The money laundering game
Wilson Quarterly

Spring 2020

OBJECT
Clean your ill-gotten gains from criminal activity. Transform that dirty money to U.S. dollars. Avoid being ensnared by governments playing against you. Stay out of jail.

PLAYERS
Kleptocrats all over the world.
Governments all over the world.

HOW TO PLAY
Move your dirty money step-by-step from its country of origin to the United States. Use it to buy real estate, influence, and a brand-new reputation.

Click the Win and Lose cards.

Make it through all five steps. You win. Everyone else loses.

Hit refresh to start the game again.

Getting Started

Money laundering is no joke. The UNODC estimates 2-5% of global GDP or $800 billion to $2 trillion is laundered each year. But money laundering does have some elements of a game. There are winners and losers.

Who plays this game? Kleptocrats. The term “kleptocracy” derives from the Greek kléptēs (“thief”) and kratia (“rule”). In a kleptocracy, collective criminal behavior is the system. Self-enrichment of oneself at the expense of the common good, and the perpetuation of power are a kleptocrat’s foremost goals.

But kleptocracies can prove too unstable for even the most skilled kleptocrats. One wrong move, and the system that made you rich can push you out of favor. Or into prison. They need a safe place for their assets. Ironically, they need a place where the rule of law provides protections.

That is where the money laundering game begins.

In our globalized world, kleptocracy is no longer bound by geography. Turning dirty money into clean, legitimate, and anonymous funds and assets in the United States can be as easy as clicking a few buttons.

Letting kleptocrats win this game is dangerous and has repercussions both here and abroad. Kleptocrats establish vast networks of influence, and export antidemocratic values and corruption. Their money fuels criminal and terrorist organizations, and poses significant threats to global governance, government accountability and local economies.

While the U.S. wants kleptocrats to lose, it also plays a part in facilitating their corruption. So how can the U.S. fight back? Play harder. Play smarter. New regulatory measures. New collaborative efforts. Push for transparency. Support watchdogs and journalists.

miami2
miami

Exit Lanes

Kleptocracies offer elites a variety of ways to enrich themselves. Opportunities abound. But so do the risks to their ill-gotten assets.

Kleptocrats often need to get their money outside the borders of their home country. What’s in their way? Pesky national and transnational rules that aim to keep dirty money out of the international financial system.

But let’s say you’ve got the will. What’s the way to start?

How to Win

You have a handful of choices.

A good old-fashioned suitcase full of cash. This route is risky, but transfers of hard currency outside of banking networks are anonymous – and cash’s fungibility makes it difficult to trace. Conceal large quantities of cash and ship it in packages that look like gifts. Pack it in a vehicle and smuggle it across the border.

Another option is trade-based money laundering (TBML). Use cross-border trade to disguise the origin of your criminal proceeds. Repeatedly import and export the same high-value commodity. Double invoice. Amass large sums of cash.

Exploit the international banking system’s weaknesses. Given the sheer volume of financial transactions, you can often evade bank regulations and threshold-reporting requirements. Make cash deposits. Seek out merchants and correspondent banks who won’t report required information. Skirt the banking regulations in your home country.

How to Lose

Being sloppy stops you right at the gate. Law enforcement might seize your large quantities of cash at the border. Or bank compliance officers update their anti-money laundering (AML) technology and discover your use of emerging TBML schemes.

The media might also blow the whistle – if they gain access to your financial and business records. A recent investigation by the International Consortium of Investigative Journalists (ICIJ) revealed how Africa’s wealthiest woman (Isabel dos Santos) successfully moved hundreds of millions of dollars of public money out of Angola via offshore companies and tax havens. She is now a formal suspect in a criminal investigation.

While the U.S. has the world’s most comprehensive anti-money laundering regime, there are areas for improvement. The government could strengthen the Foreign Corrupt Practices Act. It could also implement the recommendations made by the Office of Terrorist Financing and Financial Crimes in its National Strategy for Combating Terrorist and Other Illicit Financing to better combat financial crimes by rogue nations, money launderers, and drug kingpins.

Implementing new measures and working in greater coordination with allies to gather intelligence and combat criminal networks and the movement of illicit funds might also help. The United States should adopt the OECD’s Common Reporting Standards to improve international information sharing and staunch the flow of illegal transnational cash flows.

miami
miami

Shell Games

Phew! You successfully got your cash out of the country of origin. Now you need to get it clean – and quick. Your ill-gotten gains are nowhere near safe yet. In fact, your money is still quite vulnerable.

