International economic crime
Crime more generally
Cross-border US-UK investigations
There has been much speculation over recent weeks as to what a Trump presidency might mean for US-UK bilateral relations. As a result of the scarcity of detailed policy proposals issued during his campaign for the presidency, commentators have resorted to speculation as to what his presidency might mean for the investigation of financial and business crime – particularly international cooperation in this regard and, most pertinently, cooperation between the United Kingdom and the United States, two countries which have historically worked closely together.
One general theme which emerged during Trump's campaign was an impression of a greater inward focus; that internal affairs may take priority over international activity. The president-elect has indicated an intention to renegotiate international trade agreements, withdraw from climate change agreements and diminish US participation in NATO. The tone of some speeches has given the impression that he may not flinch from controversy and that the world order, previously taken for granted, may be subject to change.
However, since the election the president-elect's announcements have been mixed, indicating on the one hand that high office is likely to temper his approach, while suggesting that certain key proposals such as climate change may not disappear entirely.
Against that background, this update considers Trump's previous statements on international financial crime and crime in general, his apparent attitude to the 'special relationship' with the United Kingdom and the wider context in which the Trump administration will sit in order to consider the likely approach that his presidency might take to the investigation of financial crime and the potential impact on US-UK cross-border investigations.
Previous statements have suggested that Trump will not shy away from making significant changes. They have included a moratorium on new financial regulation until the US economy shows "significant growth" and the repeal and replacement of the 2010 Dodd-Frank Act in order to reduce regulation and remove perceived strictures from businesses.
However, the latter is considered unlikely, given that most Wall Street banks have already adapted to many of its rules. It is also important to recognise that the ultimate target of these remarks is the economy and the deregulation of business, rather than law enforcement.
More pertinently, the president-elect has previously indicated a willingness to repeal the Foreign Corrupt Practices Act 1977, calling it a "horrible law". However, this also appears unlikely: the repeal or diminishment of the act would set the United States very much against the strong international trend of increased enforcement in this field (countries that have recently introduced similar legislation include the United Kingdom, Brazil, and India), and would probably attract significant criticism from international bodies such as the United Nations, the Organisation for Economic Cooperation and Development and Transparency International. However, perhaps of more weight for the incoming administration is the fact that the act has been in place for nearly 40 years and there are no significant difficulties with it – the domestic legal profession is not calling for its repeal.
Many Foreign Corrupt Practices Act investigations are also perceived to be successful and are the subject of considerable envy and positive commentary in other parts of the world. Only recently Och-Ziff settled bribery charges for a sum of $412 million. In 2014 Alstom SA settled for the sum of $772 million. The highest-ever recorded settlement, with Siemens, was for $800 million in 2008.
Further, seven of the top 10 highest Foreign Corrupt Practices Act penalties involved foreign domiciled entities. Not only is it financially in the interest of the United States to continue to enforce the act, but it is an important tool to prevent foreign companies from engaging in corrupt practices in order to win contracts to the detriment of US companies. For that reason alone, enforcement of the act would be consistent with Trump's protectionist stance on trade.
Furthermore, Foreign Corrupt Practices Act enforcement is relatively inexpensive. The current method of enforcement routinely results in private corporates undertaking much of the investigation themselves and self-reporting misconduct to the Department of Justice. As a result, it has been suggested that even were that department's budget to be reduced, the impact on enforcement in this area would be minimised.
Comments made by the president-elect about crime in general suggest that, if anything, he should seek to strengthen law enforcement, having sought to present himself as the 'law and order' candidate. The 'Trump Contract' pledged to "restore security and the constitutional rule of law", and in his nomination acceptance speech he made "safety at home" a central plank of his campaign. That meant "safe neighbourhoods, secure borders, and protection from terrorism. There can be no prosperity without law and order". Finally, there is no question that appearing tough on terrorism is high on the president-elect's agenda and given the link between international financial crime and financing terrorism, it seems unlikely that he will take steps to diminish structures that are already established both at home and abroad to deal with this threat.
