Stopping international corruption starts here at home

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Kleptocrats and their cronies in countries like Russia, China and Nigeria steal huge sums from their citizens and seek safe and secret homes for their wealth. To do this, they need enablers – bankers, lawyers, auditors, real estate brokers, art dealers and financial consultants – on Wall Street, the City of London and other major international financial centers.

More than 2,000 billion dollars of dirty money are thus laundered each year. I conservatively estimate that about $ 600 billion is invested in U.S. investments, which is more than the annual sales of the world’s largest retailer, Walmart. Or consider that over $ 235 billion in dirty money from Russia and neighboring countries has been laundered over several years through the Estonian branch of Danske Bank in Denmark – an amount greater than the GDP of Denmark. Estonia itself.

Moldovan President Maia Sandu addresses the General Assembly at United Nations headquarters on September 22.JUSTIN LANE / Associated Press

The transfer of immense wealth from authoritarian regimes to Western investments strengthens the power and security of these regimes. And as we have seen with Russian efforts to undermine elections here and in Germany, and as the Chinese authorities have sought to steal our technology and have stepped up their anti-democratic propaganda, the challenges that kleptocratic regimes pose to our security are formidable. .

These dangers prompted President Biden to launch the Democracy Summit, where he noted: “By effectively preventing and combating corruption and demonstrating the benefits of transparent and accountable governance, we can secure a vital benefit to states. United and other democracies.

He is right that we can counter these kleptocrats by hitting them in their wallets. But it also requires restrictions on the activities of facilitators on our shores.

Although there are financial laws and regulations to combat money laundering and international corruption, they have been poorly enforced. And the kleptocratic facilitators don’t just directly help their foreign criminal clients; they also pressure Congress and other Western legislatures to keep the enforcement system weak and underfunded.

The flaws in this system benefit people like Isabel dos Santos, who was placed on the U.S. government’s sanctions list on December 9 for her corrupt acts. She has used major international banks for years to securely invest her stolen assets. Dos Santos, the daughter of a former president of oil-rich Angola, is widely regarded as Africa’s richest woman, with a personal fortune of over $ 2 billion. An army of lawyers in several countries helped her escape Angolan prosecutors. Imposing sanctions on people like her after they steal their home country and safely invest the proceeds abroad is unlikely to have a major effect.

Significantly, a major feature of the Biden administration’s new anti-corruption strategy, revealed on December 6, focuses on the need – finally – to step up enforcement and establish tighter regulations to curb abuses. activities of facilitators. I think the proposed measures do not go far enough, but they are a start. The key will be to ensure the necessary level of application.

Look at what happened in 2020 with Wall Street banker Goldman Sachs, who paid the biggest fine ever – $ 2.3 billion – to the US Department of Justice for foreign bribery. Authorities here and in the UK, Singapore and Malaysia have determined that Goldman Sachs was the central catalyst for a scheme in which Najib Razak, a former Malaysian prime minister, and his associates took away around $ 4.5 billion. dollars on the $ 6 billion in bonds. which were started on behalf of Malaysia’s Economic Development Fund – money meant to help the poorest people in that country. Najib was brought to justice in Malaysia, convicted of several financial crimes and sentenced to 12 years in prison. As for Goldman Sachs, only two of its executives were prosecuted in this scheme; the fine appears to be just a cost of doing business.

What more can we do?

Skilled lawyers help their kleptocratic clients create an architecture of shell companies, in which one holding company controls another, each registered in places such as Delaware, South Dakota, British Virgin Islands and Cayman Islands. What these places have in common is that they don’t require newly registered companies to disclose who actually owns and controls them.

At a minimum, all banks and real estate and auction companies should be subject to explicit know-your-customer rules that require them to exercise in-depth due diligence on where and how large potential customers got their money. Next, US banking and judicial authorities must have substantial budgetary resources to deploy artificial intelligence to monitor the tens of millions of financial transactions that cross borders in the US financial system and to investigate and, if necessary, prosecute. .

In addition, there must be a law that explicitly holds the chairmen of boards of directors and CEOs of key enabling institutions criminally accountable for money laundering and foreign bribery prosecuted by their companies. After the Enron and WorldCom scandals two decades ago, Congress passed the Sarbanes-Oxley Act, which required top executives to sign the company’s accounting reports and held them criminally responsible for misrepresentation. A similar approach needs to be taken to hold key bankers and auditors and other facilitators to account to the public.

All over the world, from the United States and the European Union to dozens of developing countries, opinion polls show people believe the level of corruption in government has rarely been higher. To counter this disturbing trend, Western governments, led by the United States, must show a much deeper commitment to rooting out corruption, both abroad and at home.

Frank Vogl, former head of the World Bank, is co-founder of Transparency International and chairman of the Partnership for Transparency Fund, both anti-corruption organizations. His latest book is “The Enablers: How the West Supports Kleptocrates and Corruption – Endangering Our Democracy”.

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