You need a place to harbor your money. A way to legitimize it and obscure its origins.

How to Win

Create anonymous shell companies. In America, “company service providers” – law firms, accountants, and consultants – can set you up with a company, or multiple companies, to hide your wealth in under an hour. Price tag? A few hundred dollars per company. According to the The Financial Secrecy Index, the United States ranks second in financial secrecy after the Cayman Islands, followed by Switzerland, for its offshore financial activities and secrecy.

Anonymous shell companies are essential to kleptocrats. By “layering” the shell companies within one another, discovering the ultimate beneficial owner is difficult, if not impossible.

The U.S is one of the easiest and cheapest places for kleptocrats to form anonymous companies. Obtaining a library card requires more information. In 2012, PlanetMoney setup an offshore company in one day.

You won’t be alone. Nearly two million companies are registered every year in America, by far the most in the world. Wilmington, Delaware is the world’s leading venue for anonymous shell company formation. But you have other options in the U.S. South Dakota, Nevada, Alaska, New Hampshire, Wyoming, Tennessee, and Ohio are all open for business.

In 2004, Pavlo Lazarenko, a former Ukrainian prime minister, was convicted of laundering nearly $114 million in the United States, through a series of shell companies in Wyoming. He was sent to prison in 2009, and released in 2012. But, guess what? He still resides in California as he wages a protracted legal fight to stay.

The revenues received by these states are enormous and addictive. Delaware brings in over $1.3 billion annually in company registration fees. In Nevada, the millions of dollars received from registrations fund teachers’ salaries.

Now that you’ve obscured the origins of your wealth, you have more freedom to move it around.

How to Lose

Oh no! You moved too much money at once. One of your bank deposits exceeds $10,000 and triggers a suspicious activity report. The U.S. Department of Treasury takes notice.

Or foreign authorities are on your trail. The FBI is assisted by international law enforcement partners who produce foreign bank records.

How can the United States put more kleptocrats in the loser column? Congress can finalize passage of Corporate Transparency Act of 2019 (H.R. 2513) and the ILLICIT CASH Act (S.2563) both of which seek to end the abuse of anonymous companies. The White House has expressed support for the House bill, saying that “the Administration believes this legislation represents important progress in strengthening national security, supporting law enforcement, and clarifying regulatory requirements.” In addition, Congress can pass the COUNTER Act (H.R. 2514) to reform the Bank Secrecy Act, strengthening anti-money laundering authorities.

States and municipalities can also tackle the problem by decoupling the funding of education and other essential state funded programs from company registration revenues.

miami
miami
miami
miami

Come In. Stay Awhile.

America isn’t only an easy place to hide your stolen wealth. With enough money, you can actually buy a way to stay.

How to Win

Get a golden visa. Around the world, citizenship is up for sale via “golden visas” – which provide a pathway to citizenship for foreigners through an investment or a monetary fee in the issuing country. In the United States, one can purchase an EB-5 visa for a minimum investment of $900,000 in a so-called targeted employment area.

In other countries, though, residency and paths to citizenship can be far cheaper, and may come with more lax regulation. Foreign residency and citizenship will allow you a measure of safety, somewhere for you and your family to getaway when the pressure rises at home.

Since its inception, the EB-5 visa program has been roiled by stories of fraud. Americans have swindled foreigners. The program has aided foreign criminals. According to a 2016 report by the Government Accountability Office, fraud mitigation is hindered by the government’s inability to review the nearly 14 million pages of supporting documentation received annually associated with the EB-5 program. The lack of investigative resources leaves the program vulnerable to abuse.

Take the case of Jianjun Qiao, a former Chinese official, and his ex-wife Shilan Zhao. In 2009 the pair came to the U.S. on a conditional green card obtained through the EB-5 program. Six years later, the Department of Justice charged the pair with immigration fraud and money laundering for falsifying their marital status and lying about the origin of EB-5 visa-related investment funds that they held.

It turned out the money they used for the investments was stolen in China through fraudulent transactions. Zhao eventually pleaded guilty, while Qiao was recently arrested in Sweden. The couple’s homes in Washington, New York and California, valued at nearly $30 million, were also forfeited.

