How to Make Kleptocrats Fear America Again

Joe Biden might be the per­fect pres­i­dent to restore America’s stand­ing as a cham­pi­on against for­eign corruption.

Four years ago, the United States was wide­ly viewed as the tow­er­ing, swag­ger­ing leader of glob­al anti-cor­rup­tion efforts. While oth­er coun­tries strug­gled with mon­ey-laun­der­ing banks and cor­rupt oli­garchs bent on plac­ing prof­its above patri­o­tism, the U.S. enact­ed pol­i­cy after pol­i­cy to cre­ate the most full-throat­ed anti-cor­rup­tion regime in the entire world. 

That regime now lies in sham­bles, col­lapsed with­in the larg­er detri­tus of Donald Trump’s pres­i­den­cy. All of the facets of America’s broad­er pro-trans­paren­cy rep­u­ta­tion stand wrecked by Trump’s mis­rule and through his effort to open the U.S. to any and all with a bit of dirty mon­ey burn­ing holes in their pock­ets. The good news, though, is that the U.S. has been here before, decades ago, when it strug­gled to slough off the lega­cy of the most cor­rupt pres­i­dent the coun­try had seen in a half-cen­tu­ry and suc­ceed­ed in launch­ing an unprece­dent­ed anti-cor­rup­tion reform as a result. And this time around, there’s an incom­ing pres­i­dent who—despite his his­to­ry, despite his provenance—may be per­fect­ly placed to rebuild America’s crum­bled anti-cor­rup­tion platform. 

It’s impor­tant to come to grips with the task President-elect Joe Biden faces and the extent to which Trump demol­ished our rep­u­ta­tion for anti-cor­rup­tion lead­er­ship, and how swift­ly he brought it low. Consider the Foreign Corrupt Practices Act, which explic­it­ly bars Americans and American com­pa­nies from brib­ing for­eign offi­cials and for­eign entities—the undis­put­ed linch­pin of America’s anti-cor­rup­tion play­book. Trump came into office hav­ing already pub­licly declared the FCPA a “hor­ri­ble law.” Almost imme­di­ate­ly, he set about try­ing to dis­man­tle it, along with our entire suite of pro­grams that crim­i­nal­ize for­eign bribery. (This was per­haps pre­dictable, giv­en the like­li­hood that he par­tic­i­pat­ed in sim­i­lar schemes in noto­ri­ous­ly cor­rupt places like Azerbaijan.)

As we recent­ly learned, in the spring of 2017, Trump told Secretary of State Rex Tillerson that he want­ed the FCPA scrapped entire­ly: “I need you to get rid of that law.” Trump then ordered arch-nativist Stephen Miller to author an exec­u­tive order to that effect, vir­tu­al­ly evis­cer­at­ing America’s pro-trans­paren­cy bona fides right at the out­set of his presidency. 

Thanks to both the reg­u­la­to­ry struc­ture and broad bipar­ti­san sup­port the FCPA still enjoys, Trump’s efforts went nowhere. But the move was a clear shot across the bow of America’s anti-cor­rup­tion stand­ing that only fore­shad­owed a thou­sand more cuts to come. And while the FCPA remained in force, the total num­ber of relat­ed enforce­ment actions declined sub­stan­tial­ly under Trump. As anti-cor­rup­tion expert Alexandra Wrage recent­ly not­ed, “The [FCPA] pipeline is thin­ning out dramatically.” 

Around the time Trump was try­ing to get some­one to rid him of this med­dle­some FCPA, the pres­i­dent found oth­er avenues to press his anti-anti-cor­rup­tion efforts. In ear­ly 2017, he signed a for­mal repeal of an American com­mit­ment to dis­close pay­ments from oil and gas com­pa­nies to for­eign offi­cials. The pre­vi­ous regulations—“a bea­con of U.S. lead­er­ship in the glob­al fight against oil and min­ing cor­rup­tion,” as Global Witness wrote—had inspired law­mak­ers in Canada, Norway, and the European Union to pass sim­i­lar leg­is­la­tion in a broad-based effort to clean up the most noto­ri­ous­ly cor­rupt indus­try in the world. Trump’s pen snuffed out that bea­con. His deci­sion, Oxfam said, was “a hand­out for klep­to­crats … [that] plays into the hands of cor­rupt politi­cians, com­pro­mised bureau­crats, and insid­er lob­by­ists who thrive on secrecy.”

