During the closing weeks of September’s legislative session, the House passed a bipartisan bill to sanction nearly 200 close cronies of Putin. The bill comes on top of President Biden’s aggressive actions to freeze the assets of hundreds of top Russian oligarchs and officials connected to Putin and his war in Ukraine.
We strongly support these steps. But their effectiveness is limited by a huge gap in our sanctions efforts: You can’t freeze accounts and assets when you don’t know where they are.
When Putin’s friend and multi-billionaire Roman Abramovich wanted to hide his assets over the past two decades, he didn’t just buy yachts and British soccer clubs. He quietly turned to American investment vehicles. The New York Times reports that Abramovich used a string of Caribbean shell companies under the guidance of a Connecticut-based private equity advisor to place millions of dollars in a variety of U.S.-based investment funds. He knew that those investment funds had no legal obligation to ask if his money was being laundered or if it was linked to criminal corruption.
U.S. law requires banks to look out for signs that incoming funds are being laundered, and banks regularly issue suspicious activity reports (SARs) when that happens. Some of these requirements were put in place after 9/11 to prevent terrorists from using cash transfer services to move money across borders. Today, they help enforce sanctions against countries like Russia.
For example, the Pittsburgh Post-Gazette reported this year that the Bank of New York Mellon issued several SARs to federal authorities over transactions linked to Putin-connected oligarch Vladimir Potanin, a “61-year-old billionaire who runs one of the largest nickel companies in the world.”
But what would have happened if Potanin’s American lawyers, accountants, and advisors had suggested that he rout his money to a private equity fund, hedge fund, or a trust instead of a bank?
Likely nothing. Without action by Congress, this Russian oligarch’s transfer of dirty money to the United States would have been cleared for smooth sailing, with no questions asked by his American facilitators.
That’s a loophole that foreign kleptocrats can literally sail a yacht through.
These due diligence loopholes directly undermine America’s effort to help Ukraine by sanctioning Russia. It’s likely that Putin, via his cronies and anonymously owned shell companies, continues to accrue interest in investment vehicles inside the United States. Since many American facilitators or “enablers” of these investments are under no legal obligation to ask questions about suspicious funds, federal investigators have no sure way of knowing the money is here.
That is, unless Congress is willing to act.
We’re leading a bipartisan effort to close those loopholes that Putin’s cronies and other criminals and kleptocrats have used to launder money into America. And our bill is moving: It was passed by the House as part of the annual defense bill and has bipartisan backing in the Senate.
The ENABLERS Act would allow the Treasury Department to impose on U.S.-based middlemen—investment advisers, certain legal advisors and accountants, and those who form companies or trusts—the same simple due diligence requirements that banks have to meet.
For too long, the United States has held the crown as the world’s top destination for dirty money. Most Western countries are way more transparent than us, many with due diligence standards that American officials drafted and demanded they follow after 9/11, even as our own laws remained out of date.
We run a system that allows crooks to steal money in countries without the rule of law and then move it to the United States, where our property rights, courts and privacy rules help them stow away their loot for life.
Amid Russia’s brutal attack on Ukraine, the United States can no longer remain complicit in the theft that sustains and enables dictatorships like Putin’s.
Sanctioning kleptocrats only works if we know where their money is. Passing the ENABLERS Act would be a great first step.
