Via Teleconference

(December 5, 2021)

5:02 P.M. EST

MODERATOR:  Hello, everyone.  On behalf of the NSC team, we’d like to welcome you to a background call to discuss a forthcoming announcement by the White House related to the fight against corruption. 

For you reference, today we are joined by [senior administration official] as well as [senior administration official] at the Treasury Department.  They’ll give some initial remarks.  And at this point on they should be referred to “senior administration officials.”

After initial remarks, we’ll open it up for a question-and-answer session. 

The call contents and the materials that we’ll circulate this evening will be embargoed until tomorrow morning at 7:00 a.m.  By participating in this call, you’re agreeing to the ground rules.

With that, I’ll turn it over to our first senior official.

SENIOR ADMINISTRATION OFFICIAL:  Thanks, [senior administration official].  And hi, everybody. 

Excuse me, got a little bit of a cold this evening.

Thanks for taking the time on a Sunday.  In parallel with all the great work that we’re about to discuss on our anti-corruption agenda, many of us in the U.S. government right now are working around the clock in preparation for the Summit for Democracy.  So, I’ve somewhat lost all track of time and space, but do realize that others respect weekends.  So, I really appreciate everybody jumping on the phone to hear it out from us.

As you know, countering corruption is a longstanding priority of President Biden and a priority for the Biden-Harris administration.  That is so because corruption robs citizens of equal access to vital services like healthcare and education.  It downgrades the business environment, can exacerbate inequality.  It’s often linked to human rights violations.  It can drive migration.  It undermines rule of law.  And in so doing, makes all forms of government less effective and less trusted. 

And right here at home, the impacts of transnational corruption have been shown to tilt the economic playing field, in part by raising housing costs and price out families, in some instances, from homeownership, as corrupt actors make illicit real estate purchases.

So, accordingly, President Biden was the first President to establish combatting corruption as a core U.S national security interest via his first National Security Study Memorandum titled, “on the Fight Against Corruption.”  It’s NSSM-1 from back in early June. 

And since the release of NSSM-1, the President has continued to elevate anti-corruption efforts as a focus area through both bilateral engagements and multilateral fora, including at the G7 and G20. 

And in parallel, pursuant to the direction from the President in NSSM-1, federal departments and agencies have been conducting and have now completed a 200-day review to identify how the U.S. government can amplify, expand, and enhance its ongoing efforts to prevent corruption, to better hold corrupt actors accountable, to curb illicit finance, and to strengthen the capacity of investigative journalists and other members of civil society who are on the frontlines of shining a spotlight on corrupt acts and actors. 

So, as a result of this review, we’re really pleased to announce that on this Monday, December 6th, we’ll be releasing the first-ever U.S. Government Strategy on Countering Corruption. 

And the strategy places particular emphasis on better understanding and responding to the transnational dimensions of corruption, including by taking meaningful steps to reduce the ability of corrupt actors to use the U.S. and international financial systems to launder the proceeds of their acts. 

To guide implementation, the strategy organizes U.S. government efforts to fight corruption under five mutually reinforcing pillars.  And I recently heard Secretary of State Blinken say there’s no good strategy — U.S. government strategy — that doesn’t have pillars.  So we’ve got five good ones here for you.  Those are:

• Modernizing, coordinating, and resourcing U.S. government efforts to fight corruption
• Curbing illicit finance
• Holding corrupt actors accountable
• Preserving and strengthening the multilateral anti-corruption architecture
• And improving diplomatic engagement and leveraging our foreign assistance resources to achieve our anticorruption policy goals

So, notwithstanding the U.S.’s historical leadership in the global fight against corruption through tools like the Foreign Corrupt Practices Act, the strategy identifies a number of areas where the U.S. government can improve upon its ongoing efforts through this documents implementation. 

And I just want to mention a few highlights that corresponds to the five pillars I mentioned. 

So, first, we’re going to strive to better understand and respond to the transnational dimensions of corruption, as I mentioned, including by increasing intelligence and diplomatic resources that are devoted to the topic.

Second, the U.S. government is going to take meaningful steps to reduce the ability of corrupt actors to use the U.S. and international financial systems to launder the proceeds of their corrupt acts.  And I’ll come back to that in a second.