The blows kept com­ing. Trump’s pro-cor­rup­tion push result­ed in a deci­sion to pull the U.S. back from the Extractive Industries Transparency Initiative, or EITI, the seminal—and pre­vi­ous­ly American-led—multinational group ded­i­cat­ed to clean­ing up the entire extrac­tive sec­tor. “We’re walk­ing away from some­thing we’ve been telling oth­er coun­tries to do for years,” one anti-cor­rup­tion activist said.

Even some of the Trump administration’s pub­lic nods to anti-cor­rup­tion efforts—he had to at least look like he was fight­ing cor­rup­tion, for appearance’s sake—fell far short of their poten­tial. For instance, while the Trump admin­is­tra­tion ini­tial­ly expand­ed a suc­cess­ful Obama-era pro­gram to tar­get anony­mous real estate pur­chas­es in select cities in the U.S., the expan­sion stopped in 2018. That meant 98 per­cent of the country’s real estate remains per­fect­ly open to any and all look­ing to laun­der their ill-got­ten gains, even in major cities like Houston, Phoenix, and Philadelphia. 

Not that any of this was espe­cial­ly sur­pris­ing. Trump had spent his pre–White House years rolling through bil­lions in dirty mon­ey, his busi­ness­es soak­ing up a stag­ger­ing $1.5 bil­lion from clients who fit basic mon­ey-laun­der­ing pro­files. This was a pres­i­dent who’d spent years per­fect­ing the art of sup­ply­ing per­fect­ly anony­mous mon­ey-laun­der­ing vehicles—anonymous real estate sales to any and all shell com­pa­nies that came knocking—for klep­to­crats around the world.

Trump threw down the wel­come mat to any­one look­ing to aid his pres­i­den­tial prof­i­teer­ing. There were the for­eign offi­cials—includ­ing those specif­i­cal­ly cit­edby the U.S. Congress for their gob­s­mack­ing cor­rup­tion—patron­iz­ing Trump’s hotels and build­ings, buoy­ing a Trump Organization will­ing to house klep­to­cratssoaked in blood mon­ey. There were the for­eign finances direct­ed toward Trump that tilt­ed American poli­cies in ways we’ve only just begun to learn. And there was Trump’s will­ing­ness to turn to those self­same klep­to­crats and crooked oli­garchs for “dirt,” real or imag­ined, on his polit­i­cal oppo­nents, which could be had in return for the lift­ing of American investigations. 

On and on and on, Trump bat­tered America’s stur­dy anti-cor­rup­tion lega­cy. In its stead, he craft­ed a per­ver­sion of what he’d inher­it­ed as pres­i­dent, erect­ing the most cor­rupt pres­i­den­tial lega­cy since Warren Harding and Teapot Dome, and leav­ing behind an Augean stables–size mess for the rest of us to clean up. 

The U.S. can ill afford to allow its list­ing, lurch­ing anti-cor­rup­tion poli­cies and rep­u­ta­tion to con­tin­ue. Perhaps for­tu­nate­ly, these are waters out of which the coun­try has nav­i­gat­ed in the recent past. Shortly after Richard Nixon—a man who, like Trump, main­tained secret off­shore accounts and glad­ly accept­ed dirty for­eign mon­ey—resigned the pres­i­den­cy in 1974, leg­is­la­tors in Washington began explor­ing just how deep the rot of post-Watergate cor­rup­tion ran. Specifically, they exam­ined a phe­nom­e­non that, for years, had embod­ied the kind of back­room, greased-palm deal­ings that summed up Nixonian America all too well: American com­pa­nies brib­ing for­eign offi­cials, with all the putrid prof­i­teer­ing along the way.

Even in those post-Watergate days, the find­ings were scan­dalous. As one Securities and Exchange Commission inves­ti­ga­tion dis­cov­ered, over 20 per­cent of America’s largest com­pa­nies were deeply enmeshed in the webs of for­eign bribery. These American com­pa­nies revealed that they’d paid over $1 bil­lion, in mod­ern dol­lars, to bribe a range of clien­tele: from for­eign gov­ern­ment offi­cials to inter­na­tion­al oli­garchs and end­less shady enti­ties in between, all promis­ing feal­ty to American man­u­fac­tur­ers and busi­ness­es in exchange for a bit of the lucre.

