.

H.R. 1, the For the People Act, included important provisions to require the disclosure of foreign donors to nonprofits and prohibiting companies with foreign ownership from influencing our elections, an important early sign that this Congress will also work to fight corruption at home.

During his campaign, President Biden referred to corruption as an “insidious pandemic,” describing it as a tool used by authoritarian leaders to fuel oppression, corrode human dignity, and weaken democracies around the world. In a clear rebuke of the Trump administration’s practices, President Biden clearly expressed his commitment to “tackle…rank corruption.” The Interim National Security Strategic Guidance document, released in March 2021, declared that the administration will not only fight corruption globally, but at home as well, stating that “We will require transparency and accountability in our government, root out corruption, and confront the distorting role of money in our politics.” By linking the defense of democracy with the fight against corruption, the Biden-Harris administration has declared corruption a national security interest and a key aspect of the administration’s foreign policy priorities.

Most recently, the Biden-Harris administration established a Democracy and Human Rights directorate in the National Security Council, a group tasked with the key mission of battling corruption under the leadership of Chandana Ravindranath. The administration has also proposed creating a new envoy position within the State Department dedicated solely to anti-corruption. During her Senate Foreign Relations confirmation hearing, Samantha Power, President Biden’s nominee to lead USAID, stated that anti-corruption work will be a huge priority for the organization and emphasized the importance of increasing the resources and attention put into fighting global corruption. As a policy issue which will require coordination across various government agencies, fields, and international governments, U.S. leadership on this issue is more important than ever.

What You Can Do

Call your representatives today at (202) 224-3121 to urge them to support legislation that clamps down on corruption including:

• H.R. 3887, the Foreign Corruption Accountability Act, which temporarily authorizes the President to impose visa-blocking sanctions against any foreign person that engages in public corruption activities (e.g., soliciting or accepting bribes or engaging in extortion) against the United States.
• S. 1591/H.R. 4806, the Transnational Repression Accountability and Prevention Act, which addresses efforts by corrupt regimes to utilize INTERPOL to repress foreign nationals in the United States by forbidding any U.S. agency from using an INTERPOL communication from an INTERPOL member country as the sole basis for detaining an individual or denying an individual a visa, without independent credible evidence supporting the communication.
• S. 14/H.R. 4322, the Combating Global Corruption Act, which requires the State Department to annually report to Congress a tiered list of all foreign countries and their efforts to fight corruption. The first tier would list that meet minimum standards for combating public corruption, while the second tier includes countries that do not yet meet these standards but are making significant efforts to do so. Third-tier countries do not meet the minimum anti-corruption standards and are not making significant efforts to do so.