Why Biden Needs to Confront Corruption
If the U.S. president-elect is serious about restoring the rule of law and democracy, he needs to first tackle the global menace of graft.
This article is part of Foreign Policy’s ongoing coverage of U.S. President Joe Biden’s first 100 days in office, detailing key administration policies as they get drafted—and the people who will put them into practice.
When U.S. President-elect Joe Biden takes office in January, he’ll immediately confront a dizzying array of near- and long-term crises—not least an economy in peril, an uncontrolled pandemic, and looming climate change. Despite this already crowded agenda, the Biden administration must not forget to make space for another priority: combating corruption. If Biden is serious about restoring trust in the rule of law and democracy at home and abroad, as he affirmed over the course of his campaign, tackling corruption will be essential. But doing so effectively will require honesty about the United States’ own failings and swift action to address them in the administration’s first 100 days, alongside a robust foreign-policy agenda that includes erecting new barriers to ill-gotten gains, reassuming the role of a global anti-corruption leader, and supporting those fighting for accountability in their own countries.
Of course, the United States cannot be an effective champion for the rule of law abroad without getting its own house in order. The U.S. campaign finance system is often described abroad as “legalized bribery,” and Washington’s reputation for corruption has only worsened over the past four years. In the TRACE Bribery Risk Matrix, which evaluates business bribery risk in 194 markets, the United States has fallen eight places in the rankings since last year, from 15th to 23rd. Instances of bribery and corruption across the government, including at the highest levels of the executive branch, have skyrocketed since 2016, according to TRACE Matrix data. Over that same period, public sector theft—stealing or embezzling public resources—has become more frequent, and fewer government officials are being sanctioned for their misconduct. Meanwhile, the federal government has become less inclusive of social groups in its selection of vendors—a trend that projects an image of nepotism and favoritism in Washington. These shifts have coincided with a decline in civil society participation, the TRACE Matrix shows, and a frontal assault on the media that leaves public officials subject to fewer nongovernmental checks.
All of these domestic problems must be acknowledged and addressed with transparency and accountability. Aside from the basics, such as refraining from gratuitous attacks on the press, Biden should follow through with his proposed ethics reforms for the U.S. government: stronger whistleblower protections, mandatory financial disclosures by candidates for federal office, and greater autonomy for government watchdogs.
Meanwhile, when it comes to countering corruption abroad, the Biden administration should move swiftly to address the most pressing priorities. First, it should deny corrupt foreign actors access to U.S. markets where they can launder and stow their plunder. Under current regulations, foreign kleptocrats have a suite of tools at their disposal to pump dirty money into the U.S. financial system. Behind the anonymity of easily established shell companies, they are free—in most American cities—to purchase real estate in cash with no scrutiny, visibility, or accountability. Through these loopholes, criminals can hide their wealth while damaging American communities: As their properties often sit vacant, there is less affordable housing, and nearby small businesses are starved of revenue.
The Biden administration can take clear steps early on to make the U.S. financial system far less hospitable to corrupt foreign money. Before Biden even takes office, Washington will abolish shell company anonymity as part of a bipartisan reform rolled into this year’s National Defense Authorization Act, likely to become law this month. The Biden administration should build on this progress by mandating transparency and due diligence in high-dollar industries popular among kleptocrats, including real estate, private aircrafts, superyachts, luxury cars, and hedge funds.
Biden can also address corrupt foreign money in the United States at its source. He has already pledged to pursue kleptocrats abroad by continuing Obama- and Trump-era practices of using targeted sanctions, seizing stolen assets, and denying visas to warn corrupt actors and keep them accountable. But his administration should bring more transparency to these programs and supplement existing tools with innovative approaches. Several countries—including the United Kingdom, Ireland, Australia, and Singapore—legally require potential investors to explain the source of any questionable money with “unexplained wealth orders,” flipping the burden of proof. The Biden administration could ask Congress to subject foreign investors to a similar policy and embed unexplained wealth provisions in the interagency Committee on Foreign Investment in the United States.
Regulating U.S. advocacy institutions would create additional barriers to corrupt funds from abroad. Because nonprofit organizations with lobbying arms have no obligation to disclose foreign donors, there’s nothing stopping kleptocrats, including those with close ties to foreign governments, from covertly bankrolling nonprofits that play key roles in influencing U.S. policy. To prevent such actors from indirectly participating in U.S. policymaking, Biden should ask Congress to require all organizations with a lobbying function to publicly disclose a list of their foreign donors. He should also more consistently enforce the Foreign Agents Registration Act, which requires individuals representing the interests of foreign countries to disclose both their ties to those governments and information about their related finances.
As he seeks to reset U.S. leadership on the international stage, the president-elect has an opportunity to frame anti-corruption as a global democratization, security, and human rights priority. The Summit for Democracy that the Biden team has already proposed offers an important opportunity to renew U.S. commitment to anti-corruption, anti-authoritarianism, and human rights worldwide. But the test of its efficacy will be in what comes next: It will be essential to commit to a concrete agenda, iterative meetings, and accountability for all parties to show that Washington is fully invested in fighting kleptocracy and the authoritarian regimes it fuels.
In all this, the Biden administration can’t just voice solidarity with democrats in other countries—it must actually help them in their quest for transparency and accountability. Popular movements in favor of democratic accountability often collapse because they lack resources, organization, or access to information. Biden should therefore work with Congress to pass the remaining provisions of the bipartisan Crook Act, which would support the fight against corruption abroad by allocating resources to countries on the brink of democratic transition in order to bolster their civil society organizations and objective journalism. The proposed legislation has garnered widespread support, and some of its provisions are included in the 2021 defense bill—but important financial support measures are still outstanding. Journalists and activists have a vital role not only in uncovering misdeeds but also in demanding reliable financial information on government contracts and officials’ tax returns. The United States should endeavor to support these checks on government globally.
Additionally, bribery cases are complex and require specific legal and accounting expertise, and the United States’ allies depend on it for anti-corruption legal enforcement training. The Biden administration can support them by ramping up FBI and Justice Department personnel exchanges to provide support and training in countries that are developing anti-corruption legal investigative and enforcement programs.
Concrete action to combat corruption will be essential if the United States aims to restore its leadership and shore up global governance, and thus far the signs are encouraging that the president-elect will engage eagerly with this issue. In his victory speech on Nov. 7, Biden swore to marshal the forces of decency and fairness to guide the country out of an era of toxic politics, cynicism, and mistrust. Over the past couple years, he has written and spoken widely about the need to resist the creeping authoritarianism that’s taking root in so much of the world. Biden should know that the menace of corruption is one of the most daunting obstacles to realizing this vision—and if he acts soon, the world will see that trust and fairness have a fighting chance.
Alexandra Wrage is president of TRACE, founded to advance commercial transparency worldwide. Twitter: @AlexandraWrage