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Biden Is Flagging on Kleptocracy

The U.S. administration is losing focus on global corruption.

A U.S. $100 bill is placed on a stack of Syrian pounds
A U.S. $100 bill is placed on a stack of Syrian pounds at a market in Qamishli, Syria, on Sept. 10, 2019. Delil Souleiman/AFP via Getty Images

U.S. President Joe Biden was supposed to be the anti-kleptocracy president—the man who, after the sleaze and foreign cash of the Donald Trump presidency, was going to finally end the United States’ reputation as a target for money laundering. And Jake Sullivan was supposed to be the anti-kleptocracy national security advisor, promising “to rally our allies to combat corruption and kleptocracy.” Fighting illicit finance at home and abroad was a core plank of the administration’s “foreign policy for the middle class.” But nearly a year after the election, there is a growing sense of disappointment and frustration in the anti-corruption community.

The first disappointment is the administration’s planned Summit for Democracy, envisaged as a grand summit where democratic leaders would come and make real pledges to fight back international corruption. Yet it has shrunk from a flagship event into little better than a Zoom call with Biden in December. There’s no clear list of invitees, and instead of plans for a firm commitment on the day to tackle global kleptocracy, there is talk of foreign countries bringing vague proposals, with a follow-up summit after a “year of implementation," according to one State department official.

Without leadership from the White House, the summit has turned into another nongovernmental organization engagement merry-go-round useful to neither the administration nor anti-corruption activists. The lackluster engagement with the United Nations General Assembly special session on corruption has been a taste of things to come.

U.S. President Joe Biden was supposed to be the anti-kleptocracy president—the man who, after the sleaze and foreign cash of the Donald Trump presidency, was going to finally end the United States’ reputation as a target for money laundering. And Jake Sullivan was supposed to be the anti-kleptocracy national security advisor, promising “to rally our allies to combat corruption and kleptocracy.” Fighting illicit finance at home and abroad was a core plank of the administration’s “foreign policy for the middle class.” But nearly a year after the election, there is a growing sense of disappointment and frustration in the anti-corruption community.

The first disappointment is the administration’s planned Summit for Democracy, envisaged as a grand summit where democratic leaders would come and make real pledges to fight back international corruption. Yet it has shrunk from a flagship event into little better than a Zoom call with Biden in December. There’s no clear list of invitees, and instead of plans for a firm commitment on the day to tackle global kleptocracy, there is talk of foreign countries bringing vague proposals, with a follow-up summit after a “year of implementation,” according to one State department official.

Without leadership from the White House, the summit has turned into another nongovernmental organization engagement merry-go-round useful to neither the administration nor anti-corruption activists. The lackluster engagement with the United Nations General Assembly special session on corruption has been a taste of things to come.

What this speaks of is something more concerning than just one lackluster summit. Can U.S. foreign policy focus on more than one thing? The administration certainly wants us to think it can. The decision to break with the Trump-era phrase “great-power competition” and speak of “strategic competition” instead when it comes to China is supposed to signal improving domestic standards and values as part of its geopolitics. Letting the kleptocracy agenda quietly slide does not back that up. It shows a worrying continuity of the worst of the Obama administration (perhaps unsurprisingly given the Biden administration’s personnel): an inability to pursue more than one agenda at the same time.

The second disappointment is bureaucratic. While activists were originally cheered by Sullivan’s anti-kleptocracy comments and by the placing of officials committed to the issue on the National Security Council, the priorities of this administration are revealing themselves—to the detriment of the fight against corruption. As the drama around the new U.S.-U.K.-Australian defense deal revealed, real foreign-policy decisions are being made by Kurt Campbell’s China team on the National Security Council, with both the Europeanists on the body and the Francophone Secretary of State Antony Blinken left flat-footed. While Sullivan’s rhetoric might have pleased activists, his strategic focus has been almost entirely on China. This bureaucratic myopia extends to the closely watched reorganization of the CIA, again prioritizing competition with Beijing. This was a real disappointment to those working in Congress: “Sadly, nothing on illicit finance or corruption in the CIA re-org,” tweeted Paul Massaro, a policy advisor for the Commission on Security and Cooperation in Europe, better known as the Helsinki Commission. “Big mistake. The intel community has to get serious about identifying and disabling corrupt networks.”

And at the Treasury Department, Secretary Janet Yellen’s prioritization of international tax reform has not highlighted anti-corruption efforts. There is dissatisfaction among activists at a lack of corruption-focused senior staffing choices and a sense that engagement with lobbyists is being prioritized when it comes to drafting the terms of implementing the abolition of anonymous shell companies in the 2020 National Defense Authorization Act (NDAA). More broadly, there is fear of a repeat of what happened with anti-kleptocracy efforts under the Obama administration, where a complex issue that required coordination among multiple departments lacked a champion and so failed to make headway. The whispers are not good.