How to Lose

Reform the EB-5 visa program. In 2019, the government took some welcome steps toward reform, including increases in the minimum investment amounts required: $500,000 to $900,000 for targeted employment areas, and $1 million to $1.8 million for non-targeted employment areas.

How can we ensure more kleptocrats are caught? Invest in the resources needed to properly vet all EB-5 applicants and related projects. More program transparency would also be welcome.

Senators Chuck Grassley and Patrick Leahy recently introduced the EB-5 Reform and Integrity Act of 2019 (S. 2540), and Senator Mike Rounds recently introduced the Immigrant Investor Program Reform Act (S.2778). Both bills, while far from perfect, provide the Department of Homeland Security greater authority to terminate applications where there is fraud, criminal misuse, or a threat to public safety or national security.

miami
miami
miami2

Location. Location. Location.

Now that your money is clean, it’s spendable. There are plenty of professionals in the U.S. who will help you integrate it into the American economy. For one thing, find a good realtor.

Regulations and laws still abound to catch you, though. There are ways to lose the game – even at this point.

How to Win

High-end real estate. Real estate markets in the U.S. are stable and show signs of continued growth.

It also helps that the industry is ripe for exploitation by money launderers. Large amounts of money can be moved in a single transaction. Owner identities are concealed by shell companies. The New York Times reported in 2015 that nearly half of all real estate sales for residential properties that exceeded $5 million each in the previous year were made to shell companies. (The total amount was approximately $4 billion!)

Lack of industry oversight also maximizes chances of success. Real estate agents, brokers, legal firms, and insurance companies traditionally bear minimal responsibility for identifying the ultimate purchaser of a property. The evolving complexity of shell company structures also increases the odds that you’ll fly under the radar.

Take Ukrainian oligarchs Ihor Kolomoisky and Gennadiy Bogolyubov. They allegedly amassed the largest privately-held real estate portfolio in Cleveland, Ohio, controlling over 2.8 million square feet of commercial real estate. They also allegedly purchased ferroalloy companies in Ohio, Kentucky, Michigan, and West Virginia.

How to Lose

Regulators are looking more closely at how the real estate sector facilitates money laundering. In 2016, the Financial Crimes Enforcement Network (FinCEN) issued its first Geographic Targeting Orders (GTOs), temporary measures requiring title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate in two major metropolitan areas, Manhattan and Miami-Dade County. The GTO program now has expanded to include 12 metropolitan areas.

What can help increase the odds that kleptocrats lose? Make the GTO program permanent. The Treasury Department can also expand it, requiring every all-cash real estate purchaser to disclose their identity.

miami

Don’t Relax. Rebrand.

Congratulations! You’ve successfully integrated your ill-gotten gains into the American economy. Did you think no one would notice? You might need a shell of a different sort.

How to Win

So, you’ve gotten your money safely to America. You’re living your best life with your multi-million-dollar condo(s) in downtown Manhattan. You send your children to elite American schools, and eat at 3-star Michelin restaurants every night.

But you can’t get comfortable just yet. Money attracts questions. And outsized wealth of questionable origin makes you stick out like a sore thumb! So how do you buy some peace of mind along with your newfound security?

Whitewash your reputation. Spend some of your cash as a philanthropist. Give to charitable organizations, NGOs, universities, and think tanks.

There are plenty of professionals who can help you. Consultants and PR firms can rebrand you – using traditional or social media campaigns. A helping hand from sympathetic media figures can advance your agenda, or harm a political adversary back home. No questions asked.

How to Lose

Even laundering one’s reputation can be tricky. The formal channels for those who help you, including lobbying on behalf of foreign clients, are regulated by the Foreign Agents Registration Act (FARA). U.S. Department of Justice enforcement of FARA since its inception in 1938 traditionally has been lax. Yet the DOJ recently announced that it would become a priority. And the number of criminal prosecutions of FARA violations has trended significantly upward in the last three years.

Additionally, calls for public disclosure of foreign funding of think tanks and universities are on the rise.

What else can help kleptocrats lose? Increased support for non-governmental organizations and investigative journalism exposing global corruption and the reputation laundering industry.

miami2
miami2

Conclusion

You may have "won" the game of money laundering, but you’ve left a trail of destruction behind you.

