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.
