Implement Strategy on Countering Corruption (US0130)

Launched as part of the first Summit for Democracy in December 2021, the U.S. Strategy on Countering Corrup- tion lays out a comprehensive approach for how the United States will work domestically and internationally, and with governmental and non-governmental partners, to prevent, limit, and respond to corruption and related crimes. The Strategy places special emphasis on the transnational dimensions of the challenges posed by cor- ruption, including by recognizing the ways in which corrupt actors have used the U.S. financial system and other rule-of-law based systems to launder their ill-gotten gains. As part of the Strategy, the Federal Government com- mitted to implementing the following five pillars: (1) modernizing, coordinating, and resourcing U.S. Government efforts to better fight corruption; (2) curbing illicit finance; (3) holding corrupt actors accountable; (4) preserving and strengthening the multilateral anti-corruption architecture; and (5) improving diplomatic engagement and leveraging foreign assistance resources to advance policy goals.

There are several commitments in the Strategy that advance open government and thus are included in this Na- tional Action Plan. In support of Pillar 2 of the Strategy and ongoing Federal efforts to strengthen the integrity and transparency of the U.S. financial system, the U.S. Department of the Treasury issued a Final Rule in Sep- tember 2022 establishing a beneficial ownership reporting requirement for certain corporations, limited liability companies, and other entities registered to do business in the United States. This rule, issued with public input through the rulemaking process, implements the Corporate Transparency Act (CTA; Public Law 116-283), enact- ed to help combat illicit finance, and meets recommendations in several past U.S. National Action Plans calling for the Federal Government to enact beneficial ownership legislation. The U.S. Department of the Treasury is continuing to build the infrastructure and database for beneficial ownership reporting, and will issue further rulemakings to implement the CTA. As set forth in the Strategy, additional measures designed to protect against illicit finance in U.S. real estate markets and other vulnerable sectors are underway or will be undertaken. Con- sistent with the transnational nature of corruption, tax evasion, and money laundering, and under Pillars 2 and 4 of the Strategy, the Federal Government commits to working with international partners to further elevate international standards and practices against illicit finance, and continue to build the cooperative relationships to combat such conduct. Finally, the Strategy commits to improving information sharing within the U.S. Govern- ment, with non-U.S.-Governmental entities, and internationally; bolstering the ability of civil society, media, and private sector actors to safely detect and expose corruption, increase public awareness, and pursue accountabili- ty; using innovative methods in the fight against corruption; and improving coordination and risk analysis across foreign assistance. The United States will continue to implement elements of the U.S. Strategy on Countering Corruption related to open government and report on progress towards these objectives.

Action Plan Review

Commitment 18: Government-wide anti-corruption strategy
Implementing agency: Not specified.

For a complete description of the commitment, see page 12 in the U.S. 2022–2024 action plan: https://www.opengovpartnership.org/wp-content/uploads/2023/01/United-States_Action-Plan_2022-2024_December.pdf.

Context and objectives
The commitment consists in implementing the open government components of the U.S. Government’s Strategy on Countering Corruption, launched in December 2021. [10]

The strategy encompasses five pillars: modernizing, coordinating, and resourcing U.S. Government efforts to better fight corruption, curbing illicit finance, holding corrupt actors accountable, preserving, and strengthening the multilateral anti-corruption architecture, as well as improving diplomatic engagement and leveraging foreign assistance resources to advance policy goals.

While the commitment itself does not contain specific activities and milestones, the strategy does provide some concrete objectives for its open government components, contained in pillars 2, 3 and 4.

Pillar 2 includes several activities on beneficial ownership transparency, an issue that has long been on the civil society agenda. Main goals include publishing regulations and building a beneficial ownership database in compliance with the 2021 Corporate Transparency Act (CTA). The CTA requires the U.S. Department of Treasury to create a beneficial ownership registry that collects information of the true owners of certain companies and make it accessible to a variety of federal agencies.

Disclosure of beneficial ownership is also required in connection with government procurement transparency. Section 885 of the 2021 National Defense Authorization Act (NDAA) requires prospective federal contractors and grantees to disclose beneficial ownership for inclusion in the Federal Awardee Performance and Integrity Information System database. A goal in this regard is the publication of effective regulations to implement this legislation. Pillar 2 also calls for additional measures to protect U.S. real estate markets and other vulnerable sectors against illicit finance, all while working with international partners to make further improvements to U.S. anti-corruption efforts.

Pillar 3 intensifies the U.S. commitment to combat corruption through multifaceted strategies, including enhancing support for investigative journalists and civil society actors, as well as recognizing the crucial role of the private sector in anti-corruption efforts.

Under pillar 4, the strategy seeks to “expand and enhance its engagement with and support for key global partnerships and platforms that aim to enhance transparency and combat corruption,” and notably OGP. In this regard, it commits the U.S.—as a founding member—to “further institutionalize OGP implementation domestically, solidify channels of collaboration with civil society, and expand existing support both directly to OGP and to international partners working to advance OGP processes.” [11]

While this is a welcome expression of good intentions regarding the revitalization of the OGP process, including the establishment of a permanent forum for joint work with civil society, which has yet to materialize, the focus of this commitment is on beneficial ownership disclosure. This makes the commitment relevant to the OGP principle of transparency.

Potential for results: Substantial
This commitment is part of a sequence of corporate transparency reforms that were initiated in 2021, with their roots tracing back to NAP2 in 2013. As Thom Townsend, Executive Director of Open Ownership, explained in reaction to the approval of the NDAA, the establishment of a beneficial ownership registry “is a huge leap, and several decades in the making. When the world’s largest economy finally decides to end anonymity for shell companies, it is a cause for celebration and its impact will be felt across the world. With this new act, the U.S. will become a far less attractive destination for those wishing to hide assets.” [12]

The primary legislation was passed long before NAP5 was even developed and a regulatory phase followed. It focuses on sorting out issues as operational definitions of beneficial ownership, the scope and detail of annual reporting requirements, the range of competent authorities with access to the data, domestically and internationally, and the range of acceptable exceptions. [13] In September 2022, the U.S. Department of the Treasury published a series of beneficial ownership information reporting requirements. [14] What remains to be done under the NAP is to, first, finalize regulations in order to implement these reporting requirements and, second, build the beneficial ownership database.

A consulted civil society stakeholder highlighted the importance of this commitment, acknowledging that civil society groups had advocated for it for a decade. However, he lamented the way the beneficial ownership registry is taking shape as it is unlikely to yield the expected results. Specifically, civil society advocated for an open registry that could be consulted by journalists and watchdog organizations, and not just a confidential one for exclusive use by law enforcement agencies. [15]

Opportunities, challenges, and recommendations during implementation
As pointed out by civil society, the registry that is shaping up falls short of offering citizens a tool to “follow the money”. However, comparative evidence appears to show that central registries of the kind that the U.S. is currently setting up can be “an important steppingstone toward beneficial ownership transparency and will allow for easier information sharing across borders as well as broadening access to citizens.” [16]

To ensure the resulting registry is as fit for purpose as it can be, the government should engage with civil society in what remains of the regulatory process, and its input—regarding definitions, thresholds, and exceptions—should be seriously considered. Steps should also be taken to ensure the registry complies with international standards adopted or recommended by longstanding multistakeholder initiatives and multilateral organizations.