U.S. President Donald Trump, joined by Counselor Peter Navarro, from left, White House staff secretary Will Scharf, and Commerce Secretary nominee Howard Lutnick, signs a series of executive orders including an order relating to the Foreign Corrupt Practices Act in the Oval Office at the White House, on Feb. 10, in Washington.Andrew Harnik/Getty Images
The United States risks becoming a cesspool of corporate corruption.
President Donald Trump is suspending anti-bribery enforcement, rolling back regulations that divulge the owners of shell companies and turfing independent government watchdogs — a systematic neutering of laws and U.S. institutions that were created to crack down on corruption in the wake of the Watergate scandal.
Those moves offer glad tidings for the world’s kleptocrats, money launderers, tax dodgers and other financial criminals. But they are also creating a predicament for Canadian businesses that operate across international borders.
“Under Trump, the American administration has descended into chaos and cruelty and corruption,” said Allan Rock, president emeritus of the University of Ottawa and a former federal minister of justice, at an anti-corruption event held by the Empire Club of Canada.
“The level and extent of the corruption is just beyond shocking. But I think what this says is that America is descending into an authoritarianism that is certainly foreign to us and it’s going to be ruinous for them.”
It is estimated that businesses and individuals around the world pay more than US$1-trillion in bribes annually, which harms the global economy and creates devastating consequences for the poorest of the poor.
Transparency International, a global civil-rights organization, is warning that countries across the Americas, including Canada, must take “urgent action” to curb corruption.
The United States, however, is now setting a dissolute example.
Mr. Trump signed an executive order in February forcing the U.S. Department of Justice to stop enforcing a law that prevents U.S. companies from bribing foreign officials to further their commercial interests in other countries.
The Foreign Corrupt Practices Act (FCPA), once considered the global standard for anti-corruption legislation, was enacted in 1977 in the aftermath of the Watergate scandal that led to the resignation of President Richard Nixon and the prosecution of companies that made illegal political contributions.
Not only did the Trump administration liken bribery to “routine business practices in other nations‚” but it also argued the FCPA “harms American economic competitiveness.”
That’s right, the greasing of foreign palms will make America great again.
Then in March, the U.S. Department of the Treasury announced it would remove beneficial ownership reporting requirements for U.S. companies under the Corporate Transparency Act - another landmark piece of legislation that was designed to unmask the owners of shell corporations. Those anonymous corporate entities are routinely used by criminals to launder illicit profits.
Numerous independent ethics officials and non-partisan government watchdogs have also resigned or been fired in recent months, raising questions about who, if anyone, is keeping the U.S. government in check.
“Europe, Canada and other countries will hopefully redouble their efforts in this area,” said Peter German, president of the International Centre for Criminal Law Reform and the RCMP’s former director-general on financial crime, at the same event.
“Corruption is bad for business.”
Now that Prime Minister Mark Carney has revealed his new cabinet, his government should ensure that Ottawa breaks ranks with Washington on this particular issue. Indeed, Canada must intensify its anti-corruption efforts to better align itself with the countries in the European Union, which are becoming increasingly important markets for our exports.
So, how should Canadian businesses with international operations conduct themselves in light of Washington’s decision to stop enforcing the FCPA? Well, for starters, they should not assume they have a free pass to give or receive graft in foreign jurisdictions.
“The law is still there, it’s just not being enforced,” said Hentie Dirker, chief ESG and integrity officer at AtkinsRéalis Group Inc., the Montreal-based engineering company formerly known as SNC-Lavalin Group Inc.
“In four years, five years’ time, another regime might come in. They might start enforcing.”
Some well-governed global companies based in the United States are instead doubling down on their anti-corruption compliance efforts, he added.
“In high-risk markets, there’s now a perception that ‘Hey, U.S. companies can go around and bribe and corrupt,’” Mr. Dirker explained, adding that is putting a lot more pressure on employees in those foreign jurisdictions.
“So, their compliance programs actually have now a much bigger emphasis on communication and training and arming their employees with the right tools.”
AtkinsRéalis has worked diligently to turn the page on SNC-Lavalin‘s bribery scandal, which involved projects in Libya. As such, Mr. Dirker offers forthright advice on adopting the correct corporate mindset to combat corruption.
Companies, he said, must ensure employees feel safe to speak up about unethical behaviour. It is also essential for companies to conduct proper due diligence when doing business in high-risk jurisdictions.
“When you hire people, make sure that you hire the right people, that you don’t hire bullies who harass people and rule by fear,” he added.
Mr. German, meanwhile, has authored a guidebook that outlines specific actions that businesses can take both domestically and internationally to fight corruption.
Canada must strengthen anti-corruption enforcement, and, as Mr. Dirker suggests, offer more guidance to corporations on improving compliance.
The U.S. is offering us a cautionary tale. Mr. Trump is living proof that a fish rots from the head down.