It’s time for the U.S. to get serious about tackling the secret financial flows that fund mercenary groups around the world.
In the wake of the Wagner Group’s revolt in Russia, and the reported death of its leader, Yevgeny Prigozhin, Wagner’s exploitative operations in Africa (and elsewhere) have increasingly been in the spotlight. As renewed media attention shines a light on how far Prigozhin’s operational and financial networks have reached, it is time for the U.S.—the world’s premiere supplier of financial secrecy—to be proactive in ensuring it has no role in facilitating the activities of groups like Wagner around the globe.
Notwithstanding U.S. stated commitments and sanctions policies, U.S. financial secrecy broadly continues to enable international money laundering and terrorism finance. As the world wonders what shape the Wagner Group will take in the wake of its leader’s death, a question for U.S. policy makers is how they might “Wagner-proof” our financial system from exploitation by Prigozhin’s posse, or from any number of bad actors following the same playbook of illicit finance.
Wagner in Africa: A Cautionary Tale
For the U.S. to achieve certain foreign policy objectives, including strengthening global democracy and mitigating the prevalence of mercenary actors like Wagner, it must look more closely at the role that illicit finance—including flows to the U.S.—have played in weakening institutions and fostering a breeding ground for Wagner-style influence. By taking a closer look at its own domestic anti-money laundering policies, the United States can make sure its policies are where its mouth is in its international commitments.
For instance, to woo authoritarian governments in Africa, the Kremlin has historically relied on Wagner not only to help African leaders siphon off wealth, but also to evade U.S. sanctions on Prigozhin and other Russian officials. In Sudan—the third largest supplier of gold on the continent—Wagner has allegedly utilized Meroe Gold, Ltd., a subsidiary of Russian company M-Invest, to move and launder gold off the continent. According to a report by investigative organization and FACT Coalition member, The Sentry, Wagner repeatedly used Sudan as a destination for precious metals before laundering their proceeds out of Africa.
Through these types of smuggling schemes, 90 percent of Sudanese gold leaves the nation without its citizens receiving any associated revenues. In exchange, Wagner has allegedly propped up the Sudanese government by running disinformation campaigns and providing military support in the nation’s ongoing war. Sudanese gold is transferred from mines to the UAE to be laundered and then, likely, to the Russian Federation, increasing the surplus of gold held by both the Kremlin and various Russian non-state actors, and potentially bankrolling the invasion of Ukraine.
The situation has escalated to the point that the U.S. State Department issued an advisory this summer stating that risks in “Sudan, the Central African Republic (CAR), Mali, and elsewhere in connection with the Wagner Group have made clear the need” for excess caution in supply chains. While this gold has directly bankrolled Wagner’s violent and suppressive activities, there’s another way in which this practice corrodes democracy abroad: by robbing state coffers of much-needed revenue.
Africa is at a crossroads in its development, owing both to numerous debt crises and the presence of foreign predatory actors on the continent. Between 2014 and 2021, Sub-Saharan Africa saw its sovereign debt rise from 35 to 60 percent of its GDP, highlighting the growing financial strain on the continent. Coupled with its collective debt, Africa suffers from persistent capital flight, with $88.6 billion in illicit financial flows leaving the continent each year. This weakens governance systems, undermines basic public service provisions, and leaves the continent vulnerable to the influence of non-state actors such as the Wagner Group.
Rhetoric by top U.S. officials, such as Secretary of State Antony Blinken, suggests a rejection of Russia’s growing influence—with Wagner as its vanguard—in the Global South, and the recent announcement by Treasury of additional sanctions on Wagner is welcome. U.S. sanctions alone are not enough, however, and the U.S. needs to strengthen its anti-money laundering (AML) policies to effectively ward off actors like Wagner and make sure that sanctioned funds do not find safe haven in U.S. markets. From 2015 to 2020 alone, Global Financial Integrity found evidence of money laundering through U.S. real estate totalling at least $2.3 billion: 13 percent of those laundered funds derived from Sub-Saharan Africa.
