Government officials who steal “vast quantities” of their citizens’ money need help hiding the loot. The first generation of kleptocrats — the Ferdinand Marcoses, Mobutu Sese Sekos, and Sani Abachas of the world – showed that the preferred way is to retain someone to surreptitiously move the money into a safe haven abroad and then invest it in assets that cannot be traced back to them. The anticorruption community calls these accomplices to grand corruption “enablers,” for they enable corrupt officials to hide their money.
The international community has begun cracking down on this professional class of crooks. The primary means has been through making them subject to domestic anti-money laws. Just as the laws of virtually all countries require banks and other financial institutions to take particular care (“enhanced due diligence”) before accepting as a customer current or former senior government officials or their family members or close associates and to report any suspicious transaction these “politically exposed persons” conduct, the Financial Action Task Force recommendations 22, 23, and 28 require the same from lawyers, accountants, real estate agents and others with the professional skills required to hide stolen assets. FATF has no power to compel countries to transpose these recommendations into domestic law. It relies instead on the peer pressure generated by regular, highly publicized reports on individual nation’s compliance with them.
That system has now ground to a halt. According to the Financial Review, the reason is fierce opposition from Australian lawyers and real estate agents to what a FATF review of Australian compliance with the anti-money laundering recommendations would reveal. For 13 years the two have blocked the extension of the Australian anti-money laundering rules to their activities; last November a scheduled FATF review was about to finally call them out. It was then suddenly cancelled. The only explanation given was that FATF had decided “to temporarily pause the start of all scheduled follow-up assessments pending the outcomes of the strategic review of FATF currently underway.” Although FATF acknowledged discussing the review at its February 2020 meeting, no details about what the review would cover or when it would be completed was provided. In the meantime, professions in the United States, Canada, and other nations (here, here, and here) who oppose extending anti-money laundering rules to their activities can breathe easier. So can kleptocrats wanting to tap their expertise in hiding money.