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House panel approves expanding anti-money laundering reporting requirements

Proposed in the wake of the Pandora Papers, the Enablers Act would require trust companies, lawyers, art dealers and others to vet clients seeking to move money and assets into the American financial system

Stacks of $100 bills at the Bureau of Engraving and Printing in Washington. (Andrew Harrer/Bloomberg News)
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A bipartisan group of lawmakers cleared a major hurdle this week to advance what they call the most significant revision to America’s anti-money laundering laws in 20 years.

The bill, called the Enablers Act, amends the 52-year-old Bank Secrecy Act to require for the first time that trust companies, lawyers, art dealers and others investigate clients seeking to move money and assets into the American financial system. Those covered by the law, who include financial advisers and art and antiquities traders, would also be required to report suspicious activity to the Treasury Department. Real estate transactions would not be covered by the law, however.

Banks are already required to vet their clients and their sources of wealth, but other American financial gatekeepers have been exempted from “due diligence rules” — a loophole long criticized by financial crime experts and international watchdogs.

“Middlemen in foreign transactions should be subject to the same anti-money laundering checks as banks, and this brings us one step closer,” said Rep. Joe Wilson (R-S.C.), who co-led the push to enact the Enablers Act, along with Rep. Tom Malinowski (D-N.J.), and sponsored its inclusion in the defense bill. “Nobody should be able to hide behind blood money to exploit democratic institutions for their benefit.”

Pandora Papers: BILLIONS HIDDEN BEYOND REACH

The House Armed Services Committee voted on Wednesday to include the Enablers Act in the National Defense Authorization Act, a broad national defense policy bill that is traditionally passed by Congress every year. The voice vote fast-tracks the bill and significantly increases the likelihood it will become law, Democrat and Republican backers say.

“If it passes, this will be the biggest money laundering reform since the Patriot Act,” Malinowski said, referring to legislation passed in the wake of the Sept. 11, 2001, terrorist attacks. “It closes the biggest remaining loopholes in our laws that allow crooks and kleptocrats all over the world to hide their money and property in the United States.”

Malinowski and other members of Congress introduced the Enablers Act in October following the Pandora Papers investigation, a sweeping collaboration by the International Consortium of Investigative Journalists, The Washington Post and other media organizations.

The investigation showed how the global elite conceal their wealth in tax havens that increasingly include the United States.

A senior White House official said that while President Biden’s administration is not involved in the bill, “we are prioritizing work to address the United States’ own regulatory deficiencies.”

“We applaud the bipartisan push within the Congress to work with the administration to limit the ways in which proceeds of corruption and other ill-gotten gains are moved through the U.S. financial system,” the official said.

In 2020, lawmakers attached the Corporate Transparency Act, which requires companies to report their owners to the federal government, to the national defense authorization bill, leading to its eventual passage. That law increased transparency requirements for the owners of companies, but did little to rein in the many service providers within the United States, including attorneys and registered agents, who are often the entry point into America for vast foreign fortunes.

Lawmakers push to uncover riches shielded by state secrecy laws

Citing the Pandora Papers investigation, state lawmakers in Alaska and New York have also introduced legislation requiring companies and secretive trusts to report who owns them to state or public databases.

In Washington, supporters say the Enablers Act will help U.S. law enforcement better identify and freeze assets held by oligarchs sanctioned in response to Russia’s invasion of Ukraine.

Since the start of the war, the U.S. Treasury Department has sanctioned hundreds of Russians believed to be close to Russian President Vladimir Putin. Law enforcement agencies and anti-corruption experts, however, have expressed concern that the Russian elite routinely hides ownership of luxury homes, yachts, jets and other assets through complex offshore arrangements put in place by lawyers, accountants and other advisers.

“It’s way too easy to use accounting firms, lawyers and others to launder money in ways that are hard for our sanctions enforcement agencies to see,” Malinowski said. “By proposing very simple, straightforward due diligence requirements, we exponentially increase the effects of the sanctions program.”

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