This year promises to be one of the most important in recent history in America’s fight against illicit financial flows, global corruption, and kleptocracy. The situation can’t get much worse, as the world is swimming in “illicit financial flows” or illicit money moving across borders, including the transfer and use of the proceeds of corruption and kleptocracy. In fact, U.S. Treasury Secretary Yellen said recently that the U.S. may be “the best place to hide and launder ill-gotten gains.” Estimates and definitions of these flows vary but are inarguably in the trillions of dollars every year. However, the tides are turning in 2022, as U.S. leaders act to turn off the hose and crack down on corruption. The FACT Coalition remains optimistic about the year ahead with our predictions for 2022:
- The White House implements its anti-corruption strategy. In December, President Biden launched the first of its kind, whole of government “U.S. Strategy on Countering Corruption.” Ambitious in scope but filled with concrete commitments, the much-needed strategy signals a high-level White House commitment to combatting illicit financial flows and corruption. To deliver on these hopes, the Biden White House must capitalize on upcoming leadership opportunities to forge a new foreign policy driven by anti-corruption and anti-kleptocracy concerns. Both in reshaping bilateral relations and engaging with global diplomatic dialogues– such as at the Summit of the Americas to be hosted by the U.S. this summer – the Biden White House must ensure the strategy is faithfully implemented and not a “flash in the pan” moment overtaken by events. A second Summit for Democracy planned for the end of 2022 will be an important “forcing moment” to deliver on commitments and for activists to hold the White House accountable.
- The U.S. Treasury action forcefully implements the Corporate Transparency Act to end anonymous shell companies. The landmark Corporate Transparency Act requires the identification of the true owners of anonymous shell companies to a secure directory housed at Treasury’s Financial Crimes Enforcement Network (FinCEN). We’re finally seeing draft regulations to implement this law, and we hope to see full implementation of the law by the end of 2022. No longer will the U.S. be the easiest place to set up an anonymous shell company, vehicles used by criminals and kleptocrats to hide stolen funds and evade taxes.
- FinCEN enacts regulations on tackling money laundering through real estate. As our coalition member Global Financial Integrity found last year, billions of dollars are being laundered through U.S. real estate. Luxury properties can often be “money laundromats on the 81st” floor, serving as favored means to stash illicit cash for everyone from dictators to drug kingpins. Again, the Biden administration has signaled its seriousness in combating this problem by launching a new regulatory process to create a regime to take on real estate-based money laundering in both residential and commercial real estate. FinCEN is seeking public comment to inform regulations we expect to see later this year.
- The White House develops a plan for plugging the private investment money laundering loophole. The $11 trillion private investment industry is huge, opaque, complex – and, since many private investment entities lack anti-money obligations, poses a key money laundering risk for the U.S. financial system, our national security and ordinary Americans. Our December report produced with Transparency International and Global Financial Integrity – “Private Investments, Public Harms” – documented a variety of concrete cases in which private equity and hedge funds were used for illicit purposes. A week later, the U.S. anti-corrupt strategy said the Treasury Department “will re-examine the 2015 Notice of Proposed Rule Making (NPRM) that would prescribe minimum standards for anti-money laundering programs and suspicious activity reporting requirements for certain investment advisors.” We’ll be watching closely and advocating for an end to money laundering through private investment vehicles.
- Climate and anti-corruption activists forge mutually beneficial advocacy alliances. Amid growing awareness of the link between climate and corruption, this year may see new momentum and new constituencies engaged in the fight against transnational corruption and illicit financial flows. The proceeds of crimes that harm the environment and undermine the fight against climate change – think illegal logging or mining – can find their way into the U.S. and other financial systems using money laundering strategies. Anonymous shell companies in the U.S. and other jurisdictions can serve as “getaway vehicles” for these crimes. As governments start to provide more money to address climate adaptation and mitigation needs, the risk increases that funds could be stolen and join the vast rivers of illicit finance. Important actors, such as the U.S. Treasury’s FinCEN, the global Financial Action Task Force, conservation groups, and others are starting to pay attention.
- New global alliances drive transatlantic parliamentary cooperation. New “cross-party” coalitions of parliamentarians committed to combating corruption and kleptocracy are springing up on both sides of the Atlantic, signaling the potential impact of greater transnational cooperation among lawmakers to fight illicit financial flows. In the U.S., the Caucus Against Foreign Corruption and Kleptocracy launched last year and has added an important bipartisan voice to policy debates. These lawmakers have joined an ”Interparliamentary Alliance Against Kleptocracy”, engaging lawmakers in the European Union, U.K., and the U.S. to “disable transnational corrupt networks while deterring the movement of dirty money into democracies.” Having already concluded its first meeting this January, the network has enormous potential to play a leadership role in providing governments with enforcement resources, oversight, and new legislative tools.
- Congress delivers on important tools for cracking down on kleptocrats and their cronies. The expansion of so-called “Magnitsky” legal regimes to sanction corrupt actors and human rights abuses picked up pace in 2021, with Australia joining the U.S., Canada, U.K., and E.U. in creating this powerful tool. Sadly, the long list of unpunished kleptocrats will provide many opportunities for greater coordination these jurisdictions in 2022. Likewise, as the U.S. Global Magnitsky Act faces a reauthorization this year, Congress must ensure to deliver the administration the tools to continue cracking down on corrupt officials and human rights abusers. Recent crises in Kazakhstan and countless other countries beset by grand corruption highlight the need for more nimble use of these tools to respond to kleptocrats the world over.
There are numerous powerful and wealthy forces arrayed against these optimistic scenarios. The illegal and shadowy illicit global economy is an affront to the rule of law and threatens democracies around the world. U.S. leadership must stand strong in the fight against financial crimes and global corruption.
For over a decade the FACT Coalition has been fighting to curb the U.S.’s role in facilitating and enabling financial crimes. Last year we contributed to enormous progress in both addressing the problem through policy reforms and recognizing that the U.S. is a favored destination to park the proceeds of criminal activity. In 2022, our 100-plus members of the FACT Coalition will be working harder than ever to ensure that the tangible promises we see at the outset of this year are fulfilled.