Will Trump’s pause of anti-corruption law enforcement trigger a wave of bribery?

Welcome back. This week brought Transparency International’s latest Corruption Perceptions index, which used surveys and data gathered last year in 180 countries to gauge perceived levels of public-sector corruption. The global average score remained level with the previous year, at 43 out of 100. But while nations from the Ivory Coast to Kosovo have been making progress, others have been on the slide: notably the US, whose score fell four points to 65, leaving it ranked only 28th in the world.

The US — and global — performance in next year’s index will be worth looking out for. Through its energetic enforcement of anti-bribery law against US-based and foreign companies, the US government has been an important force inhibiting international corruption — and thereby tackling one of the most insidious barriers to global economic development and human welfare. But an announcement from the White House this week has cast serious doubt on whether it will continue to play that role in the near future, as I discuss below.

corporate corruption

Trump stopped enforcement of a corporate corruption law. What’s the real impact?

Donald Trump’s move this week to halt criminal enforcement of a law banning companies from bribing foreign officials was a clear distillation of the US president’s priorities. Concerns about responsible business practice and global public goods, in Trump’s world view, are strictly subordinate to financial opportunities.

Trump’s executive order instructed attorney-general Pam Bondi to halt new enforcement or investigations under the Foreign Corrupt Practices Act for 180 days, pending a review of the justice department’s approach (Bondi will be empowered to make exceptions where she deems it necessary).

While fans of the 1977 law credit it with reducing corruption levels around the world, Trump views it as an unfair constraint on US companies, which he believes have been pursued for “routine business practices in other nations” by overzealous federal officials. But while the move has justifiably grabbed attention, its impact on business practice will be limited, according to my conversations this week with senior corporate lawyers specialising in this area.

Even the most gung-ho company will probably wait to see what new approach is decided on after the six-month review period. And even if the government at that point decides to adopt a long-term policy of weakening FCPA enforcement, there’s still the risk that a future administration will take a different course. The statute of limitations under the FCPA runs for five years, and prosecutors have various means of extending this window for prosecution.

For another thing, Trump’s order covered only criminal prosecutions by the justice department. It said nothing about civil cases brought by the Securities and Exchange Commission, which is the other major means of FCPA enforcement.

Still another restraining factor is the various anti-bribery laws that have been introduced by dozens of other nations in recent decades, of which US companies could fall foul if they engage in bribery overseas.

Lawyers at Paul Hastings wrote this week that the new approach taken by Trump’s justice department, following the 180-day review period, is likely to involve “a renewed focus on enforcement of the FCPA against non-US companies”, who can be prosecuted if they have a public listing or significant presence in the US.

But foreign companies have already been, at least by one measure, the primary targets of enforcement. Of the 10 largest financial penalties or settlements paid under the FCPA, according to law firm Gibson Dunn, eight have been by non-US companies — notably an $850mn settlement paid by Russia’s Mobile TeleSystems in 2019, and $800mn paid by Germany’s Siemens in 2008.

None of this is to minimise the significance of Trump’s executive order. While it may not lead to a sudden corporate embrace of large-scale bribery, it could clearly weigh on companies’ willingness to deploy resources to guard against it. And companies in certain sectors may be particularly tempted to take advantage.

Lawyers at Morrison Foerster said Trump’s order signalled that companies were likely to avoid prosecution for paying foreign bribes “to obtain resources such as critical minerals, deep-water ports, and key infrastructure”, which were named in the executive order as being of vital national interest.

For most companies, though, the freedom to bribe will not look hugely alluring. Fostering a culture of socially destructive criminality is unlikely to be good for sustainable value creation in the long term. This could be a good moment for multinational companies to reaffirm to their workforces their opposition to corruption, said Soo-Mi Rhee, head of the anti-corruption practice at law firm Arnold & Porter. “People can start getting ideas,” she said.

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