Third, the strategy commits to deepening coordination with foreign partner governments to strengthen their ability to pursue accountability for corruption where there is political will, while also deepening support to activists and investigative journalists on the frontlines of exposing corrupt acts.

Fourth, across the federal government, we’ll be elevating our anti-corruption work as a cross-cutting priority through the creation of senior positions and/or coordinating bodies at key departments and agencies including at the Departments of State, Treasury, and Commerce and USAID.

And fifth, we’re committed to improving corruption-related risk analysis in our provision of foreign and security sector assistance. 

So, for example, the Department of Defense is committing, through this strategy, to strengthening its planning processes to include more deliberate considerations of security sector governance prior to the provision of assistance and to conduct more frequent security cooperation evaluations in countries with significant risks of corruption to determine the effectiveness of security cooperation efforts. 

And on the foreign assistance side, in addition to pursuing a substantial expansion in programming that directly focuses on anti-corruption work, relevant departments and agencies led by USAID are going to commit, through the strategy, to better assessing and addressing corruption risk across all U.S. development and humanitarian assistance. 

And then, lastly, the strategy is also going to announce major new investments, as I referenced earlier, in anti-corruption programming, including a global accountability program focused on strengthening, again, so-called strategic corruption; a grand challenge that’s focused on spurring innovation and preventing corruption in high-risk sectors like construction and transportation and natural resource extraction; and in Department of State and DOJ — Department of Justice — rapid response capabilities, which will enable the U.S. government to deploy expert advisors to consult with, mentor, and assist foreign anti-corruption partners around the world where there’s demonstrated political will.

And as I mentioned — just coming back to the second pillar on curbing illicit finance: With the United States being the world’s largest economy, we understand that we bear particular responsibility to address our own regulatory deficiencies, including in our anti-money laundering and countering the financing of terrorism regime — AML/CFT — in order to strengthen global efforts to limit the proceeds of corruption and other illicit financial activity. 

And this includes but isn’t limited to effectively implementing beneficial ownership legislation transparency and promulgating regulations to target those closest to real estate transactions.

So, on that last point, I’m also pleased to announce that tomorrow, following the release of the strategy, the Treasury Department is going to release an advance notice of proposed rulemaking to solicit public comment on a potential rule to address the vulnerability of the U.S. real estate — of the U.S. real estate market to money laundering and other illicit activity.

And this will eventually lead to regulations targeting those closest to real estate transactions. 

So, for more on that and other Treasury efforts, I’m glad to be joined by [senior administration official], as was mentioned earlier.  [Senior administration official], over to you. 

SENIOR ADMINISTRATION OFFICIAL:  Great, thanks a lot.  And thanks for the introduction, [senior administration official].  Good evening, everyone.  I’m [redacted]. 

Thanks, also, for taking the time this evening to participate in this discussion. 

FinCEN is a bureau within the Treasury Department and it is a regulator that works to safeguard the financial system from illicit use and money laundering, and to promote national security.  FinCEN also provides law enforcement and policy makers with strategic analyses of domestic and worldwide trends and patterns around illicit finance. 

FinCEN and all of Treasury are proud to play a role in the administration’s anti-corruption strategy.

As [senior administration official] mentioned, corruption is a global problem with a financial nexus in the United States.  And our institution is unique in its position and ability to understand and attack corruption at its intersection with the financial system.

Treasury is equipped with tools to root out corruption at home and abroad by targeting the financial systems and flows that allow bad actors to profit from it.

You’re already probably familiar with Treasury’s tools to expose and target corrupt actors, for example, by condemning and holding accountable drug kingpins, kleptocrats, and corrupt officials through sanctions designations by OFAC, through more robust tax enforcement, and through the sharing of financial data to advance prosecutions by DOJ.

But our tools also strengthen the rule of law, making it harder for corruption to occur and for corrupt actors to exploit the financial system to hide and to benefit from their ill-gotten gains. 

We can do this through international partnerships.  For example, Treasury provides technical assistance to other countries to improve their financial governance.  And we work with international institutions on enhancing their lending and transparency standards.

That can also mean addressing the domestic nexus for corruption.  And as [senior administration official] mentioned, that’s what I’m here to talk about today.

For too long, the U.S. real estate market has been susceptible to being manipulated and used as a haven for the laundered proceeds of illicit activity, including corruption.  Our real estate market is a relatively stable store of value.  It can be opaque, and there are gaps in industry regulation.

