A recent op-ed in the Washington Post has all the earmarks of blatant government overreach disguised as national security advocacy. The op-ed, Congress is Letting International Money Launderers off the Hook supports the so-called ENABLERS Act and hits all the key words – “Putin,” “kleptocrat,” “ill-gotten gains,” “basic due diligence” – on the partisan FACT Coalition bingo card. What it fails to do is explain how the bill will make Americans safer or our financial system more secure.
The photo accompanying the story is a good example of just how badly the law will fail. It shows the massive yacht Amadea, which is stuck in a dispute between the US government and its putative owners. As the website Autoevolution summarizes:
That seems to be the case with Amadea, the stunning $325 million superyacht that crossed the Pacific a few weeks ago, allegedly seeking a safe haven. The U.S. authorities tried to pounce on it as soon as it arrived in Fiji, claiming that it’s owned by Suleiman Kerimov, known as Russia’s gold tycoon.
The High Court in Suva ordered that Amadea could not leave Fiji until the U.S. claims were settled. But in a new plot twist, Kerimov’s defense lawyer is apparently claiming that the vessel is owned by another Russian mogul, Eduard Khudainatov, who happens to not be sanctioned.
So U.S. officials have a sanctioned target in mind, they have an valuable asset within a friendly jurisdiction, and they still can’t close the deal? How exactly is the ENABLERS Act going to fix this? It is not. At its core, ENABLERS relies on criminals, including the lawyers and other financial professionals who assist them, to voluntarily provide an accurate picture of their activities to Treasury. As we’ve noted previously, Tony Soprano is not going to self-report his crimes. Nor will his crooked attorney Neil Mink.
The irony is that Congress has already passed rules that take a more practical and effective “follow the money” approach. The Customer Due Diligence (CDD) rules that took effect in 2018 require banks to verify the identities of anyone with a 25-percent ownership stake in a client company, as well as at least one executive officer with significant control over the entity or managerial responsibilities.
Instead of building on the CDD, Congress snuck the Corporate Transparency Act (CTA) into the 2020 National Defense Authorization Act (NDAA). The CTA shifts the core CDD reporting requirements from the banks to their customers. Beginning in 2024, more than 32 million Main Street businesses and others will be required to report their owners’ personal information to Treasury or face fines and years in prison, all under the assumption that a few of them may be engaged in financial crimes.
Now Congress is rushing to sneak another reporting requirement into this year’s NDAA. Proponents of the ENABELRS Act argue the bill will target so-called gatekeepers like lawyers and financial professionals who help facilitate illicit transactions. But a plain reading of the House-passed bill makes clear the provision would impact any business that engages in a wide array of mundane and commonplace activities, such as forming a business or processing payments.
The case for rushing to enact the ENABLERS Act is undermined by the complete lack of a legislative record. If the ENABLERS Act is so important, why has so little attention been paid to it? No hearings, no markups, no floor debates. Instead, the language was tucked into the House NDAA (sound familiar?) at the last minute as part of a larger block of hundreds of provisions.
That’s hardly a process that promises an effective or just law. But then the ENABLERS Act and the Corporate Transparency Act that preceded it are not about just results any more than they are about catching Russian oligarchs.
We understand why the FACT Coalition supports the ENABLERS Act. They want to create a database to “name and shame” business owners whose politics they disagree with. What we don’t understand is why Republicans like Senator Roger Wicker are helping them. The burden of this legislation, as with the CTA before it, will fall on millions of law-abiding small business owners in Mississippi and elsewhere, not Russian oligarchs.
The best defense against money laundering and terrorism financing is to follow the money. Let’s stick with that approach and leave Main Street alone.