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Azerbaijan’s President Ilham Aliyev (L), Iranian President Hassan Rouhani (C) and Russian President Vladimir Putin (R) leave after posing for pictures ahead of their trilateral meeting in Tehran on November 1, 2017. (Alexey Druzhinin/Getty Images)
For too long, kleptocracy, or “rule by thieves,” has been excluded from mainstream foreign policy discussions, while the United States has become a repository for corrupt proceeds from Iran, China, Russia, and other authoritarian nations. The ill-gotten proceeds of IP theft, terrorism financing, and sanctions evasion are being sheltered in American banks—advancing the malign goals of our adversaries and corroding U.S. institutions.
A new report by Nate Sibley and Ben Judah offers the most comprehensive kleptocracy policy study yet published. In Countering Global Kleptocracy: A New US Strategy for Fighting Authoritarian Corruption, the authors examine the pervasive threat to democracy, prosperity and security posed by globalized corruption and offer 70 recommendations for the 117th Congress and Biden Administration.
Join us Tuesday for a panel discussion featuring the report's authors; Dr. Michael Carpenter, managing director of the Penn Biden Center for Diplomacy & Global Engagement and former foreign policy advisor to Joe Biden during his vice presidency; and Abigail Bellows, nonresident scholar at the Carnegie Endowment for International Peace. See below for a selection of key takeaways and policy recommendations from the report.
5 Key Takeaways
From the new report Countering Global Kleptocracy: A New US Strategy for Fighting Authoritarian Corruption.
1. President-elect Biden has committed the United States to fighting authoritarian kleptocracy as a major priority:
The new administration can trigger a transformational moment in America’s decades-long struggle against corruption. In a March 2020 Foreign Affairs article, Biden outlined plans for a multilateral Summit for Democracy that would put countering global kleptocracy at the heart of US foreign policy:
“I will issue a presidential policy directive that establishes combating corruption as a core national security interest and democratic responsibility, and I will lead efforts internationally to bring transparency to the global financial system, go after illicit tax havens, seize stolen assets, and make it more difficult for leaders who steal from their people to hide behind anonymous front companies.”
2. Authoritarian kleptocracy is now a serious and pervasive threat to security, prosperity and democracy:
The International Monetary Fund has calculated that global tax revenues would increase by more than $1 trillion annually if all countries collected taxes as efficiently as those with the least corrupt governments, providing nearly twice the revenue needed to meet the UN’s Sustainable Development Goals.
Ruling elites in China, Iran, North Korea, Russia, Venezuela and other authoritarian regimes are the most prolific abusers of the global financial system, fusing opportunities for illicit self-enrichment with malign geopolitical ambitions.
3. Western policy failures and professional services helped globalize corruption:
All too often, it is unwitting or unscrupulous Western professional services providers who launder, conceal, and claim lucrative commissions from funds derived from transnational crime and corruption. The kleptocracy that afflicts developing countries and powers authoritarian regimes is not only facilitated but incentivized by offshore tax havens and poorly-regulated major financial centers, some of the most significant of which are located within the United States itself.
4. Authoritarian regimes now use corruption as a tool of foreign policy, but it is also a vulnerability:
Corrupt foreign officials are routinely implicated in bribery, sanctions evasion, IP and technology theft, financing of terrorism and other criminal activities that directly undermine U.S. national security. These not accidents but the foreign policy tools that inevitably emerge from domestic political systems shaped by, and sustained through, endemic corruption. In taking corruption seriously as a national security threat, the United States would turn this situation around by exposing their malign activities and the harm done to vulnerable populations worldwide.
5. The U.S. government is underprepared for the challenge of fighting global kleptocracy:
In the last decades of the 20th century, the War on Drugs resulted in new legal authorities and unprecedented resources for law enforcement to target the financial proceeds of crime. The terrorist attacks of September 11, 2001 resulted in sweeping new powers with which U.S. intelligence and law enforcement agencies could pursue the funders of terrorism through an increasingly sophisticated global financial system. Kleptocracy is a problem in its own right but also vastly exacerbates these other threats, yet efforts to upgrade America’s financial defenses and tools of economic statecraft accordingly have only just begun.
Top 10 Policy Recommendations
A selection from the 70 policy recommendations featured in Countering Global Kleptocracy: A New US Strategy for Fighting Authoritarian Corruption.
1.
Recalibrate the U.S. government for fighting kleptocracy
After decades of focusing almost exclusively on drugs and terrorism, other important financial threats are being overlooked. More resources for agencies engaged in fighting corruption, a National Security Council-led interagency task force, and greater Treasury Department engagement will help redress the balance.
2.
Implement pending anti-money laundering measures
Legislation enacted by Congress but not yet implemented by the Treasury Department includes a corporate beneficial ownership register to tackle shell company abuse and a cross-border payments database to strengthen U.S. financial intelligence capabilities.
3.
Expand anti-money laundering responsibilities beyond U.S. banks
Lawyers, accountants, real estate agents and other professions are routinely exploited by foreign money launderers. Yet unlike U.S. financial institutions, they currently have no responsibility to report suspicious transactions.
4.
Increase efforts
to target foreign corruption
Dollar supremacy means that U.S. law enforcement has a unique capability—and responsibility—to tackle abuse of the global financial system. Global Magnitsky Act sanctions, PATRIOT Act anti-money laundering provisions, the Foreign Corrupt Practices Act and other measures should be used more extensively to prosecute and deter foreign kleptocrats.
5.
Strengthen accountability
for complicity
in corruption
Fines and settlements issued to banks and other institutions found to have facilitated transnational kleptocracy and other illicit financial transactions often seem substantial, but are usually just a fraction of their profits. By targeting corrupt individual “enablers” for prosecution, U.S. law enforcement would introduce a serious deterrent while protecting U.S. shareholders from the financial consequences of misconduct.
6.
Force kleptocrats
to account for
stolen wealth
Civil asset forfeiture procedures are controversial -- but a new Unexplained Wealth Order law, modelled on the UK’s recent reforms, could mitigate civil liberties concerns while providing U.S. law enforcement with a powerful, targeted new tool.
7.
Protect whistleblowers
In many cases, whistleblowers provide the only hope for uncovering dangerous kleptocracy schemes. Congress recently enacted measures to provide better protections and incentives for whistleblowers in money laundering and foreign corruption cases, but a fast-track U.S. visa scheme for those assisting U.S. law enforcement in dangerous jurisdictions is the essential next step.
8.
Shine a light on foreign lobbying
The Foreign Agents Registration Act is outdated and ineffective. A new, streamlined system would allow for greater scrutiny of authoritarian influence-peddling in Washington, D.C.
9.
Clean up
extractives industries
In the course of dealing with valuable resources in some of the most dangerous places on Earth, U.S. oil and gas companies are especially vulnerable to extortion by corrupt foreign officials. Greater transparency over payments to foreign governments can help deter bribery attempts.
10.
Renew U.S. global anticorruption leadership
The United States can project its anticorruption agenda globally by coordinating democratic allies and strengthening vulnerable partners against kleptocratic encroachment. Taking on kleptocracy also offers a way for the United States to distinguish itself from strategic rivals, especially the Chinese Communist Party's corrupt Belt and Road Initiative and disingenuous domestic anti-corruption campaign.
