Ben Judah, for TAI: Hello and welcome. My name’s Ben Judah, and it’s a pleasure to be joined here today by Senator Sheldon Whitehouse from Rhode Island. Today we’re going to be talking about one of the most pressing issues in the international system, which is the role of offshore finance, and its link to corruption, national security threats, development, and American foreign policy. Thank you, Senator, for joining us here today.
Senator Whitehouse: Great to be with you, Ben. Thank you for having me.
Ben Judah: My first question is: How did you come to realize the threat posed by corruption in offshore finance to the United States?
Senator Whitehouse: Well, I’m the son, grandson, nephew, and cousin of Foreign Service Officers. And, growing up as the son of a Foreign Service Officer, to put it mildly, we were not on the champagne circuit. So I spent time in a lot of places that were really, really burdened by corruption.
And then just as a lawyer and as a prosecutor, I saw the dangers of money laundering and of support for criminal activity. And of course on the Intelligence Committee—where I was when I started in my Senate career—you begin to see these pieces connect more and more as you deal with crooked oligarchs and so forth. So to me, the extent to which offshore money laundering and secret accounts support criminality, terrorism, kleptocracy, and just generally evil in the world, is really pretty profound.
And then there’s the fact that, just as the rest of the world is beginning to tighten up a little bit, the United States is becoming like the mega Cayman Islands of all of this. It’s just embarrassing to be a country that has not cleaned up its act. So it’s a double whammy; it’s not just embarrassing, it’s also—someday people are going to look around at their looted country and say, “Hey, where did all of our money go that could have been hospitals, and roads, and decent healthcare, and all of those things? Oh, it went over to America where their lawyers helped hide it.” That’s not a great look for the city on a hill.
Ben Judah: How important is offshore and this nexus of anonymous accounts, enablers, professionals, and secrecy jurisdictions to understanding the phenomenon that is the rise and rule of Donald Trump?
Senator Whitehouse: I think that it has a lot to do with the rise and rule of authoritarians, and the rise and rule of kleptocrats. We have enough secretive internal funding problems in the United States that that kind of puts Trump into a category of his own. So I prefer to look overseas for most of the harm here.
I think it’s really foundational. I mean, if you open a hole for the rats to run through, it’s very hard to know how many rats are going to run through it or, if you’re able to close it up, what that does to keeping the rats where they belong. But it’s very, very foundational. We do nothing but underestimate the damage and the harm of running this dark-money, kleptocracy-supporting offshore industry.
Ben Judah: How involved have American professionals been in creating the world of offshore finance? Could you explain that a little bit more for our viewers and readers?
Senator Whitehouse: Way, way too involved. Let me give you an example. The American Bar Association opposed our legislation to clean up shell corporations. They’ve got a money laundering section that supports it. They’ve got a banking section that supports it, but there are enough lawyers out there who do this nonsense that the American Bar Association opposed me. Now they’ve backed off a bit since then, but that was the first reaction.
You saw 60 Minutes go into lawyers’ offices in New York with a very obvious money laundering scheme, and only one of all of the lawyers they interviewed said, “Whoa, this looks like money laundering. I won’t do that.” You have banking, you have finance, you have yacht brokers, and real estate brokers. You have all sorts of American professionals who earn a very good living feeding off of this dark international economy. And we keep bumping into them when we try to clean it up.
Ben Judah: Given that American professionals have played such an important role in creating the world of offshore, how could a Democratic Administration begin to “de-create” that offshore nexus?
Senator Whitehouse: Well, even in a worst-case scenario, in which nobody cares about decency or what’s right any longer and politics is just a contest of marauding, conflicting interests, banks and other institutions have a pretty powerful interest in trying to protect against this stuff.
So there are forces at work in our favor as well. But ultimately I think it’s on us to make it clear to the public how important this is as a matter of international security, how important it is as a matter of American prestige, and how wrong it is to lend our name and my finances to the kind of behavior that is made possible by these offshore hidden accounts.
Ben Judah: What are the key bills and measures ready to be passed if Democrats win the Senate this November? Tell us a little bit about the bills that you’ve been supporting, especially linked to beneficial ownership.
Senator Whitehouse: We’re actually quite close, because the House version of our Beneficial Ownership Bill was passed in the National Defense Authorization Act, and we have bipartisan support in the Senate for my bill in judiciary. I’m not on the Banking Committee, there’s a similar bill in the banking committee that is banking committee jurisdiction; that too has bipartisan support. So as we close out the National Defense Authorization Act, there’s a very good chance that we’ll be able to resolve this and get that bill passed as a part of the National Defense Authorization Act.
Bravo to the House, to Carolyn Maloney, and to Tom Malinowski for fighting so hard to get that bill into the NDAA. And bravo to those senators who sent a quiet sign over there saying, “We would welcome you to do that. And we want to work with you to try to get this closed out.”