You looted your country and lined your own pockets. That means hardship and despair for the people back home. Your actions have weakened both your country’s economy and the government. You’ve hurt average citizens who rely on the tax revenue and foreign aid you have stolen and spirited away.

The ease with which kleptocrats can launder money and place it in America only feeds the problem – and gives a hollow ring to American leaders’ lectures on the importance of good governance. By sheltering stolen money, America threatens democracy abroad, and helps perpetuate authoritarianism and kleptocracy. With funds cleaned and legitimized here, kleptocrats consolidate their power at home, ruling over their countries with conduct antithetical to our supposed values, including political and religious repression and persecution, suppression of free speech, and assassinations abroad.

It’s not only foreigners who pay the price. Americans suffer, too. In New York, Los Angeles, and Miami, real estate prices have skyrocketed. Homes sit vacant. Lower and middle class prospective home buyers get priced out.

Wealthy Americans and corporations also exploit the system by placing their money in American tax havens, as well as offshore ones, hiding their money from authorities and depriving governments at all levels of vital tax revenues.

So, crime does pay for some. Until it doesn’t. The negative externalities wrought by money laundering draws plenty of unwelcome attention from governments and law enforcement agencies. Additionally, watchdogs and investigative outlets like Global Financial Integrity and the ICIJ are exposing the enormous scale of fraud – and the systems that enable it.

Sunlight is the best disinfectant. Naming and shaming should be practice. Congress should pass the Kleptocrat Exposure Act, which will authorize the Secretary of State to publicly reveal the identities of individuals whose visas to the United States were denied due to corruption or human rights abuses. But for every Isabel dos Santos who is exposed, there are more secretly hiding their money in the nearly $700 billion in offshore wealth held in the United States.

While it is an uphill battle, there is good reason to be optimistic. Congress has put forth a spate of bills, supported by members of both parties, aimed at tackling both kleptocracy and America's facilitation of it. The Trump Administration has made strides in anti-money laundering efforts, and many leading 2020 Democratic presidential candidates proposed detailed anti-kleptocracy measures.

Tackling kleptocracy and our role in perpetuating it will be a whole of government and society effort, but by providing authorities the necessary resources and supporting organizations that shine the light on corruption, we can counter kleptocracy and its ill effects both here and abroad.

Getting Started

Money laundering is no joke. The UNODC estimates 2-5% of global GDP or $800 billion to $2 trillion is laundered each year. But money laundering does have some elements of a game. There are winners and losers.

Who plays this game? Kleptocrats. The term “kleptocracy” derives from the Greek kléptēs (“thief”) and kratia (“rule”). In a kleptocracy, collective criminal behavior is the system. Self-enrichment of oneself at the expense of the common good, and the perpetuation of power are a kleptocrat’s foremost goals.

But kleptocracies can prove too unstable for even the most skilled kleptocrats. One wrong move, and the system that made you rich can push you out of favor. Or into prison. They need a safe place for their assets. Ironically, they need a place where the rule of law provides protections.

That is where the money laundering game begins.

In our globalized world, kleptocracy is no longer bound by geography. Turning dirty money into clean, legitimate, and anonymous funds and assets in the United States can be as easy as clicking a few buttons.

Letting kleptocrats win this game is dangerous and has repercussions both here and abroad. Kleptocrats establish vast networks of influence, and export antidemocratic values and corruption. Their money fuels criminal and terrorist organizations, and poses significant threats to global governance, government accountability and local economies.

While the U.S. wants kleptocrats to lose, it also plays a part in facilitating their corruption. So how can the U.S. fight back? Play harder. Play smarter. New regulatory measures. New collaborative efforts. Push for transparency. Support watchdogs and journalists.

Exit Lanes

Kleptocracies offer elites a variety of ways to enrich themselves. Opportunities abound. But so do the risks to their ill-gotten assets.

Kleptocrats often need to get their money outside the borders of their home country. What’s in their way? Pesky national and transnational rules that aim to keep dirty money out of the international financial system.

But let’s say you’ve got the will. What’s the way to start?

How to Win

You have a handful of choices.

