The following is based on a March 24 talk I gave at the Washington office of the Council on Foreign Relations. It is posted in a slightly different form on “Latin America’s Moment,” the Council’s blog on Latin America.
One of the most promising developments in U.S. foreign relations is the all out war on corruption being waged across Latin America. From “Operation Car Wash” in Brazil to investigations of presidential wrongdoing in Bolivia, El Salvador, Honduras, Guatemala, and Panama, across the region independent, tenacious prosecutors and investigators are out to end the massive theft of state resources that for so long has hobbled political development and throttled economic growth. Americans should be cheering for these corruption warriors, for we have much to gain if they succeed. Less corruption translates into more stable, reliable political allies; it means faster, more equitable growth and that means shared prosperity and less northward migration. Finally, less corruption in government will offer American firms new opportunities. Think what the end of corruption in Brazilian public works would mean for U.S. engineering and construction companies.
But given the stakes in Latin America’s corruption war, America should be doing more than cheering from the sidelines. It should be doing everything it can – without infringing the sovereignty or sensibilities of Latin neighbors – to see its corruption warriors succeed. Here are five things to start with:
- Fund the Department of Justice’s Office of International Affairs budget request. If a Latin American investigator learns an official he or she is investigating has a bank account in the U.S., the investigator can ask the Office of International Affairs to obtain the account’s records to see if corrupt money is being parked there. But the office had at latest count more than 11,000 requests pending and was receiving 3,000 plus new ones each year. Unless the investigator gets lucky and the request finds its way to the top of the pile, he or she will be long retired, and the suspect long dead, before the OIA responds. For years the DoJ has asked Congress, without success, for funds to hire more staff to speed requests. This year it has requested $10 million to add 97 positions, 54 attorneys and 43 paralegals and support staff. Isn’t it time Congress said yes to this modest request?
- Name a single focal point to help Latin American law enforcement agencies. When looking to the United States for assistance, Latins face a bewildering number of agencies, bureaus, and offices: the FBI, the DEA, ICE, the Secret Service, FinCen, the 92 U.S. Attorneys offices and these are just at the federal level. There are hundreds, if not thousands, at the state and local level. It takes experienced American law enforcement officers years to figure out where to go for information. Why not make it easy for Latin Americans who don’t have years to decipher the complex and bewildering U.S. system? Create one office, staffed with personnel fluent in Spanish and Portuguese from across the federal and state governments who can serve as a “one-stop shop” for Latin American police, prosecutors, and judges needing information from their U.S. counterparts.
- Create an inter-agency task force to work with Latin American counterparts to target corrupt Latin American officials. Whenever a corrupt Latin American official uses the proceeds of a bribe to buy an apartment in Miami or open a bank account in Houston or Los Angeles, he or she has violated U.S. antimoney laundering laws. Depending upon whether they traveled in the U.S. or used the U.S. mails or an e-mail server in the U.S. they may have also committed wire fraud or violated the laws forbidding travel across state lines in furtherance of fraud or corruption. A task force of U.S. personnel drawn from ICE’s Foreign Corruption Investigations Group, DoJ’s FCPA unit, the U.S. Attorney’s offices in Miami, the FBI’s International Corruption Squad, DoJ’s Kleptocracy unit, and other relevant agencies should be available to work with Latin counterparts on possible violations of U.S. law committed by corrupt Latin officials. Greater intelligence sharing and joint investigations in association with Latin American anticorruption agencies and prosecutors would enhance both regional and domestic efforts against corruption and ill-gotten gains.
- Enact the Incorporation Transparency and Law Enforcement Assistance Act. Introduced by Congresswoman Maloney and colleagues in the House and Senators Whitehouse and colleagues in the Senate, this would end the ability of corrupt officials, as well as drug traffickers and other unsavory individuals, to keep investigators from learning how much money they have and where it came from. Under current law, a corrupt Latin American official can open a bank account in the United States in the name of a Delaware limited liability company. He or she can own the company anonymously, that is, without anyone, in Delaware or elsewhere, knowing his or her identity. If Global Witness’ expose of American lawyers counseling an investigator posing as the agent of a corrupt minister weren’t enough to persuade lawmakers of the need for the legislation, the April 3 revelations of massive abuses in the use of anonymous shell companies by the International Center for Investigative Journalism should lay to rest any lingering doubts about how critical this legislation is to the fight against not only corruption but terrorism and organized crime as well.