As a result, criminals and corrupt officials are able to exploit real estate far too often. 

Take but one example: After corrupt officials and their associates embezzled more than $4.5 billion belonging to Malaysia’s investment development fund, 1MDB, these perpetrators used the embezzled funds for, among other things, purchases of luxury homes in Beverly Hills and New York through shell companies. 

Increasing transparency in the real estate sector will help curb the ability of corrupt officials and criminals to launder their proceeds of their illicit activities.  And it will also strengthen both U.S. national security and help to protect the integrity of the U.S. financial system.

Treasury is committed, as [senior administration official] mentioned, to developing solutions to increase transparency in the domestic real estate market.  And that’s why tomorrow morning, as [senior administration official] mentioned, FinCEN will be announcing a new advance notice of proposed rulemaking, or ANPRM.  This ANPRM will solicit public comment on a potential rule to address the vulnerability in the U.S. real estate market to money laundering and other illicit activity.

Put another way, FinCEN is launching a regulatory process.  We’re hoping to close gaps in the real estate reporting by seeking comment on how to best to craft a new rule.

And more specifically, we’re considering how best to address the problems created by an all-cash purchases in the commercial and residential real estate sector.  These types of purchases are often conducted through opaque shell companies and are vehicles for laundering illicit funds. 

We’re basically asking for public input on which types of real estate purchases should be covered in any future regulation, what information should be reported and retained, the geographic scope of such a requirement, the appropriate reporting dollar-value threshold, and the key players who should be subject to the reporting and recordkeeping requirements. 

Getting that type of input from stakeholders will allow FinCEN to propose regulations that will obtain information needed to support law enforcement and national security agencies in their efforts to target corrupt officials and criminals that exploit our real estate market. 

And at the same time, the input that we get will help us as we seek to minimize the burdens of those regulations on the real estate industry. 

FinCEN is also seeking comment on any alternative approaches as well.  For example, promulgating general requirements for persons involved in real estate closings and settlements to implement broad AML/CFT programs and report suspicious activity comparable to requirements imposed on financial institutions.

The ANPRM reflects the administration’s anti-corruption and democratic priorities and is consistent with the pledges made by G7 and G20 leaders to curtail the ability of illicit actors to hide wealth, including in real estate.

It also reflects the concerns highlighted in the anti-corruption strategy, which addresses the money laundering risks in the U.S. real estate market as well.

In addition to the real estate ANPRM, throughout the week you will see a whole-of-Treasury approach to countering corruption at home and abroad, and proposals to enhance the transparency of our tax system and to promote economic fairness.

These efforts go hand-in-hand with the tools provided under the Corporate Transparency Act, which was enacted at the beginning of this year. 

We will also be announcing additional action regarding beneficial ownership reporting to address the gaps in our corporate transparency framework that allow corruption to flourish and illicit proceeds to flow into the United States.

Finally, over the course of the week, Treasury will take a series of actions to designate individuals who are engaged in malign activities that undermine democracy and democratic institutions around the world, including through corruption, repression, organized crime, and serious human rights abuses.

Corruption allows bad actors to abuse their authority and extract unfair gains at the expense of others.  Treasury’s work to combat these illicit activities will make our economy and the global economy stronger, fairer, and safer from criminals and national security threats.

So, those are my introductory remarks.  And I’ll hand it back to you, [senior administration official].

SENIOR ADMINISTRATION OFFICIAL:  Thanks, [senior administration official].  Let me just say — I know we’ve gone a little bit long here with the introductory remarks, but let me just say in closing that we are announcing the anti-corruption strategy during the same week that President Biden will be hosting the Summit for Democracy.  And the strategy is a major U.S. deliverable for the summit, which is taking place in this coming Thursday and Friday. 

Through the summit, President Biden is going to bring together a broad and diverse group of governmental and non-governmental leaders to set forth an affirmative agenda for democratic renewal; provide those leaders with a forum to engage, listen, and speak honestly about the challenges and opportunities facing democratic governments, and how democracies can better deliver for their people. 

And the summit is also going to serve as a platform for the U.S. and other governments to announce new commitments, reforms, and initiatives along the lines of the summit’s three pillars, of which fighting corruption is one, alongside strengthening democracy and defending against authoritarianism, and also promoting respect for human rights. 