A good old-fashioned suitcase full of cash. This route is risky, but transfers of hard currency outside of banking networks are anonymous – and cash’s fungibility makes it difficult to trace. Conceal large quantities of cash and ship it in packages that look like gifts. Pack it in a vehicle and smuggle it across the border.

Another option is trade-based money laundering (TBML). Use cross-border trade to disguise the origin of your criminal proceeds. Repeatedly import and export the same high-value commodity. Double invoice. Amass large sums of cash.

Exploit the international banking system’s weaknesses. Given the sheer volume of financial transactions, you can often evade bank regulations and threshold-reporting requirements. Make cash deposits. Seek out merchants and correspondent banks who won’t report required information. Skirt the banking regulations in your home country.

How to Lose

Being sloppy stops you right at the gate. Law enforcement might seize your large quantities of cash at the border. Or bank compliance officers update their anti-money laundering (AML) technology and discover your use of emerging TBML schemes.

The media might also blow the whistle – if they gain access to your financial and business records. A recent investigation by the International Consortium of Investigative Journalists (ICIJ) revealed how Africa’s wealthiest woman (Isabel dos Santos) successfully moved hundreds of millions of dollars of public money out of Angola via offshore companies and tax havens. She is now a formal suspect in a criminal investigation.

While the U.S. has the world’s most comprehensive anti-money laundering regime, there are areas for improvement. The government could strengthen the Foreign Corrupt Practices Act. It could also implement the recommendations made by the Office of Terrorist Financing and Financial Crimes in its National Strategy for Combating Terrorist and Other Illicit Financing to better combat financial crimes by rogue nations, money launderers, and drug kingpins.

Implementing new measures and working in greater coordination with allies to gather intelligence and combat criminal networks and the movement of illicit funds might also help. The United States should adopt the OECD’s Common Reporting Standards to improve international information sharing and staunch the flow of illegal transnational cash flows.

Shell Games

Phew! You successfully got your cash out of the country of origin. Now you need to get it clean – and quick. Your ill-gotten gains are nowhere near safe yet. In fact, your money is still quite vulnerable.

You need a place to harbor your money. A way to legitimize it and obscure its origins.

How to Win

Create anonymous shell companies. In America, “company service providers” – law firms, accountants, and consultants – can set you up with a company, or multiple companies, to hide your wealth in under an hour. Price tag? A few hundred dollars per company. According to the The Financial Secrecy Index, the United States ranks second in financial secrecy after the Cayman Islands, followed by Switzerland, for its offshore financial activities and secrecy.

Anonymous shell companies are essential to kleptocrats. By “layering” the shell companies within one another, discovering the ultimate beneficial owner is difficult, if not impossible.

The U.S is one of the easiest and cheapest places for kleptocrats to form anonymous companies. Obtaining a library card requires more information. In 2012, PlanetMoney setup an offshore company in one day.

You won’t be alone. Nearly two million companies are registered every year in America, by far the most in the world. Wilmington, Delaware is the world’s leading venue for anonymous shell company formation. But you have other options in the U.S. South Dakota, Nevada, Alaska, New Hampshire, Wyoming, Tennessee, and Ohio are all open for business.

In 2004, Pavlo Lazarenko, a former Ukrainian prime minister, was convicted of laundering nearly $114 million in the United States, through a series of shell companies in Wyoming. He was sent to prison in 2009, and released in 2012. But, guess what? He still resides in California as he wages a protracted legal fight to stay.

The revenues received by these states are enormous and addictive. Delaware brings in over $1.3 billion annually in company registration fees. In Nevada, the millions of dollars received from registrations fund teachers’ salaries.

Now that you’ve obscured the origins of your wealth, you have more freedom to move it around.

How to Lose

Oh no! You moved too much money at once. One of your bank deposits exceeds $10,000 and triggers a suspicious activity report. The U.S. Department of Treasury takes notice.

Or foreign authorities are on your trail. The FBI is assisted by international law enforcement partners who produce foreign bank records.

How can the United States put more kleptocrats in the loser column? Congress can finalize passage of Corporate Transparency Act of 2019 (H.R. 2513) and the ILLICIT CASH Act (S.2563) both of which seek to end the abuse of anonymous companies. The White House has expressed support for the House bill, saying that “the Administration believes this legislation represents important progress in strengthening national security, supporting law enforcement, and clarifying regulatory requirements.” In addition, Congress can pass the COUNTER Act (H.R. 2514) to reform the Bank Secrecy Act, strengthening anti-money laundering authorities.