Legislators in Washington had uncov­ered a canyon-wide hole in America’s anti-cor­rup­tion regime which, thanks to years of easy mon­ey and look-the-oth­er-way pay­offs, had been allowed to widen with few ques­tions asked. It’s almost ludi­crous to think this was ever the case, but there were no fed­er­al pro­hi­bi­tions on American com­pa­nies brib­ing part­ners abroad. In fact, there wasn’t even a mod­el for cor­rec­tive leg­is­la­tion. No oth­er nations had banned such activ­i­ty; some, such as France, explic­it­ly trans­formed for­eign bribery into a tax write-off. 

But amid the push for good gov­ern­ment and pro-trans­paren­cy reforms in post-Nixon Washington, leg­is­la­tors and anti-bribery activists real­ized they had the wind at their sails. Despite com­plaints from American com­pa­nies like Lockheed Martin and Northrop Grumman that ban­ning for­eign bribery would be bad for busi­ness and place American indus­try at a dis­ad­van­tage, Congress in 1977 passed the FCPA, which marked for­eign bribery as a crime.

Signed into law by Jimmy Carter, the FCPA was a tidal shift in the glob­al approach to coun­ter­ing cor­rup­tion, both domes­tic and inter­na­tion­al; as David Montero wrote, it was “ground­break­ing leg­is­la­tion that … sought to change how cap­i­tal­ism and polit­i­cal affairs were con­duct­ed around the world.” After decades of cor­po­ra­tions freely glad-hand­ing with crooked despots and their cronies, American com­pa­nies were sud­den­ly banned from such prac­tices. ­“For the first time, a coun­try made it crim­i­nal to cor­rupt the offi­cials of anoth­er coun­try,” author John Noonan added

But it wasn’t sim­ply that American com­pa­nies, nor any com­pa­ny trad­ing on a U.S. stock exchange, sud­den­ly stood liable for bribery. The U.S. had, in many ways, plant­ed its claim to a new title. Just as Nixon exit­ed the stage, the U.S. trans­formed into the world’s lead­ing anti-cor­rup­tion juris­dic­tion, will­ing to toss its weight against crooked and cor­rupt actors and net­works abroad, those who gouged com­pa­nies, those who gut­ted democ­ra­cies, those who gar­rot­ed entire pop­u­la­tions along the way. The U.S. suc­cess­ful­ly pres­sured allies to pass sim­i­lar leg­is­la­tion and pro­hi­bi­tions upon the hap­py-go-lucky bribery sys­tems that had exist­ed for decades. By the turn of the cen­tu­ry, thanks to American lead­er­ship, for­eign bribery had become anath­e­ma to much of the world. 

The explo­sion of anti-cor­rup­tion efforts that fol­lowed Nixon’s exit per­sist­ed as a heart­beat in pol­i­cy­mak­ing in the years that fol­lowed. American banks, fol­low­ing post‑9/11 hear­ings and the pas­sage of the 2002 Patriot Act, set the prece­dent for anti-mon­ey-laun­der­ing checks in the finan­cial sec­tor. American leg­is­la­tors, thanks to the 2010 Dodd-Frank Act, cod­i­fied new trans­paren­cy require­ments in the wicked­ly cor­rupt oil and gas sec­tor. American offi­cials over­saw the cre­ation of spe­cif­ic sanc­tions regimes to tar­get klep­to­crats and crooked oli­garchs; a pio­neer­ing tax-shar­ing arrange­ment that cracked open the world of Swiss bank­ing secre­cy; and a suc­cess­ful pilot pro­gram elim­i­nat­ing mon­ey laun­der­ing in the real estate sec­tor. The Department of Justice alone led the world in every­thing from seiz­ing crooked offi­cials’ assets to crack­ing down on mon­ey-laun­der­ing banks abroad

Time and again, the U.S. stood at the fore of the cre­ation and dis­sem­i­na­tion of anti-cor­rup­tion process­es and pro­grams. From the incep­tion of the FCPA to the mid-2010s, the U.S. staked a clear claim to glob­al lead­er­ship, and a decades-long lega­cy, in the anti-cor­rup­tion sector—as a shin­ing city on a hill for all seek­ing to imple­ment anti-cor­rup­tion pro­grams of their own.