So, we’re really pleased to be unveiling the strategy in time for the summit and are looking forward to working on implementing it in parallel to and in a process that ideally is going to be mutually supportive, mutually reinforcing of the anti-corruption commitments that other governments are going to bring to the summit for democracy. 

So, with that, let’s pause.  And happy to take some questions.  Thank you.

Q    Hello.  Yes.  Thank you so much.  I was just wondering if you guys could give us an update on the status of FinCEN.  My understanding is that the center was supposed to get additional staffing and stuff to, you know, take on these additional corruption issues.  And I was wondering where that stands. 

I was also curious if you could tell us where the beneficial ownership rules-making is.  Are you guys pretty much done with that, in terms of the, you know, ending the anonymous shell company thing?  Yeah, I guess those two things.  Thank you.

SENIOR ADMINISTRATION OFFICIAL:  Great.  Thank you for that question.  As you know, the AML Act that was enacted earlier this year placed a number of mandates on FinCEN and the Treasury Department with respect to enhancing AML/CFT regulations and efforts around beneficial ownership, but as well as around innovation, around liaisons both domestically and in other countries, and in improving our regulatory framework, working with our federal banking regulators for financial institutions as well. 

We are working diligently and expeditiously with the resources that we have to complete all of those mandates in a timely manner.  We have sought funding for additional staffing and resources to be able to carry out the legislation.  We still have not received that funding at this point, but we’re still pressing forward in terms of getting as much work done as possible. 

In terms of the question with respect to beneficial ownership and the status of those regulations, I expect that we’ll have some announcements coming up this week on beneficial ownership as well.  We have sent this — and this is a matter of the public record — the beneficial ownership regulations to OIRA.  And we’ll have more to talk about this week. 

So, thank you.

Q    Hi.  Thanks for doing this call.  I’m not sure if this is quite in either of your wheelhouses, but will there be any announcement or at least consideration of stronger internal ethics regulations for current and former executive branch officials as part of this?

SENIOR ADMINISTRATION OFFICIAL:  Yeah, [senior administration official], I’ll take it if that’s okay.

SENIOR ADMINISTRATION OFFICIAL:  That’s fine.

SENIOR ADMINISTRATION OFFICIAL:  Great.  Thanks.  So, Andrew, the answer is that the strategy is focused both on international and domestic elements of the fight against corruption and those transnational elements that relate to money laundering that [senior administration official] spoke to in depth. 

And President Biden has made clear, including through signing an executive order on restoring ethics in government on his first day, that he takes this issue incredibly seriously.  The Office of Government Ethics was involved in all of the meetings that resulted in this strategy. 

And so, the answer is, yes, we expect to use the strategy to continue the President’s push to restore ethics in government.

Q    Thank you for taking my question.  I’m wondering if there are specific deliverables and a timetable for those.  If you could talk a little bit about that. 

And then another question I had was: My understanding, at least historically: FinCEN was a — had a voluntary participation structure at one point, and I’m hoping that has changed in the meantime.  But I wonder if someone could — if that could be addressed as well.  Thank you.  Bye.  I’ll take my answers off air. 

SENIOR ADMINISTRATION OFFICIAL:  Thanks.  So, I’ll speak to the first part and then [senior administration official] can jump in on the second. 

In terms of deliverables and timetable, at the end of the day, the strategy is exactly that: It’s a plan for departments and agencies to implement.  So, effectively, what it does is list a number of commitments that departments and agencies are going to make in terms of the prioritization of this issue moving forward. 

And we at the White House, on behalf of the President, will be working with them, coordinating with them, and, at the end of the day, holding them accountable for implementing the strategy.

Now, that said, it does include what I would perhaps describe as a “few deliverables” that include how departments and agencies are going to go about furthering our ongoing efforts to fight corruption both at home and abroad. 

So, for instance, you’ll see in the strategy and then also in — as I mentioned earlier, in and around the summit for democracy — we’re going to be making a number of new announcements that relate to foreign assistance.  So these will include new steps we’re going to take to rapidly deploy Justice sector advisors around the world when foreign government partners are showing political will to address corruption; better supporting government partners who demonstrate will to implement their own anti-corruption reforms; more resources to link investigative journalists and activists so that they can pursue stories that shine a spotlight on anti-corruption; new forms of assistance that will allow our partners to innovate and try and get at otherwise intractable anti-corruption problems. 

