Marin Voice: Legislation would help prevent U.S. from being a ‘dirty money’ destination

Throughout the years, important document leaks have illustrated how the super-rich (including corrupt government officials) hide and shuffle money in anonymous entities, trusts and holding companies to disguise their ownership and avoid taxes.

Some have become famous: the Panama Papers, Paradise Papers, Luanda Leaks and Luxembourg Leaks, to name a few.

Those leaked documents revealed a disturbing truth. The No. 1 ultimate destination in the world for “dirty money” isn’t Switzerland, the Grand Caymans, the Bahamas or some other offshore tax haven. It is the United States.

The 20th International Anti-Corruption Conference recently concluded in Washington, D.C. It was attended by 2,100 passionate and determined corruption fighters from over 120 different countries, including the United States, Canada and Europe as well as notoriously corrupt countries such as Mali, Nigeria, Brazil, the Philippines and Peru.

The collective message was clear: Corruption is a scourge that undermines trust in government, increases poverty and inequality. It hinders world efforts to address our most pressing issues, including hunger, health care, human rights, economic migration and climate change. But equally clear was the message that the tide is turning in the fight against corruption. Great strides have been made in identifying and catching corrupt actors, identifying dirty money and its proceeds and recovering those assets for the benefit of the citizens from which it was stolen.

The revelations in the Panama Papers and other disclosures provide a road map for the remaining work to be done. Since the adoption of the Patriot Act in 2001, banks that do business in the United States have been subject to strict “know your customer” laws that require banks to perform due diligence regarding the identity of their customers and their customers’ source of funds before accepting deposits.

However, these same rules have never been extended to hedge-fund managers, attorneys, accountants, art dealers, real estate agents and other professionals who are in the position to enable corrupt foreign officials and criminals to acquire real estate, corporate stock, artwork and other valuable U.S. assets. As a result of this giant loophole, dirty foreign money has flooded the United States.

A bipartisan group of lawmakers including Rep. Joe Wilson (R-South Carolina) and Rep. Tom Malinowski (D-New Jersey), managed to include a bill called the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act into the National Defense Authorization Act.

The NDAA is a broad national defense policy bill passed by Congress every year. The ENABLERS Act would require trust companies, hedge-fund managers, lawyers, art dealers and other professional “gatekeepers” to investigate clients and their sources of money, as well as to report suspicious activity to the U.S. Treasury Department. These are the same rules that banks have followed for 20 years.

Shamefully, this much needed reform is opposed by the American Bar Association which argued in a letter to Congress that “if lawyers are required to submit SARs on their clients … this will jeopardize lawyers’ unique ability to prevent money laundering and other illicit activities before they occur.”

Coincidentally, the current ABA president and author of that letter is Deborah Enix-Ross. The Pandora Papers revealed that her law firm, Debevoise and Plimpton, has represented offshore companies owned by close associates of Russian President Vladimir Putin as well as companies owned by associates of corrupt government officials of Kazakhstan.

The ABA is a member of the International Bar Association, whose legal director, Sara Carnegie, expressed puzzlement at the ABA’s opposition to the ENABLERS Act while speaking at the IACC, noting that European attorneys complied with similar requirements without difficulty.

Jake Sullivan, the national security advisor, announced the Biden administration’s support for the ENABLERS Act for the first time at the IACC. However, in part due to the opposition of the ABA and other professionals fearing passage of the act will negatively affect their income, passage by the Senate is in jeopardy.

If you believe it is overdue for attorneys, hedge-fund managers and other professionals to exercise the same due diligence as banks, while refusing to do business with corrupt foreign officials and criminal organizations, please call or email the offices of California Sens. Dianne Feinstein and Alex Padilla.

Former Sausalito Mayor Ron Albert is principal at the Albert Law Corporation.