“Cash is king.” Though money itself may “reign” supreme, kleptocracies hold tightly to their ill-gotten gains through complex international networks in their quest to maintain power. Yet kleptocrats need help as running a violent kleptocracy is a complex venture that demands expertise, especially if concerned about covering one’s tracks. Cue the “enablers” of corruption: financial and other professionals often sought out by the world’s most corrupt and worst human rights abusers to disguise, move, and launder their illicit proceeds.
While many countries have a role to play in cutting off the kleptocratic funds, the U.S. must also do its part to flip the script on the financial secrecy that puts it at the center stage of global illicit finance. The U.S. must strengthen its anti-money laundering safeguards to better detect, flag, and prevent money laundering through U.S. non-bank financial professionals.
A new report by the Sentry, an anti-corruption investigative organization, draws upon its years of research in Sub-Saharan Africa to identify key categories of enablers – whether they be banks, international operators, insiders, or, importantly, professional gatekeepers – that prop up the world’s most violent kleptocracies. Elites in places such as the Democratic Republic of the Congo (DRC) see the U.S. as a viable place to park their ill-gotten gains. As the Sentry report shows, Francis Selemani, brother of former DRC President Kabila, allegedly parked huge sums of ill-gotten gains in the United States, including in real estate worth millions in the Washington, DC area. The DRC isn’t the only regime relying on U.S. enablers to park their funds in U.S. assets. The vice president of Equatorial Guinea, Teodorin Obiang, allegedly used webs of anonymous U.S. shell entities and networks of U.S. lawyers to invest the proceeds of violent and corrupt state capture into U.S. real estate and other corners of the U.S. economy.
In these cases, these politicians and their families were able to sidestep basic checks required by U.S. banks and move their money instead through professional U.S. gatekeepers who have no U.S. legal responsibility to help detect, flag, and prevent money laundering through their services. The U.S. lags the rest of the world in instituting these requirements, falling in the 10 percent of countries that have yet to require that these professionals perform some level of customer due diligence.
As anti-corruption groups in the U.S. and other countries continue to shine a light on the need to hold these kleptocrats accountable, conducive legal frameworks must be established and enacted to facilitate this process.
As part of the inaugural U.S. Strategy on Countering Corruption released in December 2021, the United States committed to closing some of the biggest loopholes that still remain in its anti-money laundering policy. Two changes in particular – rules from the U.S. Treasury to tackle real estate money laundering and ENABLERS legislation under consideration by Congress – will help put an end to the U.S.’ role as a conduit for illicit funds.
The Financial Crimes Enforcement Network (FinCEN), the financial intelligence unit within the U.S. Treasury Department, initiated a critical rulemaking to bring the $50 trillion U.S. real estate sector under U.S. anti-money laundering law. This is a step that overhauls a twenty-year-old “temporary” exemption from meeting those obligations. Yet since February, there is no sign that the Administration has made any progress in proposing new rules. FinCEN should deliver a timely proposed rule ahead of the International Anti-Corruption Conference (IACC) in December to implement a permanent and nationwide reporting regime requiring real estate professionals to identify the true nature of their clients. This would be a crucial step to prevent the U.S. from being a destination for corrupt and kleptocratic funds.
A second crucial reform, the ENABLERS Act in Congress, has already been included by the House in its must-pass defense bill and awaits action by the Senate. This measure would empower the Treasury Department to require professionals who provide certain financial services – such as forming a company, setting up a trust, or managing money – to adopt risk-based anti-money laundering safeguards that can help detect, flag, and prevent the laundering of criminal funds into and across the United States. The Senate must act urgently to pass the vital legislation.
Finally, U.S. financial crime fighters at FinCEN need the resources best to protect the U.S. financial system from dirty money. As such, Congress should approve $210.3 million to modernize this bureau of the Treasury Department and counter the financing of international human rights abuses and corruption.
The Sentry’s report points to major ways the international community must act to deny kleptocrats the “brain trust” on which they rely to perpetrate their crimes. It’s up to the U.S. to be a leader, not a laggard, in implementing a robust anti-money laundering regime.