A crucial piece of legislation to reduce financial crime and corruption in the country has been blocked by the Senate, which is a blow for what supporters have dubbed the biggest change to the nation's anti-money laundering rules in 20 years.
For the first time, the Enablers Act would oblige trust companies, lawyers, art dealers, and others to look into their customers' backgrounds as well as the origins of any money or other assets that are transferred into the American financial system.
The Pandora Papers investigation, a joint effort by the International Consortium of Investigative Journalists, the Washington Post, and other media outlets, was cited by a bipartisan group of lawmakers when they sponsored the Enablers Act last year.
The law was included in the National Defense Authorization Act earlier this year, which is seen as a piece of legislation that must be passed in Washington, D.C. because it permits prompt payment of salaries to U.S. military service personnel. The House of Representatives approved that version of the defense spending bill in July.
According to media accounts and discussions with lawmakers and aides, the decision to delete the provision from the NDAA was driven by Republican Sen. Patrick Toomey, the ranking member of the U.S. Senate Banking Committee. The finance committee is crucial in getting the more comprehensive military package to a vote in Congress.
According to a Republican banking committee aide responding to inquiries from Toomey, the senator is not the only member of Congress or government organization to have concerns about the bill. The assistant suggested that the Enablers Act go through the normal legislative procedures.
An examination into the Pandora Papers revealed how American lawyers, registered agents, trust and corporate service providers, and real estate brokers assisted members of the global elite in hiding their riches in tax havens including Wyoming, South Dakota, and Delaware.
Such middlemen are not compelled to carefully analyze the source of their clients' wealth, unlike banks and other financial institutions.
Despite receiving more and more well-known support, the Enablers Act was unable to pass. Jake Sullivan, Joe Biden's national security adviser, declared his "full support" for the bill earlier this week.
Additionally expressing his support, Democratic Senator Sheldon Whitehouse spoke this week at the International Anti-Corruption Conference in Washington, D.C.
Whitehouse criticized "opposition from big American lobbying groups," saying "it makes no sense to have money laundering rules for banks, to have disclosure for shell corporations, but to let somebody run into a lawyer’s office or a hedge fund and dodge all of that protection."
An open letter requesting support for the Enablers Act was signed by a bipartisan group of foreign policy experts last month.
The group of specialists, which included senior members of former President Donald J. Trump's national security team, wrote that "fentanyl traffickers... and Chinese kleptocrats operating within the United States cannot navigate the U.S. financial and legal systems by themselves. Neither can Russian oligarchs or Iranian sanctions evaders. Instead, they have often taken advantage of unwitting or unscrupulous Americans to facilitate harmful activities."
Elaine Dezenski, a signatory to the letter and the director of the Center on Economic and Financial Power at the Washington, DC-based Foundation for Defense of Democracies, told ICIJ, "This is a key way of strengthening our national security apparatus." According to Dezenski, a former representative of the Department of Homeland Security, "closing these loopholes was part of the financial reforms proposed after 9/11. Much of what we see in the Enablers Act was envisioned 20 years ago, though is now even more relevant for countering our foreign adversaries."
The plan, which would make some attorneys identify and confirm clients and report any questionable financial activity to the U.S. Treasury, has been opposed by the American Bar Association.
Deborah Enix-Ross, president of the American Bar Association, warned Congress in an October letter that the Enablers Act amendment "would undermine fundamental principles of the rule of law and the rights of citizens."
The Pandora Papers and other leaked documents reveal that Enix-Ross’s employer, law firm Debevoise & Plimpton, has represented offshore companies owned by the family of the former "banker" of Russian President Vladimir Putin as well as a business owned by a Kazakh billionaire who served as the "banker" for the former authoritarian ruler of his home nation.
Debevoise & Plimpton and Enix-Ross declined to comment.
The ABA stated that it "supports reasonable and balanced initiatives to combat money laundering and terrorist financing" and that their opposition to the Enablers Act was made before Enix-Ross was elected president.
Democratic Rep. Tom Malinowksi, who co-led the effort to pass the Enablers Act and put it in the NDAA, expressed optimism that the measure might be enacted through a different mechanism. Malinowski refuted claims that the Enablers Act has not been the subject of public hearings or periods of public discussion in an interview with ICIJ.
According to Malinowksi, "There’s support from national security experts, from Republican as well as Democratic administrations. I’m confident it is going to pass. I just like to see that this happens in this Congress."
By fLEXI tEAM