Strategy Targets Threats to U.S. from Corruption and Money Laundering Using Anonymous Companies, Real Estate, and Private Investment Entities
WASHINGTON, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition today warmly welcomed the Biden Administration’s publication of a first-ever U.S. national strategy to combat corruption. The “United States Strategy on Countering Corruption” is the result of President Biden’s directive in June to the National Security Advisor to lead an inter-agency review and strategy development process, after the White House named combatting corruption a “core U.S. national security interest.”
“This strategy to combat corruption is welcome and long overdue. It is an important sign of the Biden Administration’s commitment to tackle the global corruption that corrodes democracies at home and abroad,” said Ian Gary, executive director of the FACT Coalition. “The strategy is an important step to address the fact that U.S. financial secrecy enables corruption and illicit financial flows. It must also be backed by the money and resources to match the scale of the global threat.”
Among other steps, the new strategy promises to: address problems related to the use of U.S. anonymous shell companies; advance regulations to “reveal when real estate is used to hide ill-gotten cash or to launder criminal proceeds”; and prescribe “minimum reporting standards for investment advisors and other types of equity funds”. In addition, the strategy commits to ensuring greater scrutiny of so-called gatekeepers or enablers – such as lawyers, accountants, and company service providers – who provide access to the U.S. financial system and are currently not required to know the nature of the source of funds of their clients.
“The strategy released today, along with Treasury’s announcement that it is contemplating new regulations to combat money laundering through real estate, show the right priorities and sense of urgency we need to see from the White House to combat the scourge of corruption,” Gary said.
As the Pandora Papers’ exposé on South Dakota trusts have shown, the U.S. financial system – marked by a “race to the bottom” among U.S. states – has fostered significant financial secrecy that enables criminals, politicians, and kleptocrats to hide money, dodge taxes, and avoid accountability for human rights abuses. Enacted in January, the Corporate Transparency Act will, when implemented, largely eliminate anonymous U.S. shell companies. Still, important gaps remain.
“Money laundering in the U.S., through real estate and private investment, is rampant, and the U.S. needs to quickly close the loopholes that industry uses to escape the anti-money laundering regulations,” Gary said. “The $11 trillion private investment industry desperately needs greater transparency and should be included in the implementation of this new strategy.”
Last week the FACT Coalition, Global Financial Integrity, and Transparency International U.S. Office, issued a report – “Private Investments, Public Harms” – that calls on the Treasury Department to issue new rules to investment advisers and unregistered investment companies to establish anti-money laundering programs and conduct customer due diligence reviews of prospective clients. “Know your customer” requirements would mandate the identification of the beneficial owners of legal entities opening accounts as well as the ongoing monitoring of accounts with higher risk profiles, among other steps.
Since its founding in 2011, the FACT Coalition, comprised of more than 100 civil society organizations, has campaigned for the U.S. government to take combating financial secrecy seriously and to address the role the U.S. plays in facilitating corruption and illicit financial flows. The release of this strategy is a historic milestone in the campaign to curb the use of the U.S. financial system for illicit and criminal purposes. In addition to moves by the Biden Administration, Congress has recently shown strong bipartisan interest in countering kleptocracy, including through the founding of the Caucus Against Foreign Kleptocracy and Corruption.
“Fixing our own house is key to restoring U.S. leadership in the fight against corruption. While the Biden Administration can – and must – take important regulatory action to close loopholes in our financial system, Congress must also be an active partner in the fight against corruption and kleptocracy,” Gary said. “If agencies responsible for analyzing illicit financial flows – such as Treasury’s Financial Crimes Enforcement Network – don’t have enough resources, the kleptocrats will win.”
Notes to Editor:
- Click here for the new U.S. “Strategy on Countering Corruption”.
- Click here for the National Security Study Memorandum.
- This morning the Treasury Department asked for public comment on potential regulations “to address the vulnerability of the U.S. real estate market to money laundering and other illicit activity.” Global Financial Integrity, a FACT Coalition member, recently released a report on money laundering in the U.S. real estate sector, “Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream”.
- Dep. Secretary of the Treasury Wally Adeyemo gave keynote remarks today at the FACT Coalition cosponsored event, “Combatting Corruption to Drive Democratic Renewal”.
- Click here to download the report, “Private Investments, Public Harm”, issued by the FACT Coalition, Global Financial Integrity, and Transparency International U.S. Office.
- Click here for the FACT Coalition’s reaction to Caucus Against Foreign Corruption and Kleptocracy. Click here for information on the Inter-Parliamentary Alliance Against Kleptocracy, which will be launched Tuesday.
- Click here for the FACT Coalition’s statement on the CROOK Act..
- Click here for the FACT Coalition’s blueprint to implement the Corporate Transparency Act.