HOTLINE MONEY LAUNDERING

America’s Anti-Kleptocracy Breakthrough

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There is unprece­dent­ed wind in U.S. anti-klep­toc­ra­cy sails, thanks to leg­is­la­tion mak­ing its way through Congress. America’s reign as a haven for off­shore wealth may final­ly be com­ing to an end.

Over the past year, an extra­or­di­nary burst of anti-klep­toc­ra­cy legislation—much of it intend­ed to counter Russian influence—has tak­en aim at the tools and tac­tics of for­eign crim­i­nals look­ing to move mon­ey through the United States. These bills, which enjoy bipar­ti­san sup­port, aim to shore up America’s moral high-ground against the forces of klep­toc­ra­cy. 

Such mea­sures are long over­due. For years, America has act­ed as arguably the world’s great­est off­shore haven. Anonymous shell com­pa­nies, cre­at­ing entire indus­tries in states like Nevada and Wyoming, have blos­somed, while oli­garchs and arms-traf­fick­ers con­tin­ue to take advan­tage of sup­pos­ed­ly “tem­po­rary” loopholes—now near­ly two decades old—in order to pur­chase lux­u­ry real estate. 

But because of the bills now work­ing their way through both the House and Senate—as well as the tire­less efforts of activists in and around Congress, includ­ing the Helsinki Commission—there is unprece­dent­ed wind in America’s anti-klep­toc­ra­cy sails. Should the bills men­tioned below come to fruition, America’s time as an off­shore mag­net may well be com­ing to an end.

For decades, American states have accrued fees from com­pa­ny for­ma­tion, not both­er­ing to ask which crim­i­nals, nar­co-traf­fick­ers, or extrem­ist net­works are behind the anony­mous LLCs spread­ing like fun­gus in Reno or Cheyenne. Everyone from Chavista goons to post-Soviet klep­to­crats have got­ten in on the action, hid­ing their mil­lions from inves­ti­ga­tors both for­eign and domes­tic. Delaware, the most noto­ri­ous American haven, not only set the tone for oth­er states—with Nevada mar­ket­ing itself as the “Delaware of the West”—but also for oth­er coun­tries like Nevis and Panama.  

But the heady days of America as the cap­i­tal of anony­mous shell com­pa­ny for­ma­tion appear to be com­ing to a close. Earlier this sum­mer, a bill aimed at end­ing the practice—the Corporate Transparency Act—passed out of a House com­mit­tee. The bill, which would force com­pa­nies to iden­ti­fy their own­ers, hasn’t yet passed the House, and may yet be bun­dled with broad­er anti-mon­ey laun­der­ing leg­is­la­tion as it moves through Congress. However, a pair of bills in the Senate com­ple­ment the Corporate Transparency Act; one, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act, wouldn’t just iden­ti­fy those behind anony­mous com­pa­nies, but also cre­ate a team of finan­cial expert inves­ti­ga­tors at the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to incu­bate new inno­va­tions in America’s efforts to counter grand cor­rup­tion. 

Of course, end­ing America’s role as the world’s great­est font of anonymi­ty isn’t the be-all, end-all of anti-klep­toc­ra­cy efforts. Nor are things like the Corporate Transparency Act the only bills being pro­posed. Instead, there is a con­stel­la­tion of inven­tive laws, all aimed at dif­fer­ent facets of the klep­to­crat­ic process and rep­re­sent­ing a bipar­ti­san effort, that com­prise the leg­isla­tive push. 

One recent­ly intro­duced bill would beef up the Foreign Corrupt Practices Act (FCPA), which tar­gets American enti­ties and indi­vid­u­als offer­ing bribes abroad. The FCPA was, as the University of Cambridge’s Jason Sharman wrote, the leg­is­la­tion that sparked the “unusu­al com­mit­ment to the cause of fight­ing inter­na­tion­al cor­rup­tion” on the part of the United States. But it only crim­i­nal­ized the bribe-sup­pli­er, rather than the bribe-deman­der. 

Now, those on the receiv­ing end of graft may have to begin look­ing over their shoul­ders as well. In August, a bipar­ti­san group of leg­is­la­tors intro­duced the Foreign Extortion Prevention Act (FEPA), aimed specif­i­cal­ly at crim­i­nal­iz­ing the entire­ty of the bribery loop. “Currently, a busi­ness being extort­ed for a bribe can only say ‘I can’t pay you a bribe because it is ille­gal and I might get arrest­ed,’” Rep. John Curtis (R‑UT), one of the bill’s co-spon­sors, said in a state­ment. “This long-over­due bill would enable them to add, ‘…and so will you.’” 

To be sure, hold­ing peo­ple like the for­mer President of Kazakhstan to account when he demands bribes from American com­pa­nies is a steep hill to climb. But even if the for­eign offi­cial extort­ing a U.S.-based com­pa­ny nev­er sees the inte­ri­or of an American court­room, an indict­ment would lay out fur­ther evi­dence for oth­er poten­tial reme­dies, such as sanc­tions. (A sim­i­lar line of log­ic is at play in the pro­posed Rodchenkov Act, which would crim­i­nal­ize par­tic­i­pa­tion in state-spon­sored dop­ing regimes of the kind for which Russia recent­ly received sanc­tion.) “Even if a klep­to­crat can­not be imme­di­ate­ly extra­dit­ed, a U.S. indict­ment serves as a play-by-play of the crime com­mit­ted that can be used to sup­port addi­tion­al measures—such as sanctions—and can force transna­tion­al crim­i­nals to think twice before trav­el­ing abroad to spend their ill-got­ten gains,” said Rep. Richard Hudson (R‑NC), anoth­er of the bill’s co-spon­sors.

