Is there anything Republicans and Democrats on Capitol Hill can agree on? Indeed there is — and it’s something big: the danger to U.S. national security posed by cross-border corruption.
Proof of that consensus is visible in the text of this year’s must-pass defense bill, known as the National Defense Authorization Act. Alongside such typical items as ammunition for the F-35 fighter jet and the advance procurement money for the Columbia-class submarine are a half-dozen measures that will shore-up U.S. defenses against corrupt actors hiding and weaponizing dirty money. These measures are the product of a new, big-tent effort to combat the strategic use of corruption, and they may be deployed more effectively to protect our country than much of the hardware itemized in the bill.
Corruption and financial crime arguably represent the most serious threat to political and economic systems worldwide in this generation. The abuses have driven indignant victims into the arms of extremist groups, such as ISIS or Boko Haram, or into the streets in revolutions that, like Ukraine’s or Syria’s, have spun out of control. Illicit financial flows allow violent groups, or traffickers in counterfeit medicines or human beings, to fund their operations and bank their profits. Corruption and its proceeds have accelerated mass deforestation in Cambodia, Cameroon and the Amazon, threatening the global climate. More recently, the strategy of such hostile state actors as Xi Jinping’s China or Vladimir PutinVladimir Vladimirovich PutinUS slaps sanctions on alleged human rights abusers in Russia, Yemen and Haiti Defending our democracy through the presidential transition European (Dis)Union: The gathering storm MORE to use shell companies and laundered money to undermine our democratic system and free market has raised alarm.
Recent investigations by a financial intelligence firm, for example, revealed that the Xinjiang Production and Construction Corps (XPCC), a multi-tentacled Chinese organization, whose exports of cotton have been banned from the United States because of likely involvement in Uighur concentration camps, holds stakes in dozens of U.S.-based companies. Sanctioned Russian entities and individuals are major investors in a prospective Kentucky plant to produce rolled aluminum, a strategic raw material.
The United States is currently ranked among the easiest places in the world to set up shell companies and launder dirty money. But a series of measures to combat these once-overlooked threats gained wide bipartisan support in negotiations on the national defense bill. An equally wide spectrum of civil society groups has been working for years to bring the dangers of these practices to members’ attention. Imagine a coalition in which Dow Chemical and the Delaware Bankers’ Association sit side-by-side with Greenpeace and the AFL-CIO.
Here is some of what this disparate collection of responsible citizens has helped achieve on all of our behalf:
The most significant measure is the NDAA’s requirement that every company formed in the United States provide up-to-date information on the person or persons who actually own or control it. Until now, names and addresses were not even collected. In other words, terrorists or corrupt foreign officials wanting to move money into the U.S. could simply set up a company in an agent’s name and have that company make the investment. Under the NDAA, information about the true, “beneficial” owners of every company formed in the U.S., with some exceptions, will be collected and stored at the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), available for use by law enforcement and national security agencies. Company ownership information will also now be part of what’s collected and stored in the database used by federal agencies to determine the integrity and performance of government contractors and grant recipients. Such data will make it easier to catch dangerous criminals, stop fraudsters and bring corrupt officials to justice by, in many cases, making it possible to investigate complex financial investigations.
Another entire section of the NDAA is aimed at improving U.S. efforts to combat money-laundering and financial crime. Under its terms, FinCEN will beef up its ability to provide big-picture analyses to law enforcement agencies engaged in money laundering investigations. This type of dot-connecting is crucial to tracing interwoven networks of corruption, as specific investigations often reveal only one confusing or limited strand. Bank examiners will be given enhanced training in spotting and combatting money-laundering risks. And this section makes it easier to subpoena records from U.S.-based correspondent accounts of foreign banks.
To help get ordinary people with extraordinary knowledge of foreign corruption into the fight against it, the NDAA also creates financial rewards for people who provide information that leads to the seizure of stolen assets – that is, money looted from their countries by corrupt officials and secreted in U.S. banks – or who provide evidence of foreign efforts to subvert U.S. elections. Just like witnesses to street crime, whistleblowers or others with information on this type of highly dangerous malfeasance often take serious personal risks or incur expenses to provide it. Now they’ll have some hope of being reimbursed for taking these risks.
And the threat posed by strategic, weaponized corruption will at last receive the focused attention it deserves: The NDAA also requires the Treasury Department to formally study “how authoritarian regimes in foreign countries and their proxies use the financial system of the United States to conduct political influence operations, sustain kleptocratic methods of maintaining power, export corruption…and otherwise undermine democratic governance in the United States and [its] partners and allies.”
These concrete measures and new attention represent an entirely new take on a growing problem. They are the product of a big-tent, cross-cutting, bipartisan effort in the public interest that is all too rare in these fraught times. That effort should be celebrated. Now it is up to the diverse leaders who proposed and supported the measures – and the rest of us – to ensure they are fully and forcefully implemented.
Scott Greytak is the advocacy director for the U.S. office of Transparency International, the oldest and largest anticorruption coalition in the world.