States and municipalities can also tackle the problem by decoupling the funding of education and other essential state funded programs from company registration revenues.

Come In. Stay Awhile.

America isn’t only an easy place to hide your stolen wealth. With enough money, you can actually buy a way to stay.

How to Win

Get a golden visa. Around the world, citizenship is up for sale via “golden visas” – which provide a pathway to citizenship for foreigners through an investment or a monetary fee in the issuing country. In the United States, one can purchase an EB-5 visa for a minimum investment of $900,000 in a so-called targeted employment area.

In other countries, though, residency and paths to citizenship can be far cheaper, and may come with more lax regulation. Foreign residency and citizenship will allow you a measure of safety, somewhere for you and your family to getaway when the pressure rises at home.

Since its inception, the EB-5 visa program has been roiled by stories of fraud. Americans have swindled foreigners. The program has aided foreign criminals. According to a 2016 report by the Government Accountability Office, fraud mitigation is hindered by the government’s inability to review the nearly 14 million pages of supporting documentation received annually associated with the EB-5 program. The lack of investigative resources leaves the program vulnerable to abuse.

Take the case of Jianjun Qiao, a former Chinese official, and his ex-wife Shilan Zhao. In 2009 the pair came to the U.S. on a conditional green card obtained through the EB-5 program. Six years later, the Department of Justice charged the pair with immigration fraud and money laundering for falsifying their marital status and lying about the origin of EB-5 visa-related investment funds that they held.

It turned out the money they used for the investments was stolen in China through fraudulent transactions. Zhao eventually pleaded guilty, while Qiao was recently arrested in Sweden. The couple’s homes in Washington, New York and California, valued at nearly $30 million, were also forfeited.

How to Lose

Reform the EB-5 visa program. In 2019, the government took some welcome steps toward reform, including increases in the minimum investment amounts required: $500,000 to $900,000 for targeted employment areas, and $1 million to $1.8 million for non-targeted employment areas.

How can we ensure more kleptocrats are caught? Invest in the resources needed to properly vet all EB-5 applicants and related projects. More program transparency would also be welcome.

Senators Chuck Grassley and Patrick Leahy recently introduced the EB-5 Reform and Integrity Act of 2019 (S. 2540), and Senator Mike Rounds recently introduced the Immigrant Investor Program Reform Act (S.2778). Both bills, while far from perfect, provide the Department of Homeland Security greater authority to terminate applications where there is fraud, criminal misuse, or a threat to public safety or national security.

Location. Location. Location.

Now that your money is clean, it’s spendable. There are plenty of professionals in the U.S. who will help you integrate it into the American economy. For one thing, find a good realtor.

Regulations and laws still abound to catch you, though. There are ways to lose the game – even at this point.

How to Win

High-end real estate. Real estate markets in the U.S. are stable and show signs of continued growth.

It also helps that the industry is ripe for exploitation by money launderers. Large amounts of money can be moved in a single transaction. Owner identities are concealed by shell companies. The New York Times reported in 2015 that nearly half of all real estate sales for residential properties that exceeded $5 million each in the previous year were made to shell companies. (The total amount was approximately $4 billion!)

Lack of industry oversight also maximizes chances of success. Real estate agents, brokers, legal firms, and insurance companies traditionally bear minimal responsibility for identifying the ultimate purchaser of a property. The evolving complexity of shell company structures also increases the odds that you’ll fly under the radar.

Take Ukrainian oligarchs Ihor Kolomoisky and Gennadiy Bogolyubov. They allegedly amassed the largest privately-held real estate portfolio in Cleveland, Ohio, controlling over 2.8 million square feet of commercial real estate. They also allegedly purchased ferroalloy companies in Ohio, Kentucky, Michigan, and West Virginia.

How to Lose

Regulators are looking more closely at how the real estate sector facilitates money laundering. In 2016, the Financial Crimes Enforcement Network (FinCEN) issued its first Geographic Targeting Orders (GTOs), temporary measures requiring title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate in two major metropolitan areas, Manhattan and Miami-Dade County. The GTO program now has expanded to include 12 metropolitan areas.

