Many have speculated about finding a single cause for the explosion of FCPA enforcement after 2004, including myself. The death last month of Mike Oxley, the House of Representatives sponsor of legislation known as the Sarbanes-Oxley Act of 2002 (SOX), caused me to think yet again about the variety of factors that led to this growth in enforcement.

SOX was passed in direct response to the fraud and accounting scandals perpetrated on the U.S. public by Enron, WorldCom, Adelphia, and others in the 1990s and the first decade of this century. Yet in the FCPA world, SOX is significant as well. Many have speculated that the requirements for corporate certifications of financial statements led to greater corporate internal investigations and subsequent disclosures of corporate wrongdoing. This may have led to increased discovery of foreign bribery in violation of the FCPA, a greater number of self-disclosures to the Justice Department, and then to the increased enforcement of the FCPA from 2004 forward.

There is another school of thought, best articulated by Dick Cassin, editor of the FCPA Blog, and Dan Chapman, most prominently among others, who talk and write about FCPA enforcement as an anti-terrorism security issue post 9/11, but I never quite bought into it because I did not understand the theoretical underpinnings of such an analysis.

In a lecture by Professor Andrew R. Wilson of the U.S. Naval War College, entitled “Terrorism as Strategy,” he explained that corruption is both a part of the strategy of terrorism and a cause of terrorism. After listening to his lecture and reflecting on some of the world events which invoked both parts of his explanation, it became clear to me why FCPA enforcement exploded and, more importantly, why the U.S. government needs to continue aggressive enforcement of the FCPA and encourage other countries across the globe to enact and enforce strong international and domestic anti-corruption and anti-bribery laws.

Corruption as a Terrorist Strategy

One need look no further than the massacre of civilians in Kenya at the Westgate Mall to see how terrorists use bribery and corruption. Dick Cassin, who has consistently written about the connection between bribery-corruption and security, did so again after the attack, pointing to the continued corruption in Kenya and how this corruption led to guns and terrorists being able to cross the border and carry out the attack. In Kenya, the border controls are so porous due to corruption that in a prior episode involving the U.K. SFO, the U.K. government had banned certain Kenyan government officials from traveling to the United Kingdom in large part because the country failed to take action against obvious cases of bribery and corruption.

Giles Foden, in a Guardian article entitled, “Kenya: Behind the Terror Is Rampant Corruption,” was even more specific about the culture of crime and corruption in Kenya, when he noted that corruption was one of the signature factors which led to the massacre. He wrote, “In Kenya crime and terrorism are deeply linked, not least by the failure of successive Kenyan governments to control either. These attacks are part of a spectrum of banditry, with corruption at one end, terrorism at the other, and regular robbery in the middle. Money that should have been spent on security and other aspects of national infrastructure has been disappearing for generations.”

He concluded his piece with this warning, “You can gesture at the transnational problem of Islamist terrorism all you like, but it’s just hot air unless you invest in proper security on the ground in your own country, with the right safeguards to civil liberties. For now, Kenya must mourn its dead. But unless the corruption stops, and real investment is made in the social fabric, Kenya will once again be faced with systemic shocks it is hardly able to deal with.”

As with all laws, the FCPA and its enforcement has evolved. Mike Oxley and his U.S. Senate partner, Paul Sarbanes, played a large role in providing U.S. enforcement authorities to not only make corporations more responsive and transparent to the public, but to help the worldwide fight against corruption as well.

Professor Wilson made it clear that terrorists incorporate these concepts into their overall strategy. If a country has strong border controls and government officials, which I believe is the situation in the United States and the United Kingdom, then the terrorists will seek out a country friendly to the United States or United Kingdom, where the government officials can be bribed or corrupted and use those as ports of entry. Similarly, they can directly attack civilians in a country like Kenya where the border is so porous that both terrorist and arms can flow through with impunity.

Corruption as a Precursor to Terrorism

But not only can corruption be used by terrorists, ironically, it can also be the cause of terrorism. One only need look at the Arab Spring and what started it. It was a lone fruit and vegetable seller, Mohammed Bourazizi, who doused himself in paint thinner and set himself on fire in front of a local municipal office because of the corruption of Tunisian government officials and police officers. Yuri Fedotov, head of the United Nations Office of Drugs and Crimes (UNODC), has said that the Arab Spring’s call for greater democracy was “an emphatic rejection of corruption and a cry for integrity” and that the international community must listen to the millions of people involved. At the center of the Arab Spring movement was a deep-seated anger at the poverty and injustice suffered by entire societies due to systemic corruption. Do you think there was any terrorism associated with the Arab Spring?

If one wants to look back a little further in history, I would submit that China is the most prime example of the 20th century. For all the hand wringing about Who Lost China, I think a clear key was the endemic corruption of the Nationalists and their allies. Their corruption helped remove the moral authority of their government and allowed the Communists to take up that mantle in the 1940s. The Nationalists were certainly defeated on the battlefield but the groundwork was laid in large part due to the corruption of their government. It really did not matter how much money, foreign aid, and material that the U.S. government provided to Chaing Kai-Shek; his cronies and his government simply stole it, sold it, or gave it away for other favors.

Now I understand how terrorists use corruption both as a strategy and a tool. Moreover, when you begin to understand these inter-related underpinnings of corruption and terrorism, you can see why aggressive enforcement of anti-corruption laws such as the FCPA and U.K. Bribery Act is so important and is here to stay.

In a blog post entitled “9/11 and the FCPA” Cassin said, “What happened that day a decade ago changed the way the world looks at corruption. The tracks of the 9/11 perpetrators and those who helped them led back to corrupt third-world countries—Afghanistan, Sudan, Somalia, Yemen, and others. Those regimes had leaky borders, weak passport control, unreliable law enforcement agencies, poor anti-money laundering programs—just what the bad guys needed.”

I do not have any insight into the discussions of the Bush Administration after 9/11 about ways to fight terrorism. But just as governments have a role to play by being part of the solution, so do private businesses. Fedotov said that preventive action was needed by CEOs in the boardrooms as much as by police on the streets or civil servants in their departments: “All of us must contribute to a culture of integrity. The eyes previously closed to corruption must become the open eyes of justice and equality.” For the Justice Department and the SEC, this means continued enforcement of the FCPA so that companies subject to the Act will move forward to do business in a way that does not start down the slippery slope to terrorism. Simply because the FCPA was passed in the post-Watergate era does not mean that it cannot be used for today’s problem.

Moreover, the evolution of other laws has intersected and impacted FCPA enforcement in ways not seen or perhaps even anticipated by the bills’ authors. Just as Mike Oxley and his SOX legislation placed a key component before Justice Department lawyers and SEC regulators, its weak and ineffective SOX whistleblower provision led to the more robust protections for whistleblowers found in the Dodd-Frank Act. These whistleblower provisions provided for both greater protection from retaliation and greater incentives through the payment of bounties for information that leads to successful SEC prosecutions or agreed resolutions of a FCPA violation.

As with all laws, the FCPA and its enforcement has evolved. Mike Oxley and his U.S. Senate partner, Paul Sarbanes, played a large role in providing U.S. enforcement authorities to not only make corporations more responsive and transparent to the public, but to help the worldwide fight against corruption as well.

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