To say that Western democracies have been put on the defensive in the past decade is an understatement. To future historians, it may seem shocking to what extent the terms of political debates in the world’s wealthiest, most powerful countries are being dictated by their much weaker adversaries.
The Russia- and Iran-led war in Syria unleashed a refugee wave that almost unraveled the European Union and certainly contributed to the result of the 2016 Brexit referendum in the United Kingdom. The crisis was brought to an end partly through the EU’s commitment to bribe the strongman in Ankara, Recep Tayyip Erdoğan, into keeping Syrian asylum-seekers in Turkey. On this side of the Atlantic, the United States is mired in a conversation about whether the duly elected president is a Russian asset. And a “beautiful” letter from North Korea’s leader is all it takes to reverse decades of U.S. government policy on North Korea’s nuclear program.
The degree of leverage exercised by nominally weaker actors reflects a striking lack of self-confidence—and imagination—among Western leaders and defenders of the post-war international order. True, our form of government and U.S.-led alliances have their flaws. Overall, however, they continue to function far better than their alternatives. Moreover, they make the West significantly more powerful than its adversaries.
The only path out of the current cycle of self-defeat in which “the best lack all conviction, while the worst are full of passionate intensity,” is through a positive agenda that would bring the fight to our enemies. Autocracies in all their forms are built around political patronage and by extension around channeling public resources away from legitimate uses, and into the pockets of the governing oligarchy and its cronies. In a world with mobile capital, Western democracies have no easy way of extricating themselves from such kleptocracy—stolen money finds its way into real estate markets in London and Miami, and eventually into our politics as well.
We are not talking peanuts. Since 1994, Russia has experienced net capital outflows of $750 billion. The money has flown to specific sectors, such as real estate, because of policies enacted in the West, such as the “17-year-long ‘temporary’ exemption from PATRIOT Act responsibilities gifted to realtors,” as my former AEI colleague Clay Fuller writes.
The result is partly the empowerment of kleptocrats at home—being able to hide their loot in the safety of Western financial centers makes their job much easier. But, worse yet, thanks to the globalization of finance, post-Soviet corruption is quickly becoming a problem of our own.
The reality of democratic politics in Western Europe and the United States—with mysterious loans to extremist parties and figures such as Lev Parnas and Igor Fruman—is starting to look eerily similar to intrigues endemic to the countries of Eastern Europe and Central Asia. “The politics that Ukraine has suffered through as a result of its conflict with Russia have become our politics as well,” observed Mitchell Orenstein.
It is time to strike back. As Fuller puts it, “transnational kleptocracy is the adversary, and America has non-violent, asymmetrical weapons it can use in the growing clash between democracy and authoritarianism.”
Already, federal orders in the United States require title companies in lucrative markets, such as New York City or Miami, to trace the ultimate owners of real estate worth over $300 thousand. But it would be far more effective to introduce common standards for everyone. Thanks to the Kleptocracy Initiative at the Hudson Institute, and to individuals of diverse intellectual and ideological backgrounds, there are some grounds for optimism about the future of anti-kleptocracy policies.
In the Senate, the bipartisan Illicit Cash Act has been introduced to modernize existing legislation around money laundering and the financing of terrorism, in part by strengthening the disclosure requirements for beneficial ownership—an area in which the United States lags far behind other developed economies. The current framework for fighting money laundering is grounded in legislation that can be traced back to the Bank Secrecy Act of 1970, adopted in an era of capital controls and relatively simple technologies for financial transacting. The Illicit Cash Act would create feedback mechanisms through which law enforcement could keep financial institutions and regulators updated about the type of information that is helpful in identifying illicit financial flows. It would also create legal avenues for information sharing between financial institutions themselves in order to better detect suspicious activities, including through the use of artificial intelligence.
In the House, there are a number of more modest yet nonetheless meaningful pieces of legislation with broad bipartisan backing. Resources for democracy and rule of law promotion are often tied up in multi-annual programs, which makes it difficult for policymakers to respond quickly to events like the downfall of Yanukovych’s regime in Ukraine. The Countering Russian and Other Kleptocracy (CROOK) Act would create a rapid-response fund from part of the fines collected from U.S. businesses under the Foreign Corrupt Practices Act of 1977. The Foreign Extortion Prevention Act would criminalize bribery demands by foreign officials, as opposed to just penalizing U.S. companies, and the Kleptocrat Exposure Act would create a public database of individuals who have been denied a U.S. visa on suspicion of corruption or human rights abuses; the Protecting United States Business Interests Abroad Act would provide a new legal basis for visa bans against foreign persons who attempted to extort U.S. companies. Finally, the Justice for Victims of Kleptocracy Act would create a consolidated database of assets currently frozen by the U.S. government, presented as money “stolen from the people of country X—and recovered by the United States.”
It is striking—and encouraging—that these pieces of anti-kleptocracy legislation defy traditional partisan divides. If the current momentum is sustained and built on, fighting kleptocracy could be a new rallying point for the myriad of currently disconnected programs aimed at promoting democracy and the rule of law, many of them on intellectual and political autopilot since the mid-2000s.
“Graft and corruption are bad” is an effective, uncontroversial slogan that cuts across ideological divides. Reasonable people may disagree about how the problem should be tackled, but most would agree that there is a great deal of low-hanging fruit that would command support in both center-left and center-right circles—especially in the United States. What is more, an anti-kleptocracy agenda can help strengthen transatlantic cooperation at a time when finding common interests has been distinctly challenging.
With a new version of the Anti-Money Laundering (AML) Directive in place, policies in the European Union might seem significantly more advanced than in the United States. The fifth iteration of the Directive requires countries to set up consolidated databases of beneficial owners, thus cracking down on non-transparent shell companies commonly used in organized crime.
Due to the EU’s decentralized nature, its policies necessarily suffer from a degree of fragmentation, as the Hudson Institute’s and The American Interest’s own Ben Judah argued recently in Le Monde. In particular, the implementation and enforcement of anti-kleptocracy measures such as the AML Directive remain in the hands of member states. New anti-graft measures often interfere with national bank privacy regimes—and member states such as Luxemburg and Malta have not complied for years with the previous iterations of the Directive.
Both the arrival of a new European Commission and the policy conversations prompted by the ongoing impeachment of President Trump should be seized as opportunities. Not as opportunities for further partisan bickering and a deepening of political polarization, but for strengthening our democracies and hitting our adversaries where it hurts them the most—in their pocketbooks.