Publish in Perspectives - Wednesday, October 27, 2021
The Biden Administartion has ramped up its focus on fighting corruption in El Salvador, Guatemala, and Honduras. Here Guatemala City. (Photo: Laber Zende)
Alejandra Montenegro Almonte and Maria E. Lapetina, Miller & Chevalier. (Latinvex collage)
The Biden Administration's sustained focus on Anti-Corruption in Central America.
BY ALEJANDRA MONTENEGRO ALMONTE AND MARIA E. LAPETINA
Since June 2021, the Biden administration has announced a series of measures aimed at combatting corruption in Latin America, in particular, in El Salvador, Guatemala, and Honduras, collectively referred to as the "Northern Triangle." These anti-corruption measures are driven, in part, by the notion that corruption contributes to extremism and migration and undermines the rule of law.
On June 3, 2021, President Joe Biden issued a national security study memorandum (the Memorandum) declaring corruption as a "core United States national security interest" and directing interagency coordination to develop a Presidential strategy to "significantly bolster the ability of the United States Government … to combat corruption." A central pillar of that strategy will be to "[e]nhance efforts to quickly and flexibly increase United States and partner resources of investigative, financial, technical, political, and other assistance to foreign countries that exhibit the desire to reduce corruption." As part of the overall initiative, the national security study memorandum signals, among other things, a significant increase in resources dedicated to detecting and punishing corrupt actors in the Northern Triangle.
Days later, Vice President Kamala Harris visited Mexico and Guatemala and announced that the U.S. Department of Justice (DOJ) would increase its efforts against transnational bribery in El Salvador, Guatemala, and Honduras.
At the same time, on June 7, 2021, Attorney General Merrick Garland announced the creation of two multi-agency tasks forces focused on fighting corruption and combatting human smuggling and trafficking in the Northern Triangle: "Joint Task Force Alpha," a partnership between the DOJ and the Department of Homeland Security (DHS), and the "Anticorruption Task Force," which includes representatives from various government agencies, including the Foreign Corrupt Practices Act (FCPA) Unit of the Fraud Section, the Kleptocracy Asset Recovery Initiative in the International Unit of the Money Laundering and Asset Recovery Section (MLARS), and the Narcotic and Dangerous Drug Section (NDDS) from DOJ. The primary purpose of the Anticorruption Task Force, in particular, is to investigate and prosecute corruption cases with a nexus to the Northern Triangle.
On October 15, 2021, the DOJ announced the latest measure to address corruption in Central America – the implementation of a tip line to receive information regarding potential corruption in the Northern Triangle. Assistant Attorney General of the DOJ's Criminal Division Kenneth A. Polite Jr. stated that, with the creation of the tip line, "anyone with information about corrupt actors in El Salvador, Guatemala, and Honduras who are violating U.S. laws or moving proceeds of their crimes in or through the United States, may now report the conduct…" The tip line allows individuals to report potential misconduct in English or Spanish by directly emailing the U.S. Federal Bureau of Investigations (FBI) at firstname.lastname@example.org. The Anticorruption Task Force will review the reports received through the tip line to evaluate whether to investigate and prosecute the reported potential violations of law.
This focus on the Northern Triangle is not the first time that the U.S. government has implemented a task force dedicated to anti-corruption efforts in Latin America. For example, in March 2019, the FBI launched an "international corruption squad" in Miami, focused on targeting corruption in Latin America. The squad's efforts generated five new cases in its first year alone. In addition, the international corruption squad has been involved in a number of high-profile settlements, such as Sargeant Marine, Inc..
These developments illustrate the U.S. government's sustained attention on anti-corruption efforts in Central America and suggest that there will be increased scrutiny from U.S. regulators on companies operating in the region. However, U.S. regulators will not be the only stakeholders critically analyzing and questioning illicit and corrupt activity in the region. Indeed, the Memorandum requires that the interagency Presidential strategy enhance the U.S. government's ability to work with international partners to counteract strategic corruption" as well as its ability to "[p]romote partnerships with the private sector and civil society to … take action to prevent corruption." As such, for companies operating in this region, these measures will likely elicit scrutiny from other stakeholders as well, such as commercial counterparties, banks and financing institutions, and external auditors, among others. The Memorandum also promotes collaboration with foreign governments, which will likely lead to investigative and enforcement activity by non-U.S. regulators in the region.
What Does This Mean for Companies Operating in the Northern Triangle?
The Biden administration's recent actions, which focus on and commit resources to anti-corruption efforts in the Northern Triangle, present a compelling reason for companies operating in this region to take immediate steps to identify and mitigate risks associated with potential regulatory and commercial scrutiny. The most effective way to mitigate these risks is to establish and maintain an effective compliance program and related internal controls designed to identify and assess compliance and regulatory risk and to promptly address any such exposure. In conjunction with risk identification efforts, organizations should evaluate their existing compliance programs and assess their effectiveness in helping the company prevent, detect, and respond to corruption risks and vulnerabilities.
Conduct or Update a Risk Assessment: Whether the company already has a compliance program in place or whether it needs to begin building a compliance program, it is prudent to conduct a comprehensive risk assessment to determine the compliance risks currently facing the company. Such an assessment should recognize heightened scrutiny and related investigations risks in the Northern Triangle region.
Assess the Compliance Program: For companies that have an established compliance program, now is the moment to assess the efficacy of the program. This assessment may include determining whether the compliance function is appropriately resourced, has access to data relevant to the implementation of the compliance program, and is empowered to operate independently. Companies should also assess the adequacy of other compliance-facing functions, such as legal, enterprise risk management, and internal audit departments, to ensure a robust and comprehensive internal control environment across the company. In addition, special focus should be given on senior management's efforts to effectively reflect and communicate a culture of compliance across the company.
Companies that have not yet established a compliance program should view the Biden administration's attention on the Northern Triangle as a call to action to develop and implement policies and procedures aimed at mitigating or addressing the potential risks identified during the risk assessment. Companies should take immediate steps to develop an anti-corruption compliance program that aligns with the company's particularized risk profile and that includes elements such as anti-corruption policies and procedures, trainings, gift and entertainment policies and procedures, and a third party management program. Senior management's endorsement of these efforts will be critical. Compliance officers should partner with company leadership to ensure that senior management sets a strong, authentic, compliance-oriented tone at the top that reaches employees throughout the organization.
Investigate Red Flags and Potential Misconduct: To the extent that the organization identifies red flags or learns of potential misconduct, it must act swiftly to investigate that misconduct. Companies may learn of such misconduct through their own whistleblower hotlines, which are themselves a critical component of an effective compliance program. Any internal investigation should be comprehensive and properly scoped, and the results and findings of the investigations should be carefully analyzed in order to determine appropriate next steps (such as taking remedial action, disclosing the findings to relevant authorities, etc.).
Remediate, Remediate, Remediate!: Finally, to the extent internal investigations conclude any misconduct or non-compliance has occurred within the organization, the company must quickly address the wrongdoing through appropriate remedial action, including imposing appropriate discipline on those involved. Any remedial action should be well documented and seek to directly address the issues identified.
Alejandra Montenegro Almonte is Vice Chair of the International Department of Miller & Chevalier. Maria E. Lapetina is Counsel in the International Department of Miller & Chevalier
Abi Hollinger, a Miller & Chevalier law clerk, contributed to this client alert.
This article is based on an alert by Miller & Chevalier. Republished with permission.