That indict­ment would also serve as pub­lic notice of the official’s cor­rupt proclivities—a real­i­ty that anoth­er bill, the Kleptocrat Exposure Act, would also high­light. If passed, that leg­is­la­tion would allow the State Department to pub­licly reveal which for­eign offi­cials (and which mem­bers of their fam­i­lies) had been barred from the United States on account of cor­rup­tion. As with the oth­er bills at hand, this one is bipar­ti­san, spon­sored by Representatives Steve Cohen (D‑TN) and Steve Chabot (R‑OH). “Global crim­i­nals and cor­rupt autocrats—or kleptocrats—seek to spend their ill-got­ten gains in the United States, where they can indulge in lux­u­ry, pur­sue posi­tions of influ­ence, and exploit the rule of law, which pro­tects their stolen wealth,” said Cohen. “Our coun­try should not be a shel­ter for these cor­rupt indi­vid­u­als.”

Another arrow in the expand­ing leg­isla­tive quiver, the Countering Russian and Other Overseas Kleptocracy (CROOK) Act, would take anti-cor­rup­tion efforts abroad. If passed, the CROOK Act would cre­ate a brand new anti-cor­rup­tion fund, over­seen by the State Department and direct­ed toward coun­tries under­go­ing demo­c­ra­t­ic tran­si­tions (such as Moldova a few months ago, or Ukraine in the after­math of the 2014 EuroMaidan Revolution). The fund would use some 5 per­cent of the fines levied under the FCPA—good, pre­sum­ably, for mil­lions of dol­lars annually—while also set­ting up anti-cor­rup­tion points of con­tact in American embassies. Back in Washington, the CROOK Act would also set up an inter­a­gency task­force focused on direct­ing relat­ed American anti-cor­rup­tion efforts—effectively set­ting up some­thing of a first respon­der sys­tem for erad­i­cat­ing cor­rupt net­works abroad.  

Plenty of oth­er bills round out America’s sud­den sprint toward trans­paren­cy, from those bar­ring visas for offi­cials demand­ing bribes from Americans to oth­ers incen­tiviz­ing whistle­blow­ers with insight into the kinds of klep­to­crat­ic net­works degrad­ing democ­ra­cy else­where. None of the afore­men­tioned bills have yet become law, and their suc­cess isn’t assured. But there’s a rea­son so much opti­mism con­tin­ues to swirl in the world of anti-klep­toc­ra­cy efforts.  

For instance, many, if not all, of these bills have come with bipar­ti­san back­ing. In an era of par­ti­san ran­cor, thwart­ing klep­to­crat­ic net­works remains a bipar­ti­san goal. Much as increas­ing sanc­tions regimes on Russian actors com­mands near-unan­i­mous sup­port among leg­is­la­tors, the anti-klep­toc­ra­cy bills in motion have found a deep well of sup­port on both sides of the polit­i­cal spec­trum. That breadth of sup­port stems from the con­scious efforts of those push­ing the legislation—especially the Helsinki Commission, which is com­prised of an equal num­ber of Republican and Democratic leg­is­la­tors. 

But the sense that the dam has bro­ken when it comes to long-stalled anti-klep­toc­ra­cy efforts isn’t lim­it­ed to Congress. The cur­rent Administration, for instance, has expand­ed FinCEN’s Geographic Targeting Orders (GTO), a pro­gram aimed at iden­ti­fy­ing those behind anony­mous real estate pur­chas­es in a num­ber of American locales. And con­tenders for the 2020 pres­i­den­tial elec­tion have begun plac­ing anti-cor­rup­tion poli­cies front and cen­ter in their cam­paigns. Former Vice President Joe Biden has called for an end to anony­mous shell com­pa­nies, while Senator Bernie Sanders (I‑VT) has already announced that he would back leg­is­la­tion like the Foreign Extortion Prevention Act. Senator Elizabeth Warren (D‑MA) has like­wise pledged to “crack down on tax havens” and called for increased “trans­paren­cy about the move­ment of assets across bor­ders.” 

All told, America still remains a—perhaps the—major hub for all and sundry look­ing to con­ceal their ill-got­ten wealth. Not only does it remain eas­i­er to set up an anony­mous shell com­pa­ny in the United States than it is to get a library card, but any num­ber of investments—from hedge funds to real estate—remain exempt from even basic anti-mon­ey laun­der­ing due dili­gence. A litany of issues con­tin­ues to plague efforts to com­bat America’s role in facil­i­tat­ing klep­toc­ra­cy, and the bills above shouldn’t be con­sid­ered a panacea.

But they are, tak­en togeth­er, a remark­able step forward—and a sign that anti-klep­toc­ra­cy efforts are no longer rel­e­gat­ed to a small num­ber of aca­d­e­mics and activists try­ing to sound alarms. We haven’t crossed the fin­ish line yet, but it’s there, in sight. And with the pas­sage of the bills men­tioned above, the United States can put an end to its role as a glob­al bas­tion of klep­to­crat­ic anonymity—setting a mod­el for allies and send­ing a mes­sage to cor­rupt adver­saries every­where. Published on: August 28, 2019Casey Michel is an inves­tiga­tive reporter at ThinkProgress.

Author: CASEY MICHEL

Original arti­cle:  The American Interest 

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