How art dealers, real estate agents and hedge funds promote corruption
If Biden is serious about fighting corruption, he needs to regulate 10 key white-collar professions
Josh Rodolphe. Illustration: SCT
Josh Rodolphe. Illustration: SCT
The problem is that the Treasury has traditionally been reluctant to extend these rules to most white-collar facilitators outside of banks. Particularly for the most ubiquitous and problematic (in terms of corruption) professions – such as real estate agents, lawyers and car dealers – it would take a lot of time, resources and political support to defeat corporate groups. entrenched interests, and regulations should be carefully calibrated to avoid undue economic costs or protracted legal battles. An unfortunate result of this hesitation is that the United States is among only about 10 percent of countries in the world that fail to comply with the international standard on the regulation of facilitators. The Financial Action Task Force, an international standards body, calls this the worst vulnerability in the US financial system. This, in turn, creates a global threat, given that the United States is the world’s largest provider of offshore financial services.
The good news is that this may change now that Washington has recognized corruption as a major threat to national security. Regulating catalysts has become an urgent priority for U.S. lawmakers, law enforcement, and civil society. Biden’s memorandum establishing the fight against corruption as a fundamental national security interest highlighted that “professional service providers allow the movement and laundering of illicit wealth, including in the United States and in d ‘other democracies based on the rule of law “. Likewise, the main political priority identified by the White House was to reform the regulatory structure that governs illicit financing. The US Treasury cited Biden’s memo when it classified corruption as the main US financial threat and specifically warned of the role of “financial facilitators.”
The time to move from rhetoric to implementation will come in December, when the White House unveils its comprehensive anti-corruption strategy and Biden hosts its first of two planned democracy summits. The US Treasury should take the opportunity to launch a major campaign to impose anti-money laundering regulations on non-bank facilitators. The ministry should credibly demonstrate that it is serious by officially announcing that new rules will come into force in 2022 and will cover a first set of professions. It could start with the three white-collar sectors described above: private equity and hedge funds, real estate title insurers and art dealers.
In time for Biden’s second Democracy Summit, slated for late 2022, the administration is set to begin the second half of this campaign, which focuses on the toughest political battles. These include regulating the Four Horsemen of Dirty Money: lawyers, founding agents, accountants, and secret public relations firms. If lawmakers on both sides are uncooperative and prefer to shield these corrupt-prone professions from scrutiny, the administration could focus on the perhaps easier agenda of repealing regulatory exemptions for real estate agents, luxury vehicle sellers and cryptocurrency service providers.
Twenty years ago, Congress’ smartest initial response to the 9/11 attacks was legislation requiring professional facilitators to establish anti-money laundering compliance programs. A year later, unfortunately, the George W. Bush administration granted exemptions for key professions and refocused its energies on the wars in Afghanistan and Iraq. With the Biden administration seeking to take a more effective approach to national security than militarized nation-building attempts, it could do worse than restarting efforts to regulate the catalysts, preventing the United States from being the world’s biggest haven for dirty money, and start showing how democracies can fight crooked opponents and powerful vested interests.
Josh rudolph is a member of the Alliance for Securing Democracy for Malicious Finance.
Disclaimer: This article first appeared on Foreign Policy and is published under a special syndication agreement.