Botching anti-money-laundering move, Biden weakens national security


From the horrors of the withdrawal from Afghanistan, to the collapse of the Iran nuclear deal, to the sluggish support for Ukraine, the Biden administration is broadcasting America’s decline to a global audience.

Next to failures of such historic magnitude, the failed rollout of a technocratic anti-money laundering law may seem insignificant.

But for America’s most dangerous adversaries, it’s open season to exploit the US financial system – with terrifying implications for national security and the safety of all Americans.

The measure was designed to address widespread abuse of US shell companies. These are the escape vehicles from all of today’s financial crime and corruption, allowing a host of bad actors to transfer illicit funds across borders and through our economy with near complete anonymity.

Russian oligarchs use them to evade sanctions and stash stolen wealth. Iran used one to secretly maintain ownership of a skyscraper on Fifth Avenue for two decades and demand rent payments from unsuspecting American tenants.

Above all, shell companies are a major conduit for China’s increasingly aggressive attempts to infiltrate America and undermine our national security – from buying farmland near sensitive locations, to flooding our streets with fentanyl, to stealing high-tech military secrets. .

Chinese President Xi Jinping speaks with Chairman of the National People’s Congress Li Zhanshu during the opening session of the National People’s Congress on March 5, 2023.
AFP via Getty Images

The last major update to America’s antiquated financial defenses was in 2001 USA PATRIOT Lawbut it did not directly address the threat of the empty company.

So after two decades of hand-wringing in Washington, and long after our British, European and Ukrainian allies implemented their own solutions, even the dysfunctional 116th Congress felt compelled to act.

It passed the bipartisan Corporate Transparency Act in January 2021 as part of the National Defense Authorization Act. It requires the owners of shell companies registered in the United States to disclose their true identities, rather than simply naming rogue lawyers or other associates as stooges on the paperwork.

This information is securely stored in a registry maintained by the Treasury Department, accessible only to law enforcement and U.S. banks for the purpose of combating illicit financing.

We know this model works because it is already operational in other countries. In fact, the UK’s leading global registry is accessed almost every day, not only by UK law enforcement officers, but also by US counterparts.

After Congress overruled President Donald Trump’s NDAA veto (one of his last acts in office), the task of implementing this critical national security measure fell to the incoming Biden administration.

So far, so good: President Joe Biden has repeatedly committed throughout his campaign to strong executive action against shell companies as part of his laudable plan to fight corrupt authoritarian regimes.

But fast-forward to February 2023, and not only was Biden’s Treasury Department a year late in delivering his plans for the plan — it inexplicably watered it down to the point of futility.

Under the final rules of Biden’s bureaucrats, law enforcement officers on a state, local and tribal basis — those on the front lines of the fight against fentanyl — will have to process a mountain of paperwork to access information that can be time-critical in saving American lives.

Fentanyl has a negative impact in many communities.

Access by US banks required by law to identify and report suspicious transactions by cartels, terrorists and spies is also severely restricted.

As if that weren’t enough, trusted allies like the United Kingdom, who are happy to share their records with our law enforcement officers, will also be blocked.

Republicans in Congress have worked hard to ensure that the final legislation addresses privacy concerns, unnecessary business burdens and secure access for foreign partners.

But the bureaucratic hurdles put up by Biden’s treasury go far beyond the reasonable safeguards Congress has mandated. And they certainly don’t match Biden’s earlier boast about cracking down on illicit funding.

Biden committed to executive action against shell companies during his campaign.
AP/Patrick Semansky

It appears that the Treasury Department has either botched the process or given in to the demands of corporate lobbyists who instinctively resist new regulations because they care more about personal gain than America’s long-term prosperity and security.

Fortunately, it is not too late for Treasury officials to put this right. They may change their plans to reflect Congressional intent for a more robust anti-money laundering system that helps law enforcement and the private sector work together to keep Americans safe.

If they don’t, the United States will be drastically out of step with allies who are bolstering their own financial defenses.

And that means America becomes an even more attractive place for the cartels to sell fentanyl, for Iran and Russia to get around the sanctions we impose on them, and for China to continue stealing our commercial and military secrets.

Nate Sibley is a research fellow at the Hudson Institute’s Kleptocracy Initiative.

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