A Transparency’s Eye View on Anti-Corruption Trends (Part 2)

I continue here my discussion with Transparency International-US Executive Director Gary Kalman. In the first of this two-part series, I covered his views on the FCPA. But what else should be tracked? In addition to the FCPA pause, Kalman highlighted the February 5 disbanding of the Task Force KleptoCapture and the Kleptocracy Asset Recovery Initiative, which have moved DOJ attorneys away from anti-corruption enforcement and towards combating transnational criminal organizations (TCOs) and cartels. Kalman noted that TCOs are not actually well defined, so efforts could still entangle corrupt foreign officials. In fact, some legal commentators have pointed out that a decentralized approach could actually mean more FCPA enforcement, as TCOs are often entangled in networks of corruption. 

Kalman flagged changes in the composition of the civil service following the January 20 Executive Order on “Restoring Accountability To Policy-Influencing Positions Within the Federal Workforce – The White House.” As he noted, civil service reform in the US, moving from a patronage to a merit-based system, was a critical part of the overall effort to reduce the role of graft in the country’s politics and economy.  

What of other laws in the US anti-corruption arsenal, such as the landmark 2023 Foreign Extortion Prevention Act, which criminalizes the demand side of foreign bribery? Interestingly enough, he noted, while AG Bondi’s February 5 memo did discuss a reprioritization of FEPA, the law was not referenced in the February 10 Executive Order. Kalman thinks it possible that FEPA will remain an important tool, given that it is designed to prosecute those who target US firms. 

In terms of the rollback of enforcement of the Corporate Transparency Act, which Kalman called a “foundational” reform, he noted that its emphasis will now shift from all companies operating in the US to only foreign firms, leaving only about one percent of the companies currently covered. However, some in the Treasury Department understand how the law can be used to advance aims such as going after cartels. Despite numerous lawsuits challenging the law’s constitutionality, Kalman is cautiously optimistic that the law will be upheld, noting that the Administration has continued to defend the law in the courts. 

Kalman and I concluded with the implications of the foreign aid freeze and the dismantling of USAID. He pointed out that USAID helped create a predictable business climate for US firms operating overseas. Efforts to advance transparency, such as helping countries put budgets, contracting systems and more online, are a boon for companies seeking to make investment and risk decisions. Moreover, corruption has often touched off widespread protests that can make it near impossible for US firms to operate safely and profitably. The withdrawal of US assistance from governance and accountability projects has also crippled efforts critical to economic and social stability. For the civil society organizations, anti-corruption experts and advocates around the world with which Transparency International partners, the US withdrawal from the scene brings a real risk of retaliation from the governments of the countries where they work. They have lost not only funding, but also the implicit protections that came with US financial support. Kalman stressed that nothing can destabilize a country more than a government going after its critics.

Marc Schleifer