Casey Michel is the author of a forthcoming report from the Hudson Institute examining the United States’ transformation into a global financial secrecy haven.
Over the past few weeks, Americans have acquired unprecedented insight into how corrupt leaders use the United States to protect and expand their ill-gotten wealth.
This week, a consortium of journalists from around the world unveiled the so-called Paradise Papers, an extraordinary trove of leaked documents revealing the secret financial details of billionaires, celebrities and officials. The findings have turned a spotlight on ties between the Trump administration and the post-Soviet space. The most dramatic revelation involves the secret financial relationship between Commerce Secretary Wilbur Ross and Russian President Vladimir Putin’s family. Documents revealed that Ross owned shares in a shipping company that in recent years earned nearly $70 million in revenue directly from a Russian company that happened to be co-owned by, of all people, Putin’s son-in-law. (Note: There is no indication that Ross did anything illegal, but the news certainly raises the possibility of a serious conflict of interest.)
All this comes in the wake of the indictment of ex-Trump campaign manager Paul Manafort on charges of money laundering and tax evasion (among others). He and his colleague Rick Gates allegedly used shell companies and offshore accounts to channel the funds they earned from their work as political consultants to the blatantly corrupt Ukrainian President Viktor Yanukovych. The details of the government’s case make for illuminating reading. Manafort was even tied to the same Belize shell company that served as a conduit for illicit funds from corrupt leaders in the Central Asian republic of Kyrgyzstan.
While Manafort is looking at a lengthy prison sentence, Ross has somehow managed to hang on to his job. Yet all these revelations highlight the pressing need for Washington lawmakers to start erecting defenses against the influx of grand corruption — while we still can. Admittedly, there’s not much we can do about overseas havens in the short term. But there’s plenty we can do right here at home.
The government could start by giving new life to the Foreign Agents Registration Act (FARA), which special counsel Robert S. Mueller III has now used to snare Manafort. For nearly 80 years, FARA has served as an important tool for identifying lobbyists, consultants and operatives shilling for dictators from Azerbaijan to Zimbabwe. That was the theory, at least. As scholar Jahad Atieh writes, the Act has been “essentially self-policed” — rarely enforced with any real enthusiasm by the authorities.
But Manafort’s case — and President Trump’s administration as a whole — may help jolt new life into FARA. Suddenly, thanks to the president’s men, a new specter is stalking Washington: transparency.
It’s also time for the U.S. government to crack down on American states that have effectively transformed themselves into offshore havens for dirty money. As Martin Kenney, a lawyer specializing in shell companies, writes: “It’s not entirely beyond the realms of possibility that ISIS could be operating companies and trust funds domiciled in Delaware.” Abu Bakr al-Baghdadi may not live across the street from Joe Biden, but there’s little preventing him from opening his company just down the block — with the rest of us none the wiser.
And no matter how much it may grate upon the president, Congress — and legislators in California, Florida, Texas and New York — should pass laws ensuring transparency in high-end real estate purchases. For years, corrupt actors overseas have poured their cash into luxury pads in Manhattan, McMansions in San Antonio, waterfront properties in Seattle. Dictators and oligarchs have used U.S. property as a haven for their money, skirting sanctions and letting the properties sit vacant, all while driving up costs for the rest of us. Until recently, no one had ever had to reveal the details of these transactions — what the source of the funds was, who was fronting the cash and which dictator’s daughter was moving into the neighborhood.
Real estate agents, of course, don’t care. But the Treasury Department — one of the lone bright spots in Washington these days — increasingly does. With the success of the department’s recent “Geographic Targeting Orders” (GTOs), which have pried into real estate purchases in New York, Los Angeles and Miami, the Treasury’s Financial Crimes Enforcement Network announced this year that it would be expanding its writ, adding Honolulu as another metropolitan area where it will be pulling back the curtains on luxury sales.
But there’s no reason to stop there. Let’s expand the GTOs to all 50 states and to all high-end property purchases. Think of it as a know-your-neighbor law. You’d want to know if the apartment across the hall, or the brownstone on your corner, was a shield for protecting dictators’ dollars, right?
These are the easiest steps, which amount to enforcing and expanding laws already on the books. Such measures will hit the shady Americans — the consultants, the lawyers, the real estate agents — doing business with odious regimes abroad. The kleptocrats who have used the United States as the safest store for their money will have to look elsewhere.
To be sure, there’s no reason to think that the revelations about the financial machinations of those surrounding Trump will end anytime soon. Nor is there any reason to think that a president so keen on undercutting existing anti-corruption regulations would be interested in combating sleaze.
But we don’t need Trump. We have legislation on the books, and officials who – as the Treasury Department shows – are willing to act. It’s time for this country to stop acting as an accomplice of the oligarchs and autocrats who are plundering their own populations. This is one case where we can’t leave policy to the president.