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Congress takes aim at kleptocracy

National JournalCristina Maza

A bipartisan group of lawmakers is gearing up to make 2021 the year Congress has the bipartisan support necessary to pass sweeping legislation to fight kleptocracy.

On Sept. 10, Reps. Steve Cohen, the U.S. Helsinki Commission cochair, and the committee’s ranking member, Joe Wilson, introduced the Counter-Kleptocracy Act.

The legislation consolidates seven bipartisan bills that aim to tackle corruption and illicit financial flows, all of which lawmakers introduced in the past year. The Counter-Kleptocracy Act now has 17 bipartisan cosponsors. It includes legislation enabling the administration to name and shame kleptocrats banned from the U.S. and creates a public website documenting the amount of money stolen by corrupt officials in each country, among other initiatives.

The game plan is to leverage the bipartisan support for the bills in the House and Senate, and to include the bills in the National Defense Authorization Act this year or next. Several of the measures have already been added to the most recent version of the House bill.

Three decades after the end of the Cold War, many lawmakers in Washington recognize that, rather than adopting democratic norms and practices, corrupt officials and kleptocrats from abroad have influenced the U.S. political system and undermined national security by funneling money stolen from their own citizens into the U.S.

With this in mind, fighting kleptocracy is becoming one of the standout issues that Republican and Democratic lawmakers agree about tackling.

“We’ve never had more momentum on this than we have now,” said Paul Massaro, a senior policy adviser at the U.S. Helsinki Commission, who has been advocating for anti-corruption efforts in Congress for a decade. “If you told national security experts in 2014 or 2015 that corruption is a national security threat, you would get blank looks. Now Congress and the president are calling it a national security threat.”

The Biden administration released a memorandum establishing the fight against corruption as a core national security interest in June. Members of Congress say they wholeheartedly agree with that assessment.

“From my experience as a former CIA case officer and from my work on the House Foreign Affairs Committee, it is very clear that corruption at home and abroad is a national security threat,” said Rep. Abigail Spanberger, one of the bill’s cosponsors.

Rep. Katie Porter, another cosponsor, added that anti-corruption efforts at home can help advance U.S. interests abroad.

“Americans know that corruption makes government less representative, less transparent, and less responsive to people’s needs. That’s true everywhere there is government corruption, including in many countries where it poses a threat to our foreign policy and national security goals,” Porter said.

Experts say former President Trump’s administration played a crucial role in highlighting the dangers of kleptocracy and raising awareness about corruption.

“I think one of the reasons that we’ve seen enormous momentum in Washington is that the U.S. had a very unique experience over the past several years with a president who was so saturated in and benefited significantly from these types of pro-kleptocracy or kleptocratic services,” said Casey Michel, an adjunct fellow at the Hudson Institute’s Kleptocracy Initiative and author of the book American Kleptocracy.

“Trump was one of the first global leaders to emerge from one of these pro-kleptocracy industries. That is, the American luxury-real-estate industry and its marriage with anonymous shell companies,” Michel added.

What’s more, it’s becoming apparent that global kleptocracy affects the lives of the people that Congress members represent. When Ukrainian oligarch Ihor Kolomoisky laundered millions of dollars through real estate in Cleveland, for example, it stymied economic growth in the area, Michel says.

“They used all of this looted wealth and bought up commercial real estate, factories, and manufacturing plants that were really the life blood of these small communities, and they left these buildings to rot,” Michel said. “So instead of being a revitalization campaign and bringing jobs back, they are just dead weight.”

Meanwhile, the rise of illiberalism and anti-democratic regimes from Hungary to Venezuela has also played a role in calling attention to illicit financial flows, lawmakers argue.

“With authoritarianism on a troubling rise around the globe, the United States must do everything humanly possible to root out foreign corruption and kleptocracy—which is the preferred fuel of a tyrant’s rise to, and hold on, power,” said Rep. Emanuel Cleaver.

“The Counter-Kleptocracy Act is critical to America’s national security and the defense of democracy-loving nations across the world,” Cleaver added.

Sen. Marco Rubio, a member of the Senate Foreign Relations Committee, also introduced bills included in the Counter-Kleptocracy Act because of concern for rising authoritarianism.

“As corrupt regimes worldwide seek to undermine the rule of law, the Justice for Victims of Kleptocracy Act of 2021 represents a step in the right direction in order to hold kleptocrats accountable,” Rubio said, referring to a bill that would create a public Justice Department website documenting the amount of money stolen by corrupt officials in each country and recovered by the U.S.

In general, U.S. counter kleptocracy initiatives fall into three categories.

Some work to push dirty money out of the U.S. financial system by enforcing beneficial ownership transparency or requiring lawyers, lobbyists, accountants, real estate agents, and other gatekeepers to verify the source of their clients’ income.

Advocates say more efforts are needed on this front, including legislation imposing gatekeeper requirements.

Other efforts aim to bolster the rule of law and tackle corruption abroad by abolishing tax havens and making it more difficult for corrupt individuals to use anonymous shell companies based in foreign jurisdictions.

Another category of anti-corruption efforts, led in large part by the Justice Department and the Treasury Department’s Office of Foreign Assets Control, include dismantling kleptocratic networks by issuing sanctions, visa bans, or indictments.

The legislation in the Counter-Kleptocracy Act focuses largely on these latter efforts. For example, the Foreign Corruption Accountability Act authorizes visa bans on foreign nationals who use state power to engage in acts of corruption and the Revealing and Explaining Visa Exclusions for Accountability and Legitimacy Act enables the executive branch to reveal the names of human-rights abusers and kleptocrats banned from the U.S.

Sen. Ben Cardin, who introduced two of the initiatives in the Counter-Kleptocracy Act, noted that the bills have support in the Senate.

“I am proud that two of my initiatives, the Combating Global Corruption Act and the Transnational Repression Accountability and Prevention Act, have been included in the Counter-Kleptocracy Act. A third, the Countering Russian and Other Overseas Kleptocracy Act, is also moving in the House. All three bills have momentum in the Senate as well,” Cardin said. “By passing these pieces of legislation, we create the tools and authorities necessary to confront modern dictatorship.”

Cohen, who introduced the package, also said he’s counting on his colleagues to back the initiative.

“All seven of these bills are bipartisan and they are good bills,” Cohen said. “I don’t know of a single member of Congress who publicly supports corruption or kleptocracy. Does that mean there won’t be pushback? Maybe not. I have been surprised before. But I hope that my colleagues in Congress will recognize how important this bill is and lend their support.”

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