- End secrecy in the U.S. real estate market. Thanks to gaps in U.S. antimoney laundering regulations, corrupt officials in Latin America (and elsewhere) can use the proceeds of corruption to secretly buy property in the United States. Requiring real estate agents, title insurance companies, and others involved in the purchase and sale of condominiums, houses, and other U.S. real estate to comply with the antimoney laundering rules will expose attempts by corrupt officials to create a “safe haven” for when they leave office. The Treasury Department took a small, first step in this direction in January when it issued an emergency order (in response to a New York Times’ expose) requiring title insurance companies in Manhattan and Miami-Dade Country to apply the antimoney laundering rules to all real estate purchases over $1 million in cash for the next six months. The rule should be made permanent and extended to all regions. Since 2002 the Treasury Department has given real estate brokers a “temporary” exemption from the antimoney laundering rules while it studies their situation. The time for study is over. The Department should follow the European Union’s lead and require brokers to comply with the antimoney laundering rules.
The burden of ridding Latin America of the corruption that infests so many of its governments remains first and foremost the responsibility of its governments. But the United States has much to gain if they succeed, and there is much it can do to help them. The steps above are a modest beginning; it should move on them expeditiously.
GAB | The Global Anticorruption Blog 
Hear hear! I agree wholeheartedly with just about all of this. But I’m pessimistic that we’ll see much progress on anything that requires congressional action (such as recommendations 1 and 4), at least in the current political climate. Fortunately, it seems that other recommendations (2, 3, and 5) could be done by the executive branch without additional congressional authorization or resources.
Actually, on recommendation #5, I’m a little fuzzy on what the Treasury department can do on its own, under existing statutory authority, and what measures might require additional congressional authorization. I’m also a bit fuzzy on what states or municipalities could do on their own. I gather Mayor DeBlasio already took some limited action regarding New York City real estate. Do you have a sense of what, if anything, states or cities could do without additional federal action?
Oh, and by the way, recommendations 1, 4, and 5 don’t seem particularly specific to Latin America. Recommendations 2 and 3 are, at least given how they’re currently worded — but don’t seem like the need to be. I was wondering (a) why you made Latin America specifically the focus of your discussion, and (b) whether your second and third recommendations should be expanded to improve assistance with legal assistance requests coming from other parts of the world as well.
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I wish I had something more substantive to add, but I had to comment to say that I always appreciate the specificity of Rick’s posts–and the ability to highlight those seemingly “boring” changes that I never would have thought about (lacking the experience of a practitioner) and which often (even if not always) seem like realistic “ask”s. I appreciate, too, how these proposals don’t–as Rick says–impinge on sovereignty, while still taking advantage of U.S. power/resources (in that any changes made here could have significant positive–or at least do-no-harm–effects elsewhere).
Katie, thanks for the kudos.
Matthew,
Given the hubbub created by the Panama Papers expose I think chances of Congressional action on the Incorporation Transparency and Law Enforcement Assistance Act, the budget increase for DoJ’s Office of International Affairs, and other matters that will help on the corruption front is more likely than not. Members of both Houses will be looking for ways to align themselves with the general public’s disgust at the revelations. An easy way for a Member to do so would be to add funds for OIA; the press release almost writes itself. (Note to Congressional staff. I would be happy to lend a hand with the release.)
Moreover, publicity usually helps good causes that are being blocked by narrow special interests. If press reports are accurate, passage of the corporate transparency legislation is being held up by officials from a handful of states who fear a loss of revenue if the legislation is approved. Some states will indeed lose revenue, but by any measure the gains to law enforcement efforts to fight corruption, tax evasion, and even terrorism will far outweigh the losses from this dubious source of income. The more public the debate on the costs and benefits of the legislation, the more obvious the cost-benefit calculus and the harder it therefore becomes for opponents to block the bill.
On transparency in real estate transactions, the Treasury Department has the power under 31 U.S.C. §5326 to “issue an order requiring any domestic financial institution or nonfinancial trade or business or group of domestic financial institutions or nonfinancial trades or businesses in a geographic area . . .to obtain such information as the Secretary may describe in such order concerning . . . any transaction in which such financial institution or nonfinancial trade or business is involved for the payment, receipt, or transfer of United States coins or currency. . . .”
My guess is that state and local governments have a great deal of power to order more transparency in real estate transactions. After all, they are the ones with laws governing property registration and transfer taxes. I could see a jurisdiction refusing to register a transaction unless the beneficial owners were disclosed or requiring when a transfer tax is paid that the beneficial owner be disclosed.
You are right that several of the recommendations aren’t Latin American specific. But I was asked to address a group that follows Latin American-U.S. relations. Hence the Latin angle.