Ben Judah: What are the political risks that could scupper this in the weeks ahead?
Senator Whitehouse: There’s big money in this. There are people who make a fortune moving this money around, hiding it, setting up the corporations, providing investment advice. This is a very, very big economy. This is a multi-trillion dollar economy. It would be a fairly good sized country on its own if it just stood on its own and the world, this dark economy. And that’s only from what we know. It’s actually probably bigger than we actually know. So there are a lot of people who are depending on it, and people who depend on this kind of stuff are not above using dirty political tactics. That’s what we’ve got to look out for.
Ben Judah: What are the risks to our economy and democracy here in the United States if the world of offshore and anonymous shell corporations is not confronted?
Senator Whitehouse: It’s the same risk that has always been the case with human beings, which is that at a certain point, when you are treated unfairly enough, your anger and your resentments explode. Henry Kissinger once used a phrase to me in a conversation that I’ve never forgotten. He said that all of the great upheavals in human history have been caused by a confluence of resentments.
And for those of us who live well in a world that is, to us, very pleasurable, that supports a strong economy, that is fair, that allows us to vote and speak safely, have the luxuries of life—all of that is at risk if the resentments of the rest of the world explode so much that people are willing to do violence to the established order because they’re not being heard. We’re kind of at that phase. There are so many countries that have just been robbed.
Look at Equatorial Guinea. There’s a real beauty right there. The oil industry went in, pumped millions and millions and millions of dollars into corrupt funding of the family that runs that little otherwise nondescript country. And it doesn’t have decent roads. It doesn’t have decent hospitals. It doesn’t have decent healthcare. It doesn’t have decent anything, because the family just looted all the money. It all got scooped out in bribes to them and to their crooked administration. So there’s a place that’s a tinder box ready to go off from fury and resentment that the wealth of that country was stolen by the leaders of the country.
You can replicate that all over the world. That’s one particularly noxious example, but everywhere you go, where you find corruption and the kind of evil that builds that public resentment, you almost always find that those folks are using offshore accounts to hide their ill-gotten gains to cover their theft.
Ben Judah: What should the international movement to reform the financial system do to become more effective?
Senator Whitehouse: Well, it should insist on transparency. There should be no account where it’s impossible to figure out whose money is in that account. If you want to incorporate under names for business purposes, a lot of people will buy a property under the name of the address of the property, and set it up as Address, Inc. Those sorts of things are fine, but somebody, if pressed, needs to be able to go and hit the button on Address, Inc., and find out who the real owner is.
Because then law enforcement can try to connect the dots. Then if an honest administration comes to a looted country, they can go back and start to dig out the stolen assets, and try to restore them and recoup what was taken from their country. But if you don’t do that, you allow all of that bad behavior to take place, and of course you encourage criminals. And of course you encourage terrorists and other people who have to do their business in the dark shadows.
Ben Judah: How can the U.S., EU, and UK work together to tackle this blight?
Senator Whitehouse: I think we need to reinforce each other. You look at parts of London, nobody lived there because all of those fancy houses were actually big safe deposit boxes for crooks from elsewhere in the world who wanted an escape hatch and a place to hide their ill-gotten gains. But you could walk around, and there would be no cars on the street, no bodies.
There are neighborhoods in the U.S. where corner stores have been suffering because there’s actually nobody there. All of the apartments in the fancy buildings are basically giant safe deposit boxes for offshore crooks and criminals.
So we have to do this together. It’s a global problem. And I think it’s a place where, if we show a lot of common leadership, we’ll move a lot faster. There’s always the danger of the person who cheats getting the benefit of cheating. So we’ve got to make sure that there’s a rising tide of transparency that lifts all boats, and that anybody who tries to cheat doesn’t get any benefit from that; free riders you don’t want, to use the economic term.
Ben Judah: Bringing the conversation into the future, if Joe Biden wins in November, is there anything in his platform that you think could be really key to closing down the offshore system? What would you like to see him do in the first hundred days in office against offshore? And is there a particular vice presidential potential pick that he might have in mind that you think would be best placed to fight offshore finance?
Senator Whitehouse: I don’t, but I do think that when it comes to the Senate clearing his Treasury Secretary and his Secretary of State, we should insist that this issue have priority in both of their work. This should be something that the National Security Council has an entire operation to pursue, and run down, and discover. This is like having a toxin loose in the body, and it’s going to continue to poison the way that the world operates until we clean it up. And so I think it ought to be a diplomatic, financial, and national security priority for the next administration.
Ben Judah: Senator Sheldon Whitehouse, thank you for joining us today.
Senator Whitehouse: Great to be with you. Thank you for your outstanding work on this issue. You’ve shown lots of leadership, and particularly bipartisan leadership, which matters on an issue like this.