Cases like that of Equatorial Guinea President Teodoro Obiang Nguema Mbasogo only reinforce the need for reform. Obiang, a frequent abuser of human rights and the world’s longest-serving head of state, spent state funds on lavish residencies in the U.S., including a number of homes in Potomac, Maryland, a posh Washington D.C. suburb. Additionally, Obiang’s son, who is also EG’s Vice President, made extravagant purchases such as a mansion in Malibu, California with the help of California attorneys and real estate agents.
Such corruption and capital flight weakens states and makes them susceptible to influence from non-state actors like the Wagner group. Wagner operatives have been active in Malabo, EG, and Obiang’s son met with Wagner leaders in Moscow regarding potential partnerships as recently as 2021. Most concerning in EG are alleged Wagner-linked social media campaigns that attempt to attract Equatorial Guineans toward a pro-Russian stance and criticize media from nations critical of the Obiang administration, such as France. Wagner’s influence campaign has helped tighten Obiang’s grip on power, making it all the easier for him to siphon state funds and park them in assets and accounts around the globe—including, potentially, in the United States. Whether these illicit funds come directly from Wagner or from the dictators it backs, the United States must be on guard and well-equipped to prevent, detect, and flag potential cases of kleptocracy and illicit finance.
And the risks are drawing nearer: as detailed in leaked Pentagon documents, it’s apparent that Wagner has had interest in positioning itself closer to the U.S. through operations in Haiti, facilitating its laundering and influence playbook in North America. Wagner is currently sanctioned by Treasury, but weaknesses in U.S. anti-money laundering policies still leave the door open for illicit Wagner finances to be stashed in the U.S. financial system through real estate or anonymous shell companies, the latter of which Wagner has relied upon for its operations elsewhere. Prigozhin’s presence in Africa in the days leading up to his death suggests that Wagner’s influence in Africa may continue, whether under its traditional organizational structure or under more formal Russian state control.
The U.S. has to reckon with its own illicit finance rules to make sure that its foreign aid and investment benefits the people it aims to support, instead of lining the pockets of kleptocracies and mercenaries. The U.S. has stated publicly that it supports Africa’s development, and the current administration has committed $55 billion in aid to the continent from 2023 to 2025. However, U.S. domestic anti-money laundering reforms are critical to ensuring that this aid is not diverted and rerouted illicitly back into the U.S. through state corruption. Until that happens, actors like Obiang and Wagner still have a blueprint for hiding their ill-gotten gains inside the U.S.
In other words, until the U.S. becomes “Wagner-Proof” via AML reforms, the risk of allowing dark money to enter U.S. financial markets from corrupt African leaders and malicious non-state actors remains.
A “Prigozhin Prophylactic”
To make U.S. systems Wagner-proof, Treasury first needs to robustly implement the Corporate Transparency Act, the landmark anti-corruption reform that would require certain entities formed or registered in the U.S. to name their true, “beneficial” owner to a directory at the Financial Crimes Enforcement Network (FinCEN). With billions in illicit financial flows entering the country each year, urgent action is needed: the implementation of this registry must not be allowed to slip past its intended enactment date of January 1, 2024.
Further, the Treasury must propose strong draft rules to tackle money laundering through the $50 trillion U.S. residential and commercial real estate markets, and FACT has recommended changes to FinCEN to ensure the effectiveness of said rules.
Finally, Congress must pass the ENABLERS Act and signal U.S. commitment to routing out dirty money and preventing corruption. By applying due diligence requirements for lawyers, trust and company service providers, and other non-bank financial service providers, this legislation would place additional hurdles in the way of actors such as the Obiang family hiding their wealth in the U.S. This is an opportunity for the U.S. government to communicate leadership on global anti-corruption, as well as dedication to helping Africa regain its full financial and political autonomy.
Until these reforms are enacted, the U.S. will continue to be a haven for laundered money that will be used to finance terrorism, human rights abuses, and groups like Wagner and other mercenary forces in Africa. If Congress and the Biden administration take the task before them seriously, the U.S. could become a true partner to Africa in the fight to root out corrupt leaders, better service its debt and its people, and empower a shift away from the influence of malicious foreign actors.