You Need Regulators to Deregulate

I wrote the other day that, in the Trump administration, “the legal status of crypto is still kind of uncertain, but the enforcement status is ‘go ahead, do whatever.’” This is not just a crypto thing; it’s a more general approach. Traditionally the way regulation works is that there are rules, and you are supposed to follow them, and if you do not follow them you get in trouble with the government. Companies organize themselves around this basic reality. A big bank will have a compliance officer, and the compliance officer will say to the bankers “hey guys don’t pay any bribes,” and if the bankers say “why not” the compliance officer can answer “because if you pay bribes we will have to pay a big fine and you might go to prison” and the bankers will say “oh right that’s bad.”

But in the Trump administration, an important law against paying bribes — the Foreign Corrupt Practices Act — has not been repealed, but it is no longer being enforced. President Donald Trump doesn’t like the FCPA, so he issued an executive order “pausing” its enforcement. What does that mean? If you are a compliance officer at a bank, and a banker comes to you and says “hey I’d like to pay bribes, is that cool now,” what should you say? Well! I am not going to give you legal advice, but my anecdotal impression is that actual compliance officers who get this question these days still say “absolutely not, no bribes.” (Here is a Wall Street Journal story reporting that this is mostly the case.) And then if the bankers say “but I thought the FCPA was paused, what’s the problem with paying bribes,” the compliance officers might give answers like: