June 24, 2019

Whitehouse Remarks in Judiciary on Combating Kleptocracy

In this new clash of values, the United States is not living up to its reputation as a “city on the hill.” America too often enables global corruption, by allowing the looters the shelter of our rule of law for their ill-gotten gains.

First let me thank you, Chairman Graham, for holding this hearing. We have been working on this for a long time and I appreciate very much your patient and persistence and your attention to the rising threat that kleptocracy poses to our country.  I also want to particularly thank Senator Grassley who has been my compadre on the TITLE Bill for a long time, back when he was chairman and now as Chairman of Finance he has another terrific position to push for clarity and transparency in this area. And I think between Chairman Grassley in Finance and Chairman Graham in Judiciary we have got a really great opportunity here.

American’s democratic institutions and our commitment to the rule of law have long stood as an example and inspiration to those in far corners of the globe chafing under authoritarian rule.  As President Clinton once said, the power of our example matters more than the example of our power. 

Countries such as the United States are founded on respect for the inviolable rights of the individual and governed by rule of law.  In other countries, it’s different state power is concentrated in the hands of a single person or ruling clique, accountable only to itself, oiled by corruption, and dedicated to looting the country’s citizens and domestic resources.

In this new clash of values, the United States is not living up to its reputation as a “city on the hill.” America too often enables global corruption, by allowing the looters the shelter of our rule of law for their ill-gotten gains. 

With every passing day, we learn more about how Russia and Russian kleptocrats exploit opaque business laws in the rule of law world to hide illicit riches, bribe corrupt officials, undermine the world’s economy, and degrade democratic institutions.  Heather Conley at the Center for Strategic and International Studies wrote in her report, “The Kremlin Playbook,” that corruption is “the lubricant” with which the Russians operate.  CSIS warns that “enhancing transparency and the effectiveness of the Western democratic tools, instruments, and institutions is critical.”

As the “Panama Papers” revealed; however, American institutions are now a facilitator in this racket.  Rather than demand transparency and push corrupt actors back to their dark corners, whole industries, American law firms, realtors, shell corporations, and financial services companies, cater to international crooks and kleptocrats.  This is a blot on American capitalism, a blot on our democratic system, and a blot on the rule of law.

And make no mistake, this is a national security issue. I’ll offer the piece that General and Former CIA Director David Petraeus and I wrote in The Washington Post. I think that our Chairman will agree that he has some credibility in the area of national security.

If you live in a country robbed blind by crooked rulers, it is hard not to resent the country that helped them get away with the loot.  Justly earned discredit will fall on the institutions—capitalism and democracy—if they fail in the face of these well-known evils. It’s actually worse than just that not only can kleptocrats use American shell companies to protect their ill-gotten gains and engage in money laundering, bribery, and other offenses, they can use shell companies to directly influence American elections.  

For instance, we had Facebook CEO Mark Zuckerberg here to testify about foreign influence campaigns as they relate to his company.  He related right here in this room that, even under Facebook’s new ad disclosure measures, if a Russian operative were to advertise on Facebook through a U.S.-chartered shell corporation, Facebook would run the ad without tracing its true source.  Boris and Natasha LLC is where the investigation stops into who is funding political ads.

Quite simply, Vladimir Putin and his ilk can use dark money channels to wield influence in American elections.  Wherever America allows dark money influence into our politics, we leave an open channel and an open invitation to foreign interference.  That may be a fact that certain American special interests don’t like, but it’s still a fact.  And it’s a fact that has national security implications.

One simple measure to harden our legal system against this abuse would be to require corporate entities to truly report and update their beneficial ownership information.  I have been proud to work with Senator Grassley and Senator Feinstein on the TITLE Act, which does just that.

Transparency into shell corporations is not a novel idea.  It’s the coming thing around the world, The United Kingdom has already implemented its own transparency law.  In the EU, the light of transparency is about to shine on criminal assets hidden in European shell companies, all of which means that money will be looking for new, dark homes.  And America must not become that new, dark home.

America has long stood before the world as an exceptional country.  And America’s exceptional nature confers upon us responsibilities. It is not a burden to bear those responsibilities, it is an asset that we command.  But we have to earn that asset by living our values.

So thank you again, Mr. Chairman, for holding this hearing, and pushing forward to make sure American values are at the forefront of our posture.