And then, in 2016, Americans elect­ed Donald Trump to the pres­i­den­cy, who quick­ly demon­strat­ed that the entire­ty of this regime was, all this while, frag­ile enough to top­ple at the whims of a pres­i­dent with the mind to do so and to take down our rep­u­ta­tion as a bas­tion against for­eign cor­rup­tion with it. If there’s a les­son to be learned from this half-cen­tu­ry of expe­ri­ence, it’s that a renewed com­mit­ment to anti-cor­rup­tion poli­cies can actu­al­ly be ramped up quick­ly, but it must be more strong­ly under­gird­ed than it was before. 

Thankfully, this is one area to which the incom­ing admin­is­tra­tion is ready, will­ing, and able to apply its “Build Back Better” cre­do and right the bat­tered ship of American anti-cor­rup­tion efforts. Biden has pledged to return America to the fore of glob­al demo­c­ra­t­ic efforts, and his incom­ing admin­is­tra­tion has laid out a clear slate of anti-klep­toc­ra­cy poli­cies that will restore the U.S. to a glob­al lead­er­ship position—and even bring a range of inno­va­tion into the stale world of com­bat­ing cor­rup­tion, bribery, and dirty mon­ey writ large. 

As he out­lined in a piece in Foreign Affairs, fol­low­ing the elec­tion, Biden will specif­i­cal­ly sin­gle out cor­rup­tion as a core pol­i­cy through line for his admin­is­tra­tion, issu­ing “a pres­i­den­tial pol­i­cy direc­tive that estab­lish­es com­bat­ing cor­rup­tion as a core nation­al secu­ri­ty inter­est.” To that end, he announced he will specif­i­cal­ly tar­get illic­it tax havens—hopefully includ­ing those in the U.S., like his home state of Delaware—and expand American efforts to go after stolen and laun­dered assets. Structurally, Biden announced he’ll cre­ate a new fed­er­al agency, the Commission on Federal Ethics, which will not only ensure “vig­or­ous and uni­fied enforce­ment” of anti-cor­rup­tion laws but will fur­ther be empow­ered to issue (and enforce) sub­poe­nas and “refer mat­ters for crim­i­nal inves­ti­ga­tion to the DOJ.” Internationally, Biden’s already sin­gled out “weaponized corruption”—the kind that allows klep­to­crat­ic regimes to entrench, expand, and enhance malign efforts abroad—as a “non­tra­di­tion­al threat,” one that NATO mem­ber-states must reform in order to han­dle and unwind. 

Biden’s post­elec­tion mis­sive fol­lows his ear­li­er com­mit­ments and rein­forces the con­sen­sus that his com­ing admin­is­tra­tion will attempt to repair the bus-size breach left in Trump’s wake. He’s already pledged to ban lob­by­ists for klep­to­crat­ic regimes, and pushed for an end to anony­mous shell com­pa­ny for­ma­tion in the U.S. He and his advis­ers are keen­ly aware of the ongo­ing nation­al and elec­toral secu­ri­ty threats that transna­tion­al mon­ey laun­der­ing pos­es to our inter­ests. (Which is hard­ly sur­pris­ing, giv­en that Trump turned to post-Soviet oli­garchs immersed in filthy mon­ey to try to drum up the “dirt” he need­ed on Biden.) 

But Biden and his incom­ing admin­is­tra­tion have every rea­son to go further—and, like those leg­is­la­tors four decades ago, cre­ate an entire­ly new par­a­digm for how to build up America’s anti-cor­rup­tion anti­bod­ies. For instance, the Biden admin­is­tra­tion can lend its weight to any num­ber of the anti-klep­toc­ra­cy bills still strug­gling in Congress: mea­sures that will help the U.S. seize ill-got­ten assets, trans­form American embassies abroad into anti-cor­rup­tion bas­tions, and pub­li­cize all those per­sons who have been explic­it­ly banned from the U.S. on account of their rank cor­rup­tion. There’s even one bipar­ti­san bill, the Foreign Extortion Prevention Act, that will crim­i­nal­ize those who demand bribes of any Americans, explic­it­ly clos­ing the loop the FCPA began all those years ago. 

Nor should a Biden admin­is­tra­tion stop there. Thanks to “tem­po­rary” exemp­tions on the books since the ear­ly 2000s, American escrow agents, hedge fund man­agers, and pri­vate equi­ty firms can all dodge basic anti-mon­ey-laun­der­ing and anti-klep­toc­ra­cy require­ments. The excep­tions allow malign for­eign actors to laun­der mil­lions of dol­lars through these indus­tries with­out run­ning afoul of the law, while these intermediaries—much like the American real estate indus­try before them—gorge on heap­ing help­ings of dirty money. 

