Corruption in the US: Is change coming?

The United States continued its downward trend in this year’s Corruption Perceptions Index (CPI). With a score of 67, the country earns its lowest score since 2012. Mismanagement of the pandemic response, including Presidential pushback on independent oversight of the US$2 trillion response package, and a year-long effort to discredit U.S. election results were likely leading factors in the troubling score.

While the two-point drop from last year is not statistically significant, the trend contributes to the CPI’s overall finding that most countries have made little to no progress in tackling corruption in almost a decade. The COVID-19 pandemic complicated matters, exposing political fault lines and triggering societal upheaval all over the world.

In the U.S., in the span of six weeks, the U.S. government appropriated more money to address the crisis than the gross domestic products of some 150 foreign countries combined. The rapid rollout of provisions included in the CARES package opened the door for pandemic profiteers to exploit regulatory loopholes and abuse programs like the Small Business Administration’s Paycheck Protection Program (PPP).

The program was created to help companies retain employees during the economic downturn. Instead, more than US$1 billion went to fraudsters who double dipped or allegedly used the loans to purchase yachts, Lamborghinis, and luxury real estate.

The government’s initial refusal to release data on PPP loan recipients restricted oversight of the program. Anti-corruption advocates called out concerning patterns of potential fraud found in the federal procurement of personal protective equipment (PPE) and lifesaving medical devices like ventilators.

These abuses follow several years of serious conflicts of interest and self-dealing at the highest levels of government, which has, understandably, increased cynicism and lowered trust in our democratic institutions.

The previous administration’s attacks on whistleblowers and firing of inspectors general (independent government watchdogs) when oversight was needed the most signalled a rollback of longstanding democratic norms.

A virtual tsunami of election spending, a record-shattering US$14 billion, was spent by candidates and their supporters, in large part, to convince voters their political opponents were corrupt and that the system itself had been corrupted. It is little wonder that perceptions were influenced.

In September, the release of the FinCEN Files by the International Consortium of Investigative Journalists (ICIJ) and Buzzfeed News rocked the anti-corruption community with evidence that global banks moved over US$2 trillion in suspicious payments between 1999 and 2017.

While these financial institutions did file suspicious activity reports (SARs) for these payments with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), limited action was taken, and the investigation also revealed that the agency had abandoned a major money laundering case against a Dubai-based gold company.

Similar to past leaks and investigations, the FinCEN Files highlighted the need for capacity building within regulatory institutions, as under-resourced enforcement sows distrust in the public eye.

Despite the adversity of 2020, there are signals that change is coming. The new President has been outspoken on the need to address corruption as a national security and foreign policy priority. In addition, on New Year’s Day, the landmark Corporate Transparency Act, the most significant update to U.S. anti-money laundering law in two decades, became law.

The U.S. can reverse its downward slide on the CPI, but it will take time and commitment from all stakeholders, in both the public and private sectors, to press for reforms. The Biden Administration has already pledged to reengage American leadership on the global stage, evident in its commitment to hold a Summit for Democracy that will prioritize the fight against transnational corruption.

The implementation of beneficial ownership is a good place to start, considering that it brings the U.S. into compliance with global anti-money laundering standards set by the Financial Action Task Force (FATF) and the Organization for Economic Co-operation and Development (OECD).

While new measures to fight financial crime are undertaken, it will be equally important for the government to renew its investment in longstanding enforcement agencies like FinCEN and the Office of Foreign Assets Control (OFAC), which oversees economic and trade sanctions.

Responsibility will continue to fall on Congress, which has already demonstrated its willingness and ability to bridge divides to pass meaningful anti-corruption legislation.

Today, the U.S. office of Transparency International published a 21-point plan titled Combatting Global Corruption: A Bipartisan Plan. The plan serves as a roadmap for boosting the U.S.’s CPI score and, more importantly, rebuilding trust in our public institutions— a necessary component of sustainable governance.

American citizens need to have confidence that their lawmakers can restore democracy and fight dirty money, twin goals that stand to benefit the United States and world writ large.