Dirty money is undermining democracy, weakening capitalism, and threatening security— both in America and abroad. The time has come for democracy to stand up to kleptocracy by closing criminal loopholes and improving transparency.
1. End anonymous companies.
An “anonymous” company or other legal instrument is one whose true beneficial ownership is obscured, making them attractive vehicles for money laundering, terrorist financing, and other illegal activities. In the U.S., company incorporation takes place at state level, and several are notorious as international secrecy jurisdictions. Ending anonymous companies is an urgent priority which requires a federal solution.
a) All companies incorporated and/or registered in the U.S. must be required to disclose information about both their legal and beneficial ownership.
b) A rigorous monitoring, investigation, and enforcement regime must be established.
c) Prohibitive sanctions should be available to the courts, to deter non-compliance.
2. Close real estate reporting loopholes.
Real estate provides secure assets in which kleptocrats consistently hide their stolen wealth. While the Patriot Act introduced customer due diligence requirements for a range of industries, the real estate sector gained exemptions in 2012 after heavy lobbying. In January 2016, FinCEN introduced Geographic Targeting Orders (GTOs), which required title insurance companies to report information about customers involved in high-value, all-cash transactions in New York and Miami. GTOs have since been expanded to several other high-risk U.S. jurisdictions. One- third of customers identified in the scheme had previously triggered suspicious activity reports.
a) Patriot Act exemptions for the real estate industry must be revoked.
b) Meanwhile, the GTO scheme should be extended and expanded nationwide.
c) Customer due diligence requirements must apply not only to realtors, but all professionals involved in real estate deals.
3. Include bribe-takers in the FCPA.
The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 to prohibit U.S. individuals and companies from bribing foreign officials in order to obtain or retain business. In 1998, the FCPA was expanded to cover bribes by U.S. companies and individuals overseas. Foreign nationals who engage in corrupt payments within the U.S. can also be prosecuted for FCPA violations.
Although the FCPA has been greatly expanded since it was first introduced, those who solicit bribes are still not covered by its provisions. Bribery is a two-way street–without punishing bribe-receivers, the norm of extortion will persist, and corrupt government officials will simply engage with other companies which are more willing to engage in corrupt practices.
a) It should be possible to prohibit the identified recipients of bribes from engaging in transactions with U.S. businesses and financial institutions, and if warranted, from traveling to the U.S.
b) Middlemen involved in FCPA violations should face the same legal consequences as bribe-receivers.
4. Improve and enforce FARA.
The Foreign Agents Registration Act (FARA) was introduced to protect the U.S. government’s decision-making process from foreign influence. However, deficiencies in the legislation and weak enforcement have rendered FARA ineffective and in urgent need of reform.
Currently, registrants are able to decide whether to file under FARA or the less onerous Lobbying Disclosure Act; registrants are required to file informational materials only if they have been distributed to more than one individual; meetings abroad between American officials and foreign nationals on behalf of foreign politicians are not subject to registration or documentation; some registration documents are submitted electronically, others by mail, which convolutes submission dates; and no special filings are required when lobbyists make potentially suspicious political donations—even, for example, when they have met with politicians about their clients’ interests on the same day. Only 12 to 15 compliance inspections take place each year, and the criminal burden of proof makes it almost impossible to successfully prosecute cases of non-compliance.
a) The FARA and LDA databases should be consolidated.
b) The frequency and scope of compliance inspections must be dramatically increased.
c) Criminal penalties must be replaced with civil measures which enable feasible and proportionate enforcement.
d) Registrants must be required to file if they distribute any informational materials.
e) Meetings abroad with American officials should be documented and filed.
f) Potentially suspicious correlations between meetings and financial contributions must be filed.
g) All filings must be submitted digitally to an online database—not by post or hand—and immediately available to the public.
5. Strengthen the hand of U.S. law enforcement.
Many government agencies are acutely aware of the threat posed by global corruption—as evidenced by the formation of the Department of Justice’s Kleptocracy Asset Recovery Initiative, or the FBI’s International Corruption Squads. However, this understanding is by no means shared throughout the U.S. security apparatus. Legal obstacles, insufficient resources, and lack of political support pose significant challenges to successful investigations.
a) Funding and other forms of support for government agencies engaged in investigating and prosecuting global corruption must be increased.
b) A high-level coordinating body should be established to improve information-sharing and cooperation across government agencies.
c) Intelligence, law enforcement, and other relevant officials should be consulted about measures to improve investigation success rates.