News & Events

Cyberattack on Think Tank Can Point the Way to Fighting Back against Russia’s Aggression

This article was originally published by the Miami Herald.

On the same day that the U.S. Senate held two separate hearings on additional Russian sanctions, news broke that the Hudson Institute, a right-of-center think tank, had come under cyberattack by Russian intelligence agencies.

Connecting the two stories provides tremendous insight into the ways in which rogue nations and corrupt individuals operate and how they undermine our efforts to hold them accountable.

The Hudson Institute houses a program called the Kleptocracy Initiative. The Initiative has produced important research on how despots and oligarchs steal from their own nations and stash untold billions in financial havens around the world. Given the size and relative stability of our economy and the financial secrecy we allow, it should not surprise anyone that a recent study ranked the United States second only to Switzerland among financial secrecy jurisdictions.

The scholars at the Initiative have been outspoken critics of the financial opacity that allows these individuals to move money with impunity. At one time, Russian leadership seemed most concerned with reports exposing the size and capability of their military strength. Today, these individuals seem even more concerned with reports exposing the size of their stolen wealth hidden in bank accounts and other investments in secrecy jurisdictions.

The Institute’s reports explain in detail how Russia’s missing billions help prop up a corrupt regime and fund actions to disrupt and destabilize democracies around the world. The theft drains wealth from their own nation, starves basic services necessary for a functioning society and impoverishes Russian citizens.

The secrecy we provide undermines our ability to enforce sanctions and hold Russia’s kleptocrats accountable.

Sadly, this is not the first time a rogue nation and its leaders have exploited holes in our financial system. Through the National Bank of Iran, the Iranian government owned property in Manhattan.

When sanctions were first put in place as a response to their nuclear program, the Iranians maintained their investment through the use of anonymous companies.

Tenants in the building unwittingly paid millions in rent to a shell company secretly owned and controlled by the Iranian government.

As Congress considers new sanctions on Russia, they should also consider the work of Hudson’s Kleptocracy Initiative. The attack provides additional evidence that, in calling for an end to the abuse of anonymous companies, the scholars at Hudson struck a nerve among the Russian oligarchs. Requiring U.S. companies to name their true owners would curtail access to our financial system.

And that would really hurt. Where else would they go?

Europe is moving towards transparency. Infamous tax havens like the Cayman Islands and the British Virgin Islands will soon be more transparent as well. Other economies are either not large enough or not stable enough to trust that the investments would be safe and sustainable. In the absence of reform, the United States will continue to be a magnet for illicit finance and provide the safe haven Putin’s cronies seek.

Fortunately, the cyberattack was discovered early and thwarted. It would be easy to treat the incident as one more example of Russian aggression and continue the debate over sanctions alone. But the specifics of this attack suggest a new and important vulnerability. Congress should not ignore the probable reason behind the attack and what it suggests about effective enforcement.

Hudson’s reports and policy recommendations are instructive. Bipartisan legislation to end the abuse of anonymous companies and close this gaping hole in our financial system already exists. The bills have support from law enforcement, the national security community, anti-corruption organizations and the financial institutions concerned about potential abuses of their own organizations and services, among others.

Let’s strike back at the attackers by heeding the informed advice of those attacked. Let’s end the use of anonymous companies.

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Gary Kalman is the executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition, a nonpartisan alliance promoting policies to combat the harmful impacts of corrupt financial practices.

This article was originally published by the Miami Herald.