As for US-UK relations, it is too early to draw any specific conclusions. The US-UK relationship is likely to remain strong. However, if anything is to be read into delayed telephone calls, photoshoots with leaders of opposing political parties and apparent support for 'Ambassador Farage', it will be that the president-elect has yet to decide how important his relationship with the current UK government should be. Despite having been 11th in line for a phone call following Trump's election win, Prime Minister Theresa May has said that he is "very easy to talk to" and "very much values" UK-US ties.
Conversely, the importance of maintaining the relationship with the incoming administration has not escaped the UK cabinet. The government might be said to have altered its tone significantly in relation to Trump (with Boris Johnson describing him as, "in many aspects, a liberal guy from New York"); alternatively, it could simply be treating the office that Trump will soon occupy with appropriate and diplomatic respect. Either way, the United Kingdom can be expected to work hard to maintain the relationship: it is one which is always in the interests of the United Kingdom, but particularly post-Brexit. Hopes of economic cooperation were raised when, during the campaign, Trump declared himself a supporter of Brexit and suggested that the United Kingdom would be "treated fantastically" under his administration. May must also recognise that the undercurrent of discontent that led to Trump's election has strong echoes in the voice that spoke through the Brexit referendum result – this acknowledgment surely lay behind a recent comment that globalisation must work for all. However, individual remarks and attitudes aside, Chancellor Philip Hammond's characterisation of the relationship as one which operates deeply on many levels and which transcends the personalities occupying the most senior posts in either country is likely to remain accurate.
Cross-border US-UK investigations
Much like the diplomatic relationship between the two countries, US-UK cooperation on cross-border offences is so well established that it is robust enough to withstand any significant alteration in rhetoric emanating from senior posts. This is not to say that the relationship between the two countries is wholly absent from tension in any event (particularly in the field of extradition, as the case of Gary McKinnon demonstrated). Nonetheless, the United States and the United Kingdom can rely on well-established links between the Department of Justice and the Serious Fraud Office in terms of information and evidence sharing (through mutual legal assistance). The United States is also a member of the Strategic Alliance Cyber Crime Working Group – a formal partnership between the United States, the United Kingdom, Australia, Canada and New Zealand dedicated to tackling global crime. Within this initiative, there is increased information sharing between the National Crime Agency and the Federal Bureau of Investigation on serious fraud and cybercrime.
The United States is also a longstanding party to international treaties which have international cooperation between party states as a key element, such as:
- the UN Convention against Corruption;
- the UN Convention against Transnational Organised Crime; and
- the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
In 2007 the UK Attorney General's Office issued domestic guidance for handling criminal cases affecting both England, Wales or Northern Ireland and the United States. The guidance not only serves to provide a mechanism for determining questions of jurisdiction, but also has the effect of providing a channel for cooperation in developing a case strategy and information sharing with respect to specific cases.
Unpredictable times notwithstanding, any great changes to the effectiveness of US-UK cooperation on issues such as financial crime are unlikely. Even if rhetoric may cause diplomatic relations to wax and wane, the channels of communication between the two countries are interdependent and well established. Trump might be minded to reduce future regulation for businesses and markets, but he is unlikely to roll back criminal legislation wholesale – particularly given his stance on crime in general. Even if he were to propose the repeal of the Foreign Corrupt Practices Act or withdrawal from international treaties on criminal law, gaining the support of Congress to do so would be another question entirely; not even the president of the United States operates in a vacuum. If all of that were not enough, the president-elect will soon discover that international terrorism, and thus transborder financial crime, is the key area where isolationism will not achieve the objectives that he put at the heart of his campaign.
For further information on this topic please contact Kathleen Harris or Sean Curran at Arnold & Porter Kaye Scholer LLP by telephone (+44 20 7786 6100) or email ([email protected] or [email protected]). The Arnold & Porter Kaye Scholer website can be accessed at www.apks.com.