Tag Archives: enablers

Working Smarter, Not Harder: Using Secondary Sanctions to Strengthen the Global Magnitsky Act

Posted on by
4

Arkady Rotenberg, Vladimir Putin’s childhood judo partner, is living large. Despite using his relationship with Putin to facilitate state capture, gaining lucrative contracts for everything from constructing the bridge between Russia and Crimea to hosting spurious “anticorruption trainings” for state employees, and being subject to American sanctions since 2014, Rotenberg maintains extensive links with the global economy. He has used Deutschebank to move millions of dollars out of Russia, channeled investments through a technology firm co-owned with a member of the British royal family, and hired a well-connected Monegasque lawyer to manage his taxes and PR. Rotenberg is not alone: Corrupt officials around the world, and their cronies, use Western professional service providers to facilitate their use of corrupt funds.

The United States has a powerful and under-utilized tool to control connections between corrupt officials and the professionals service providers who enable them: the Global Magnitsky Act (sometimes shortened to “GloMag”), which authorizes the U.S. government to impose targeted sanctions on individuals engaged in serious human rights abuses and/or high-level corruption. To date, the U.S. has imposed GloMag sanctions on 299 persons deemed to have been involved in official corruption. Yet despite some high profile successes (see here, here, and here), critics have pointed out that GloMag remains too limited in scope to seriously impact many of its targets. Sanctions against corrupt officials remain mostly unilateral tools, with governments often failing to coordinate their sanctions, leaving opportunities for evasion (see here and here). And while GloMag has inspired similar efforts by 35 additional countries, many of these governments—and the European Union—use GloMag-inspired programs only to target human rights abusers, not those engaged in grand corruption (see here and here).

There have been proposals to increase the comprehensiveness of GloMag sanctions, ranging from simply listing more corrupt officials to convincing the EU to broaden its sanctions regime to cover those engaged in high-level corruption. While these are worthwhile efforts, the United States possesses an extremely powerful tool that it could use unilaterally to drastically increase the heft of GloMag sanctions, one which is already authorized by statute and executive order: secondary sanctions. Secondary sanctions are sanctions that are imposed on a set of persons or entities that transact with an individual who is subject to primary sanctions under GloMag or a comparable regime. The U.S. can and should impose secondary sanctions on the professional service providers (such as accountants, wealth managers, bankers, and real estate agents) that provide individuals covered by GloMag sanctions with the services they need to launder the proceeds of their corruption. Under such a regime, for example, if Deutchebank helps Arkady Rotenberg (already the target of sanctions) to move his money around the world, then the U.S. would also sanction Deutschebank—restricting its ability to transact using U.S. dollars, a disastrous outcome for many firms.

Continue reading →

Guest Post: Model Open Government Partnership Commitments for Fighting Kleptocracy

Posted on by
Reply

Today’s guest post is from Jodi Vittori, Professor of Practice at Georgetown University:

This past January, I authored a report, co-sponsored by the Open Government Partnership (OGP) and the National Democratic Institute, entitled “Committing to Combat Kleptocracy: A Guide for Open Government Partnership Members.” The report explains how various kleptocrats and their “enablers” move illicit assets from the country where they were stolen to the locations where they will be stored and enjoyed. The report also discusses how kleptocracy undermines not only the countries where the assets were stolen, but also the transit or destination points for kleptocratic money, people, and other resources.  While it might seem like an infusion of money, assets, and rich people into a given country might be a benefit for that country (putting aside the moral issues), it turns out that these inflows have real drawbacks for the host state, contributing to governance backsliding, facilitating real estate manipulation and industrial asset stripping, exacerbating migration challenges, and undermining national security. The role of Russia’s kleptocracy in election interference in the West, as well as the corruption associated with China’s Belt and Road Initiative, have helped put the role kleptocratic inflows play in receiving states in the spotlight.

The OGP’s open government principles—to which all OGP member governments commit—are a set of norms that, if honored and implemented, will help countries fight back against inflows of kleptocratic assets. At the most basic level, the OGP stresses the importance of making relevant, usable, and timely information on governments available to citizens and civil society to hold their governments accountable. This helps ensure that public resources are managed transparently, fairly, and equitably. The report develops this further by outlining a series of model OGP commitments for consideration by governments and citizen activists, including the following: Continue reading →

New Podcast Episode, Featuring Panel Discussion on Professional Enablers

Posted on by
Reply

A new episode of KickBack: The Global Anticorruption Podcast is now available.  This episode features a panel discussion on the role of so-called “professional enablers” (including lawyers, accountants, consultants, and others) in facilitating corruption, illicit financial flows, money laundering, and related activities. The panelists–Robert Barrington, Guy Beringer, Liz Dávid-Barrett, Tena Prelec–discuss the meaning of the “professional enablers” term, distinguish legal from illegal functions, and discuss the types of corruption-related activities that these service providers might facilitate. The panelists provide a variety of case examples from around the world, focusing particularly on the legal profession, and discuss potential responses, including highr professional standards.

