By Edward Luce • November 28, 2019 • Financial Times
Dirty cash is a curse that dare not speak its name in the 2020 election
After winning the cold war, the US sought to export the rule of law to other countries. That flow has gone into reverse. Today it is importing some of the worst corruption from abroad. America’s largest law firms, real estate companies and lobbying outfits thrive on dirty money. In the process they are leaving stains on US democracy that will not easily come out in the wash.
Donald Trump is the public face of a problem that extends into the heart of America’s system. It spans Democrats and Republicans, New York and Washington, the public and private sectors. It is a curse that dare not speak its name in the 2020 election.
It is easy to guess why Joe Biden, the Democratic frontrunner, goes light on it. Mr Biden helped to turn Delaware, his home state, into the most popular domicile for anonymously-owned companies. Without those, The Trump Organization would have garnered far fewer of the investors that bought its condominiums. In one of Mr Trump’s towers in Florida, more than 80 per cent of its units are owned by shell companies. The US has 10 times more shell companies than the next 41 jurisdictions combined, according to the World Bank.
To be sure, unlike Mr Trump’s alleged transgressions, Mr Biden’s are legal. But it is “legal graft” that has seeped into all corners of US politics — and society beyond. Mr Biden has done as much as any US public figure to put such practices on the statute books.
More surprising is Elizabeth Warren’s relative silence on the links between US politics and global corruption. Early in her campaign for the Democratic nomination, she rolled out numerous plans. These included blueprints to tackle foreign lobbying and corporate malfeasance. Since then, the US senator from Massachusetts has been consumed in a battle to justify her $20tn Medicare-for-All programme. That she is still threatening to die on a cross of M4A raises questions about her political skills. Here is what a better Warren campaign would argue — or indeed any White House contender who is serious about reviving US democracy and fighting global authoritarianism.
America is the largest dirty money haven in the world. Its illicit money flows dwarf that of any other territory, unless you treat Britain and its offshore tax havens as one. The US Treasury estimates that $300bn is laundered annually in America. This is probably a fraction of the true number. Worse, the US government has no idea who controls the companies that channel the money because America lacks a corporate central registry.
There is no law in America requiring disclosure of “beneficial ownership”. US banks must report suspicious activity. But law firms, real estate companies, art sellers, incorporated enterprises and non-bank financial institutions are exempt.
Those hoping to clamp down on money laundering are thus heavily outgunned by lobbyists for the status quo. Mrs Warren should point out that the US system offers a red carpet for dirty money. Furthermore, autocrats in Russia, China, Saudi Arabia and elsewhere could not thrive without the connivance of America’s suite of service providers.
The US voter is exhausted with the “forever wars” that Mr Trump and Mrs Warren agree should be brought to an end. A better US foreign policy would be to close down weapons of mass incorporation in states such as Delaware and Nevada and hold their enablers in New York and Washington to account.
America’s military firepower poses no realistic danger to the likes of Vladimir Putin, Russia’s president. His visceral reaction to the 2010 Panama papers showed how deeply he fears the financial glare. Shining a light on dirty money flows would pose a greater risk to autocracies than five new US aircraft carriers.
The danger, if polls are a guide, is that next year’s election will be a contest between Mr Trump and Mr Biden. Each will accuse the other of being corrupt. In Mr Trump’s case, the evidence appears overwhelming.
But Mr Biden’s family has done enough to monetise his name to make that distinction a test of the voter’s research skills. The risk is that many will see little difference between the two.
There used to be a bright red line between America and the world’s kleptocracies. Now they are symbiotically linked. America needs a candidate who can point out that the kleptocrats are winning. If not Mrs Warren, then who?