The third disappointment is to do with the enablers: the term for American professionals who are not covered in whole or in part by existing anti-money laundering legislation, leaving them free to advise and enable illicit actors at home and abroad. Despite the significant expansion of the role of the Financial Crimes Enforcement Network (FinCEN) in the 2020 Anti-Money Laundering Act, no new regulations have passed in the U.S. Congress or from the White House to enforce better compliance on private equity firms and similar institutions. At present, over 90 percent of countries require nonbank enablers to have their own anti-money-laundering programs as banks do, but the United States is not one of them.

Events are now catching up with the administration after the explosive revelations in the Pandora Papers, which show to what extent the United States itself is now operating as a platform for the world’s shadiest financial transactions. The Washington Post reported this week that U.S. trust advisors helped a Colombian kleptocrat launder funds and two Ecuadorian kleptocrats hide millions of dollars in stolen government money. The administration has found itself behind the curve. Despite months of rumors that the Biden administration was planning to begin to take action on the enablers, there is now fear the White House has parked the issue. The strong signal that such a rule change is coming is nowhere to be seen. Worse still, there was barely any audible White House reaction to the Pandora Papers.

These revelations have again shown that Congress, not the administration, seems more focused on corruption. As the revelations broke, Reps. Tom Malinowski, Maria Elvira Salazar, Steve Cohen, and Joe Wilson introduced a bipartisan piece of legislation dubbed the ENABLERS Act to crack down on its professional namesakes. If passed, this would mark the biggest change to U.S. anti-money laundering rules since 9/11. But it lacks real White House support.

This comes off the back of a growing frustration by Democrats. Malinowski and Democratic Sen. Sheldon Whitehouse have urged Yellen to implement a proposed 2015 FinCEN rule to make investment advisors establish anti-money laundering programs. This rule could easily be applied, or ideally reworked and expanded and applied, by the administration. Yet the White House has not given a strong sign of support or done the political groundwork to engage with these sectors. As a result, there is growing confidence among enablers—and palpable disappointment on sections of the left that rallied to the Biden administration’s promise of action on malign finance.

And yet, the Biden administration could claim that it has taken more action on anti-kleptocracy than any previous administration, and this would be true. It could state that Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest is ongoing and due to be completed in December. This would again be true. But it would also be incomplete. The scale of the problem is so vast—the Treasury has estimated that $300 billion, or roughly 2 percent of GDP, is laundered in the United States every year—that these measures are nowhere near enough, and the vested interests are so politically and financially powerful that a huge amount of work would need to be put in to force meaningful reform through. To be sure, there are many demands on the administration’s energy—but anti-corruption touches on both domestic reform and foreign policy in a way few other issues do.

Most worrying is the sense the administration is missing a political moment. The House recently approved the annual NDAA with six anti-kleptocracy acts promoted by the new bipartisan anti-kleptocracy caucus, covering actions from expanding Magnitsky sanctions to recovering stolen assets. Like the 2021 NDAA, which began the process of banning anonymous shell companies in the United States, a majority in the Senate will probably support it. The administration should appreciate this is a rare area of bipartisan accord and a congressional opening for its agenda.

The Biden team needs to throw its weight behind these efforts now, taking advantage of the momentum of the Pandora Papers and of the interagency review in December. The White House should move quickly not to let this go the way of the Summit for Democracy. Firstly, it should revive plans for an empowered White House coordinator for anti-corruption, giving the agenda a visible champion. There were once hopes in the anti-corruption community that such a post would be filled by a heavy hitter like Matt Duss, the foreign policy advisor to Sen. Bernie Sanders. The White House should demand that the Treasury prioritize the issue, immediately implement the proposed 2015 FinCEN rule covering investment advisors, and pave the way for a major legislative push against the enablers along the lines outlined in a new report by the researcher Josh Rudolph. Finally, it should separate the fight against kleptocracy from the doomed Summit for Democracy process and launch a new coalition of the willing centered on the United States, European Union, and United Kingdom—a Global Kleptocracy Initiative, as outlined in a report for the Center for American Progress by Trevor Sutton and myself—that can organize a real collective push for domestic reforms, coordinating, and capacity building.

Climate and China are big challenges for the Biden administration—but global kleptocracy could actually be the one it solves. Corruption’s role in shaping the global commons is not a distraction from great-power competition with Russia and China but complementary to it in a world of electoral interference and the globalization of aspects of authoritarian corruption and deal-making in projects such as China’s Belt and Road Initiative.

While most foreign-policy challenges, from climate change to those with Russia’s Vladimir Putin or China’s Xi Jinping, are chronic, the United States has the power to unilaterally vastly reduce the space afforded to global kleptocrats thanks to the role of the U.S. dollar as a global reserve currency. An issue like this deserves both institutional champions and the highest priority in the bureaucratic process of government.

 

Ben Judah is a British-French journalist and the author of This Is London and Fragile Empire.

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