What can help increase the odds that kleptocrats lose? Make the GTO program permanent. The Treasury Department can also expand it, requiring every all-cash real estate purchaser to disclose their identity.

Don’t Relax. Rebrand.

Congratulations! You’ve successfully integrated your ill-gotten gains into the American economy. Did you think no one would notice? You might need a shell of a different sort.

How to Win

So, you’ve gotten your money safely to America. You’re living your best life with your multi-million-dollar condo(s) in downtown Manhattan. You send your children to elite American schools, and eat at 3-star Michelin restaurants every night.

But you can’t get comfortable just yet. Money attracts questions. And outsized wealth of questionable origin makes you stick out like a sore thumb! So how do you buy some peace of mind along with your newfound security?

Whitewash your reputation. Spend some of your cash as a philanthropist. Give to charitable organizations, NGOs, universities, and think tanks.

There are plenty of professionals who can help you. Consultants and PR firms can rebrand you – using traditional or social media campaigns. A helping hand from sympathetic media figures can advance your agenda, or harm a political adversary back home. No questions asked.

How to Lose

Even laundering one’s reputation can be tricky. The formal channels for those who help you, including lobbying on behalf of foreign clients, are regulated by the Foreign Agents Registration Act (FARA). U.S. Department of Justice enforcement of FARA since its inception in 1938 traditionally has been lax. Yet the DOJ recently announced that it would become a priority. And the number of criminal prosecutions of FARA violations has trended significantly upward in the last three years.

Additionally, calls for public disclosure of foreign funding of think tanks and universities are on the rise.

What else can help kleptocrats lose? Increased support for non-governmental organizations and investigative journalism exposing global corruption and the reputation laundering industry.

Conclusion

You may have "won" the game of money laundering, but you’ve left a trail of destruction behind you.

You looted your country and lined your own pockets. That means hardship and despair for the people back home. Your actions have weakened both your country’s economy and the government. You’ve hurt average citizens who rely on the tax revenue and foreign aid you have stolen and spirited away.

The ease with which kleptocrats can launder money and place it in America only feeds the problem – and gives a hollow ring to American leaders’ lectures on the importance of good governance. By sheltering stolen money, America threatens democracy abroad, and helps perpetuate authoritarianism and kleptocracy. With funds cleaned and legitimized here, kleptocrats consolidate their power at home, ruling over their countries with conduct antithetical to our supposed values, including political and religious repression and persecution, suppression of free speech, and assassinations abroad.

It’s not only foreigners who pay the price. Americans suffer, too. In New York, Los Angeles, and Miami, real estate prices have skyrocketed. Homes sit vacant. Lower and middle class prospective home buyers get priced out.

Wealthy Americans and corporations also exploit the system by placing their money in American tax havens, as well as offshore ones, hiding their money from authorities and depriving governments at all levels of vital tax revenues.

So, crime does pay for some. Until it doesn’t. The negative externalities wrought by money laundering draws plenty of unwelcome attention from governments and law enforcement agencies. Additionally, watchdogs and investigative outlets like Global Financial Integrity and the ICIJ are exposing the enormous scale of fraud – and the systems that enable it.

Sunlight is the best disinfectant. Naming and shaming should be practice. Congress should pass the Kleptocrat Exposure Act, which will authorize the Secretary of State to publicly reveal the identities of individuals whose visas to the United States were denied due to corruption or human rights abuses. But for every Isabel dos Santos who is exposed, there are more secretly hiding their money in the nearly $700 billion in offshore wealth held in the United States.

While it is an uphill battle, there is good reason to be optimistic. Congress has put forth a spate of bills, supported by members of both parties, aimed at tackling both kleptocracy and America's facilitation of it. The Trump Administration has made strides in anti-money laundering efforts, and many leading 2020 Democratic presidential candidates proposed detailed anti-kleptocracy measures.

Tackling kleptocracy and our role in perpetuating it will be a whole of government and society effort, but by providing authorities the necessary resources and supporting organizations that shine the light on corruption, we can counter kleptocracy and its ill effects both here and abroad.

Research and Writing:

Morgan Jacobs – Program Associate, Kennan Institute
Jemile Safaraliyeva – Program Assistant and Assistant to the Director, Kennan Institute

Cover Design:

Kathy Butterfield, Wilson Center

Visual Concept and Design:

Marquee , published with Proof.