U.S. Advances Legislation to Stop Enablers of Money Laundering

Published: 27 June 2022

money laundering fasciklaThe ENABLERS Act is intended to close existing loopholes used by kleptocrats to launder their ill-gotten gains in the United States. (Photo: Nick Youngson, Pix4free, License)

By Henry Pope

In what will mark a significant reform for U.S. anti-money laundering laws, the House Armed Services Committee approved the inclusion of the Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act into the annual defense budget for 2023.

Introduced last October as a bipartisan bill, the ENABLERS Act is intended to close existing loopholes used by kleptocrats to launder their ill-gotten gains in the United States.

American lawmakers originally drafted the bill in the wake of the revelations behind the Pandora Papers, which exposed how dictators, criminals, and the corrupt launder their money through various economic sectors around the world that are not required to perform the same due diligence expected of the banking industry.

For instance, if one were to wire a significant amount of money to the U.S. from the Caymans, American banks will file a suspicious activity report. The transaction will subsequently be flagged to ensure that neither of the accounts are linked to any criminal activity.

To get around this hurdle, money launderers resort to real estate transactions, private equity investments, art dealers, and other “enablers” that do not receive the same degree of scrutiny from U.S. financial authorities.

This backdoor into the American economy has long been a point of scrutiny by the country’s financial crime investigators and lawmakers.

“If we make banks report dirty money but allow law, real estate, and accounting firms to look the other way, that creates a loophole that crooks and kleptocrats can sail a yacht through,” said U.S. Congressman Tom Malinowski, one of the original proponents of the ENABLERS Act. “Our bill closes that loophole and encourages the administration to move in the same direction.”

One case from the Pandora Papers that caught the attention of American lawmakers was Azerbaijan’s ruling family, the Aliyevs, who used such enablers to obtain almost US$700 million worth of London real estate.

Investigations made by OCCRP and its partners revealed how Azerbaijan president Ilham Aliyev’s family and close associates used an interconnected network of 84 offshore companies to acquire luxurious London properties, while keeping their true ownership of them a secret.

These companies, registered in the British Virgin Islands, had been under the control of the Aliyevs and their associates since 2006.

Under the new ENABLERS Act, the middlemen who facilitated the transfer of the Aliyev’s $700 million will now need to ensure a higher degree of due diligence when doing business with the United States.

Malinowski noted that the goal is not only to close off all avenues of money laundering for criminals and the corrupt, but also to “protect Americans from inflated real estate prices, job loss, human trafficking, and influence peddling.”

The ENABLERS Act has also gained additional traction due to its potential to help U.S. authorities identify and freeze assets held by Russian oligarchs who have profited off of Russian President Vladimir Putin’s regime and have supported his invasion of Ukraine.

“Corrupt Russian leaders have financed their campaigns of military aggression and authoritarianism by stealing money from their people and investing that money abroad,” Scott Greytak, Director of Advocacy for Transparency International U.S. said.

Despite significant partisan animosity clogging the U.S. legislative process, Greytak praised American lawmakers on both sides of the aisle for their commitment to “prevent corrupt Russian officials and future kleptocrats from hiding and growing their dirty money in the United States.”