You can also find both this episode and an archive of prior episodes at the following locations:

KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

Guest Post: The Ukraine Crisis Demonstrates (Again) that the U.S. Must Crack Down on Illicit Finance

Posted on by
5

GAB is pleased to welcome back Shruti Shah, the President of the Coalition for Integrity, to contribute today’s guest post:

Like so many of us, I am shocked and horrified by Russia’s invasion of Ukraine and unforgivable attacks on civilian targets. At the same time, I have been encouraged by the resistance to Russia’s unprovoked aggression—most obviously and importantly by the brave Ukrainians defending their homeland, but also by the response of the international community. The United States, the European Union, Canada, the United Kingdom, and other nations have announced coordinated sanctions against Russia, including cutting off major Russian banks from the SWIFT system and preventing Russia’s central bank from drawing on foreign currency reserves held abroad. In addition to sanctions targeted at Russia’s financial system, Western nations have also sought to use targeted sanctions aimed at oligarchs close to President Putin. The Biden Administration also announced a transatlantic task force to ensure the effective implementation of financial sanctions by identifying and freezing the assets of sanctioned individuals and companies and an interagency law enforcement group called KleptoCapture.

This renewed focus on the corruption of the Russian political and economic elite is welcome. Russia’s deep-rooted corruption is one of the reasons that Putin has been free to engage in such outrageous acts. He relies on the security services and corrupt oligarchs to protect him. Oligarchs also serve as his personal wallet. Yet for far too long, these corrupt oligarchs have lived lives of luxury off of ill-gotten wealth, which they have used to purchase luxury property in places like New York and London. Yet while some oligarchs and Russian political figures were already the subject of targeted sanctions prior to the recent attack on Ukraine. Overall the West had been far too complacent. The Ukraine tragedy seems to have prompted Western governments to pay more attention to this problem. Indeed, the new sanctions are significant in both scope and size, and they welcomed by the Coalition for Integrity and most other anticorruption activists around the world.

But there’s more work to be done. It’s time for Western governments to ask some hard questions about how these corrupt elites were able to use their ill-gotten gains to buy luxury property and assets and enjoy their wealth in places like New York and in London for so long, and about the role of Western “enablers” in hiding the sources of their wealth and shielding questionable transactions from scrutiny. And, to turn to more specific priorities for policy reform in the United States, there are three specific things that the U.S. government should do to crack down further on illicit finance and thereby advance the agenda laid out in the White House’s Strategy On Countering Corruption: Continue reading →

New Podcast Episode, Featuring Casey Michel

Posted on by
Reply

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview the American journalist Casey Michel about his new book, American Kleptocracy: How the U.S. Created the Greatest Money Laundering Scheme in History. In our conversation, Casey and I touch on a variety of topics raised by his provocative book, including the dynamics that led to the U.S. and U.S. entities playing such a substantial role in facilitating illicit financial flows (including the nature of American federalism, the broad exceptions to the coverage of U.S. anti-money laundering laws, and the role of U.S.-based “enablers” of illicit finance), the challenges of regulating lawyers and law firms, the role and responsibilities of universities in light of concerns about “reputation laundering” by kleptocrats and others, the impact of the Trump and Biden Administrations in this area, and the challenges of generating and maintaining bipartisan/nonpartisan support for fighting kleptocracy. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Guest Post: Every Bank Robber Needs A Getaway Car; Banker Held Accountable For Money Laundering

Posted on by
2

GAB is pleased to publish this analysis by Emile J. M. Van Der Does De Willebois, Coordinator of the World Bank/UNODC Stolen Asset Recovery Initiative, of the significance of a decision of the Gerechtshof Den Haag, the Dutch appeals court in The Hague. As he explains, for too long authorities in the developed world have ignored the role lawyers, bankers, and other “enablers” play in facilitating corruption in the developing world.  Let us hope that the court’s decision marks a turning point in holding them accountable for their role in corruption crimes.  

Last month, a Dutch appeals court ordered the public prosecutor to initiate the criminal prosecution of the former CEO of the nation’s largest bank. The court directed that Ralph Hamers be put on trial for money laundering and other crimes the Amsterdam-based banking giant ING committed during his seven–year tenure as its chief executive. Financial and legal professionals are rarely prosecuted for crimes they facilitate, and it is even rarer that senior executives, as opposed to the institution they run, are targeted. Until this decision, the indictment of Goldman Sachs bankers for their role in the 1MDB scandal was a notable exception.

The culpability of those who, like the driver in a bank robbery, facilitate a crime is not particularly controversial. We all know that the corruption that happens “over there” needs the services of bankers, lawyers, accountants and other facilitators “over here.” We like to pay lip service to the idea that “it takes two to tango” and acknowledge, at least verbally, that the financial and corporate services in the financial centers of the developed world facilitate the corruption found in large parts of the developing world.

But whether those working on anti-corruption always act upon that notion is another matter. A quick look at the Transparency International corruption perceptions index helps maintain the illusion that the rich developed world is doing well on corruption, and that, looking at the bottom of the table, corruption is really a developing-country problem. We have not really internalized the lessons of the Panama Papers, 1MDB, Danske Bank and, most recently, the FinCEN files, which shone a spotlight on the services provided by banks, lawyers and other professionals in making corruption possible.

Continue reading →