So you’ll see some of those programs referenced in the strategy.  But at the same time, a lot of the changes that we hope to achieve, in terms of where we want to go with raising the priority of our anti-corruption work, are going to take time to unfold.  And so, you’ll see, as part of the strategy, that it has a fairly extensive appendix that really lists out the actions that departments and agencies have taken and will be implementing over the course of the years to come. 

[Senior administration official], over to you for the second portion. 

SENIOR ADMINISTRATION OFFICIAL:  Great, thank you.  I’m not sure I fully understand your question, but I will take a shot in terms of answering what we’ve done with respect to real estate to date. 

You know, FinCEN has imposed transaction reporting requirements in the form of something called a “geographic targeting order,” which is authorized under our governing statute, the Bank Secrecy Act.  These GTOs, or geographic targeting orders, are requirements; they aren’t a voluntary process.  And they require title insurance companies in certain parts of the United States to file reports with respect to all-cash purchases of residential real estate by legal entities.

And essentially what we’re doing with respect to the real estate ANPRM is looking for a permanent regulatory solution that would provide information to FinCEN and to law enforcement on a nationwide basis. 

The existing geographic targeting orders are limited to certain geographic metropolitan areas throughout the United States with respect to all-cash residential real estate transactions.  And we’re looking at a nationwide approach and we’re looking at both commercial and residential real estate transactions in this additional step. 

So, hopefully, I’m answering your question.  And if not, I’m happy to elaborate on your — on any other element as well.

Q    Hey, guys.  Thanks.  Yeah, I was wondering if maybe you could just help me wrap my arms around — so what would change under — I understand that it’s early in the rulemaking process, but how real estate transactions would look different at the conclusion of this process. 

So, is the idea that more geographic areas would be subject to these reporting requirements?  Is the idea that in some way that, you know, corrupt actors could no longer purchase real estate within the United States?  How is this going to impact the industry? 

I’m just trying to get sort of a tangible sense of how this — how, ideally, this will function or what tangibly would change both for the industry and for people who are making the high-value real estate purchases.

SENIOR ADMINISTRATION OFFICIAL:  That’s just an absolutely great question.  Under the current GTO program, we’re focused on reporting from title insurance companies.  Title insurance companies in 12 specific metropolitan areas are required to file reports concerning all-cash purchases of residential real estate by legal entities with a purchase price exceeding $300,000. 

So, what this real estate ANPRM gets at is: It asks questions around what the right approach should be with respect to a broader approach that applies on a nationwide basis.  It asks questions about what the appropriate approach should be, whether it should be a reporting requirement approach or whether it should be a broader approach akin to an AML/CFT program, and suspicious activity reporting requirements akin to similar requirements that are imposed on financial institutions that are subject to FinCEN regulation.  It asks questions about what appropriate sectors should be — should fall within whatever their reporting requirements are as we think through the ANPRM and an NPRM. 

So, for example, should it apply to residential real estate; it should apply to commercial real estate as well, which would represent a broadening of the GTOs. 

And then lastly, there’s sort of a series of questions around: What are the right players to impose these reporting requirements or additional requirements on.  Are there particular actors who play a central role in all-cash real estate transactions that any reporting requirement or additional requirements should be focused on because of their centrality in all-cash real estate transactions? 

And, you know, I’d be remiss in noting that we recognize that any approach that we take is going to have burdens on the real estate industry and real estate sector.  So we’re very focused on asking a number of questions around ways that any approach that we take towards this additional regulation can be used to minimize the regulatory burdens on the real estate sector, as well, in a way that’s consistent with our efforts and desire to combat corruption and to get the information that we need for law enforcement and for national security agencies to both protect our national security and to protect the integrity of the global financial system and the U.S. financial system as well.

MODERATOR:  That was our last question.  With that, I’m going to conclude this call. 

As a reminder, our speakers should be referred to as “senior administration officials.”  The call contents and the materials that I’ll be following up with you all later this evening are embargoed until tomorrow at 7:00 a.m. 

If you have any questions, feel free to reach out to me.  Otherwise, have a good evening.  Thanks, everyone.

5:33 P.M. EST