There are some two dozen candidates gunning for the Democrats’ 2020 presidential nomination, but few have taken on an issue buffeting their campaigns and the people who will be voting for them: America’s role as a global haven for money laundering.
There are a number of proposed policies — some easy to enact, some more challenging — to help Democratic politicos roll back the U.S.’s leading role in the global dirty money laundromat, from banning anonymous shell companies to registering trusts, to aligning American anti-money laundering policies with foreign partners.
Congressional sources, speaking anonymously because of ongoing discussions surrounding legislative language, told ThinkProgress that a number of upcoming bills will build upon growing anti-kleptocracy momentum.
One bill, for instance, would empower the secretary of state to reveal the identities of foreign officials who have been denied American visas as a result of corruption. Another would create a rapid-response fund for foreign governments looking to beef up anti-corruption efforts, paid for with fines collected from Foreign Corrupt Practices Act (FCPA) enforcement.
Despite the momentum, only two candidates so far have carved out a clear position in the anti-kleptocracy lane, both in terms of rhetoric and policy: Vermont Sen. Bernie Sanders and Massachusetts Sen. Elizabeth Warren. But anti-kleptocracy policies aren’t necessarily the sole province of left-leaning candidates. Former Vice President Joe Biden and Rep. Eric Swalwell (D-CA) have also made recent statements bringing anti-kleptocracy policies to the fore.
Even before the first year of President Donald Trump’s tenure was through, Sanders had begun placing Trump — and the Russian interference that helped him to victory — in a broader lens of authoritarianism, oligarchy, and offshore transfer of wealth. “Around the world we have witnessed the rise of demagogues who once in power use their positions to loot the state of its resources,” Sanders said in a September 2017 speech. “These kleptocrats, like [Vladimir] Putin in Russia, use divisiveness and abuse as a tool for enriching themselves and those loyal to them.”
“We need to understand that the struggle for democracy is bound up with the struggle against kleptocracy and corruption,” Sanders added in 2018. “That is true here in the United States as well as abroad.”
Now, Sanders’ campaign told ThinkProgress, the senator is on board with a raft of anti-kleptocracy policies that would help unwind America’s role in the globalization of grand corruption.
“That is not a democracy, that is an oligarchy.”
In addition to ending anonymous shell companies, eliminating anonymous trusts, and beefing up enforcement of the Foreign Agents Registration Act (FARA), Sarah Ford, a spokesperson for Sanders’ campaign, told ThinkProgress that the Vermont senator wants to expand the Foreign Corrupt Practices Act (FCPA). Currently, the FCPA makes it illegal for American companies and individuals to bribe foreign officials, but Sanders would broaden the statute to make it illegal for foreign officials to demand bribes in the first place.
Ford said Sanders also wants the U.S. to rejoin the Extractive Industries Transparency Initiative (EITI), the foremost pro-transparency initiative in the world of hydrocarbons and mining. “Bernie strongly supports holding oil and gas companies accountable by rejoining the Extractive Industries Transparency Initiative and strictly enforcing the requirements,” she said. Ford added that Sanders also wants to force American oil companies to disclose all payments to foreign governments.
“Trump and his administration get more donations from their friends on Wall Street and in the pharmaceutical and fossil fuel industries, and then those friends receive political favors in return,” Ford said. “Super PACs and dark money groups pour endless sums of money into our elections. And everyday Americans have their needs ignored. That is not a democracy, that is an oligarchy.”
Like Sanders, Warren is also highlighting the pairing of kleptocracy and authoritarianism, and the resulting harm to democracy. She’s also siphoned away some of Sanders’ polling momentum, though both still trail front-runner Joe Biden.
Warren positioned herself firmly in the anti-kleptocracy camp earlier this year. In piece for Foreign Affairs, Warren called on the U.S. to “stand with those who bravely fight for openness and pluralism in Moscow, Beijing, and beyond.”
“This marriage of authoritarianism and corrupt capitalism is a direct threat to the United States, because it undermines the very concept of democracy,” Warren wrote. “It enables corruption to spread across borders and allows authoritarian leaders to foment a global crisis of confidence in democracy. Free and democratic societies, the United States included, risk sliding toward corruption and kleptocracy, becoming democracies in name only.”
“This marriage of authoritarianism and corrupt capitalism is a direct threat to the United States, because it undermines the very concept of democracy.”
And as it pertains to domestic policies in the United States — the kind of things that have positioned the U.S. as arguably the world’s leading dirty-money magnet — Warren has kept pace with Sanders’ proposals.
Not only has she called on Washington to “work with our international partners to crack down on tax havens,” but she also said last year that “we need transparency about the movement of assets across borders” — the type of thing a database of cross-border payments could provide. She also called for an alignment of American and European Union anti-money laundering policies.