The Biden admin­is­tra­tion should remove these exemp­tions, full stop. There’s no rea­son these tril­lion-dol­lar indus­tries shouldn’t be sub­ject to basic anti-mon­ey-laun­der­ing requirements—especially now that the FBI has explic­it­ly labeled them as klep­to­crat­ic threats that under­mine glob­al democ­ra­ti­za­tion efforts. Such reg­u­la­tions would be no dif­fer­ent from those to which American banks are subjected—regulations that not only helped cleanse the bank­ing sec­tor of for­eign cor­rup­tion but that, as we can plain­ly see, have hard­ly impinged their growth. (Though the reg­u­la­to­ry body over­see­ing American banks’ anti-mon­ey-laun­der­ing pro­ce­dures should be sig­nif­i­cant­ly beefed up, as well.)

That also goes for anti-mon­ey-laun­der­ing pro­grams for two oth­er mar­kets favored by glob­al klep­to­crats. First, there are anony­mous American trusts, which states like South Dakota sell by the bil­lion-dol­lar boat­load, allow­ing purchasers—including Chinese oli­garchs, who’ve recent­ly begun flock­ing to the state—to remain anony­mous in per­pe­tu­ity. Second, there are anony­mous American art ven­dors and auc­tion hous­es, which have both spent decades allow­ing sanc­tioned oli­garchs and bru­tal despots to laun­der their funds, again anony­mous­ly, build­ing up war chests of price­less art and celebri­ty mem­o­ra­bil­iaalong the way.

Finally, there are anony­mous shell com­pa­nies, the beloved tools of finan­cial crim­i­nals and crooked fig­ures around the world. America has act­ed as a glob­al geyser for these shell com­pa­nies, an Old Faithful of anonymi­ty, with states like Delaware and Nevada and Wyoming spray­ing the world with anony­mous tools that serve no pur­pose oth­er than mon­ey laun­der­ing. Thankfully, the days of anony­mous American shell com­pa­nies appear num­bered, but that doesn’t mean the U.S. can’t take the glob­al lead in fight­ing to end these tools else­where, espe­cial­ly in places like Dubai, Mauritius, and the Seychelles or the Caribbean. 

Indeed, if the post-Watergate era saw ener­gy direct­ed against bribery both for­eign and domes­tic, and the post‑9/11 era saw efforts direct­ed at clean­ing up the bank­ing sec­tor, the post-Trump era has its clear antag­o­nist: anonymi­ty, espe­cial­ly of the American vari­ant. Anonymity in real estate, anonymi­ty in hedge funds, anonymi­ty in shell com­pa­nies, anonymi­ty in per­pet­u­al trusts, anonymi­ty in high-end art: anonymi­ty all around, all in order to laun­der dirty mon­ey, hide assets, pay off cronies, entrench bloody regimes, and keep the entire engine of glob­al cor­rup­tion purring right along. 

Anonymity, it goes with­out say­ing, remains the kleptocrat’s favorite tool—their asym­met­ric advan­tage. Which means that trans­paren­cy is the best weapon in the American arse­nal. And an incom­ing Biden admin­is­tra­tion that already plans to restore the country’s anti-cor­rup­tion bona fides needs only to take a few log­i­cal next steps to tar­get that anonymi­ty across the board and ush­er in a new gold­en age of trans­paren­cy and integrity. 

As with so many parts of our civic fab­ric that Trump spent years unrav­el­ing, it won’t be enough to sim­ply return to the sta­tus quo ante. His unruly admin­is­tra­tion revealed cracks that need more than mere patch­ing to be stur­dy and whole. It was from the wild world of klep­to­crats that Trump emerged: those sup­ply-side indus­tries of mod­ern cor­rup­tion, those ven­dors and prof­i­teers sell­ing anony­mous tools to all the grifters look­ing to laun­der their ill-got­ten gains. Absent these afore­men­tioned reforms, it will be from that world that the next Trump emerges. Should such a per­son ever come to pow­er again, one can rea­son­ably wager that they’ll not just smoth­er American anti-cor­rup­tion efforts, they’ll also make sure there will be no sec­ond chance to rebuild what’s lost.

Casey Michel, NewPublic.Com

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