And in some instances, Warren has gone even further than her peers. Amid talk of FARA reforms, Warren has called for an outright ban on Americans lobbying for foreign governments, foreign individuals, and foreign companies. As part of her proposed Anti-Corruption and Public Integrity Act, U.S. citizens who lobby on behalf of foreign interests could face up to five years in jail or $200,000 in fines.
Warren’s proposals enjoy “strong backing among good government groups and ethics experts,” Warren spokesperson Saloni Sharma told ThinkProgress.
Sanders and Warren aren’t the only 2020 candidates who’ve begun highlighting America’s role as a global center for dirty money, especially when it comes to anonymous shell company formation.
Biden, as the putative front-runner, is certainly the most notable candidate to begin discussing ending anonymous shell companies — and maybe the most surprising. After all, Biden hails from Delaware, a state where the budget depends greatly on company formation. (Delaware’s company formation industry now brings in revenues equal to move than a quarter of the state’s total budget.) Over the past half-century, the state has transformed into a global hub of anonymous shell company formation, helping spearhead the U.S.’s evolution into a global leader in attracting illicit finance. Some of those who have utilized anonymous shell companies in the state include Viktor Bout, a Russian national who, as the most notorious arms smuggler over the past quarter-century, allegedly used at least a dozen Delaware shell companies to move money and guns alike.
Biden did little over his long political career to call attention to Delaware’s financial secrecy laws. His campaign did not respond to ThinkProgress’ questions about whether he ever pushed any bills or made public statements about Delaware’s role as a leader in global kleptocracy.
But with his campaign in full swing, Biden now appears to be calling out his state’s leading industry and the shell company industries that exploded in other jurisdictions across the U.S.
“A federal requirement to disclose the true owners of LLCs would allow law enforcement to scrutinize the ‘ghost corporations’ that pop up overnight in states like Nevada or Delaware.”
In an article he co-authored last November, Biden pointed a finger at his state directly, specifically flagging the threat anonymous shell companies posed not only to the U.S. electoral process, but to America’s standing abroad.
“A federal solution to this issue is necessary because individual states compete for incorporation revenue and therefore have little incentive to reform on their own,” Biden and co-author Michael Carpenter wrote. “A federal requirement to disclose the true owners and controlling interests of LLCs would allow law enforcement to scrutinize the ‘ghost corporations’ that pop up overnight in states like Nevada or Delaware — and that could be used to funnel dark money into our politics.”
Swalwell, meanwhile, hasn’t yet come as far as Sanders in terms of banning entities like anonymous trusts, or as far as Warren when it comes to banishing foreign lobbying outright. But as his campaign told ThinkProgress, the congressman is specifically interested in pushing policies that would unwind America’s role in burgeoning kleptocracies.
“Rep. Swalwell believes the practices of anonymous shell company formation, anonymous real estate purchases, and anonymous trusts deserve careful examination and reform to prevent abuses such as money laundering, inability to hold owners accountable for properties and activities, and so on,” said Josh Richman, a spokesperson for Swalwell’s campaign.
“He definitely supports beefing up enforcement surrounding the Foreign Agents Registration Act, and supports the U.S. rejoining the Extractive Industries Transparency Initiative. And Rep. Swalwell opposes any use of any tax havens to avoid payment of a fair share of taxes.”
What comes next
To date, few other campaigns appear interested in pursuing specifically anti-kleptocracy policies at home or abroad. ThinkProgress reached out to all candidates for the 2020 Democratic ticket, but none of the others responded.
While other candidates have thus far preferred to focus on other aspects of domestic policy — health care, energy policies, criticisms of the current administration — they may be forced to start crafting anti-kleptocracy, pro-transparency positions soon enough. Not only because policies like the ones ThinkProgress detailed are long overdue, but because current and future bills in Congress aim at precisely at such issues.
Some of these bills have already been introduced. The Corporate Transparency Act, for instance, is a bipartisan effort that would end the formation of anonymous shell companies in the U.S. Earlier this month, the bill passed out of the House Finance Committee, coming with the support of more than 100 different groups, including some of the foremost pro-transparency organizations extant, such as Global Witness and Human Rights Watch. Other bills, like those mentioned above, remain in the pipeline, waiting for their final language to be hammered out.
Regardless of the final language of the proposed bills, both fit within the broader awakening across the country to the dangers of unmitigated kleptocracy, and the role the U.S. played in allowing foreign crooks to ransack their countries and move their money to and through the U.S.
The damage, which predates Trump, will roll forward for years to come. But, at least among the leading Democratic candidates, there’s a growing realization that an anti-kleptocracy plank fits within broader pro-democracy, pro-transparency positions — and that the next few years will be the critical moment when the U.S. either cleans up its act, or sinks into a kleptocratic morass of its own creation.