The Enablers of Russian Oligarchs

This headline is evidence that America's support for Ukraine has reach suburban-middle-class-virtue-signaling levels.

putin_1.PNG

It reminds me of how people virtue signal "doing their part" for saving the environment by recycling their garbage and driving a Tesla. When in fact if you really wanted to save the environment you would work to stop mountain-top removal mining, fracking, drift-net fishing, and strengthening environmental regulations of corporations, to give a few examples.
The former makes you feel good about yourself without doing anything measurable. The latter interferes with the profits of very powerful people, but actually accomplishes something.

So if you're serious about punishing the Russian oligarchs that support Putin, don't bother with the pittance in your 401k. You need to go after the primary enablers of the Russian oligarchs - specifically American oligarchs on Wall Street.

Biden faces a significant obstacle: corporate lobbyists’ success in shrouding the American finance industry in secrecy, which makes it far easier for Russian oligarchs and their business empires to evade economic sanctions...
More than two decades ago, federal investigators warned Congress of potentially illicit streams of cash flowing from Russia into the opaque American financial system — and leaks of the so-called Panama Papers and Pandora Papers over the past few years suggest those flows have only increased, as have oligarchs’ attempts to evade sanctions.

The first thing everyone needs to understand is that international money laundering isn't something that is being done in some hot, third-world nation. The 2nd most popular destination for laundering money in the entire world is the good 'ol U.S of A.
We are a nation of tax havens and tax loopholes.

While the same is true to some extent of other nations with federal systems, and of the intricate financial network of the United Kingdom and its overseas territories, the United States offers unparalleled opportunities for concealment, lax enforcement, and legal obfuscation.

The Pandora Papers cite the example of South Dakota, an attractive destination for billionaires and others seeking to avoid estate taxes...
South Dakota led the way in providing such trusts, as reported in detail even before the current revelations. But other states, including Alaska, Florida, Delaware, Texas, and Nevada, have followed suit.

It doesn't matter that those states are mostly Republican states, because the only color that matters here is green. Plus, while those states are the entry points into the U.S. of dirty money, most of that cash goes elsewhere. An extremely large chunk of it winds up in the most popular way to launder money in the world - real estate.
This mountain of dirty overseas cash is having all sorts of negative impacts on working class families at home.

America’s cities are being bought up, bit by bit, by anonymous shell companies using piles of cash. Modest single-family homes, owned for generations by families, now are held by corporate vehicles with names that appear to be little more than jumbles of letters and punctuation – such as SC-TUSCA LLC, CNS1975 LLC – registered to law offices and post office boxes miles away. New glittering towers filled with owned but empty condos look down over our cities, as residents below struggle to find any available housing.

All-cash transactions have come to account for a quarter of all residential real estate purchases, “totaling hundreds of billions of dollars nationwide,” the Financial Crimes Enforcement Network – the financial crimes unit of the federal Treasury Department, also known as FinCEN – noted in a 2017 news release. Thanks to the Bank Secrecy Act, a 1970 anti-money-laundering law, the agency is able to learn who owns many of these properties. In high-cost cities such as New York, San Francisco, Los Angeles and Miami, it’s flagged over 30% of cash purchases as suspicious transactions.

Of every possible type of investment, real estate is the preferred method for laundering money.
In just the last five years, in just real estate, around $2.3 Billion of dirty oligarch money have flooded over our borders. The proportion of residential rental properties owned by individuals and families has fallen from 92% in 1991 to 74% in 2015.
Now just imagine how much more affordable your house or rent would be if it wasn't for all this dirty money.

“There’s this misunderstanding that you can just go out and seize these mansions, seize these yachts. For so many of them, it’s a complete black box,” said Casey Michel, the author of “American Kleptocracy: How the U.S. Created the World’s Greatest Money Laundering Scheme in History.”
“The U.S. provided all the tools of anonymity the oligarchs needed,” he said, and there’s no immediate executive action Biden can take to fix it.

A report called Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream came out just last year.

Essentially the problem is that bad actors or wealthy speculators can use anonymous companies to bid up prices on properties and then use them as a “bank” rather than a home — all without identifying who they are or where the money came from to purchase the property. Limited Liability Companies (LLCs) shield property owners from personal liability while obscuring their identities.

The World Bank found that the U.S. was the preferred destination for corrupt politicians from around the world to set up companies to move or hide dirty money, and that this is “especially troubling given the huge number of legal entities formed in the United States each year – around ten times more than in all forty-one tax haven jurisdictions combined.”
...Even when inquiries came from clients that were similar to a front for terrorism or for those that should have raised a corruption risk, clients were on-boarded. The evidence suggests that company service providers are not interested in who you are or what you might be doing, and current U.S. laws do not require them to be. You have to provide less information to obtain a library card than incorporate a company in every U.S. state.

In 2016 seventy-three percent of purchases by international clients were made in cash.
The U.S. is the only member of the G7 that does not impose anti-money laundering rules on real estate professionals.

In recent years the proliferation of all-cash buys by shell companies has obliterated the transparency of real estate ownership..
Countries around the world have addressed this problem directly. In Argentina, Australia, Israel, Jamaica and the Netherlands, any member of the public may request this information. In Russia and Ukraine, it is already online.
You read that right. Russia is actually more transparent, and a less attractive destination for money laundering than the United States.

So what is the U.S. going to do about this? Are we going to get serious in stopping the money laundering of Russian oligarchs? Probably not.

Even now, the ENABLERS Act — which would require a broad range of professionals such as attorneys and art dealers to perform basic due diligence on their elite clients’ sources of wealth — remains stalled in the U.S. Congress.

A much bigger danger to the United States than Russian oligarchs are American oligarchs. Those two groups of oligarchs have similar interests, and our politicians are so easily, and cheaply purchased.
Biden doesn't need Congress to eliminate these loopholes. The Treasury Department could revive a rule to extend existing disclosure rules to private funds and pooled investment vehicles. Biden has declined to do so.

The Treasury backed off tightening such rules for the art industry, even after a bipartisan Senate report spotlighted that industry’s role in helping Russian oligarchs evade existing sanctions, such as by laundering money through auction houses.

Even when Biden shows some backbone on ending these financial crimes, Congress caves under the pressure.

In December, the Biden administration proposed a rule to implement a 2021 law requiring corporations and shell companies to more thoroughly disclose their actual owners. Experts say the initiative is necessary to strengthen the effect of any sanctions aimed at Russian financial institutions and oligarchs. But that bipartisan transparency legislation had already been watered down by a corporate lobbying blitz that included pressure from Wall Street’s private investment firms.
The result: Vast swaths of the financial, accounting and insurance industries were exempted from new transparency mandates.

Even that law, already full of holes, is under attack from lobbying groups like National Federation of Independent Business (NFIB) and the National Association of Manufacturers, who are determined to repeal it.
At this point I should point out that we aren't only talking about money laundering from Russian oligarchs. We are also talking about drug cartels, organized crime, and terrorist groups. For example, in 2017 the FBI reported “New York-based private equity firm received more than $100 million in wire transfers from an identified Russia-based company allegedly associated with Russian organized crime.”
So what became of that information?

“The scope of the Corporate Transparency Act has a notable exclusion that lets some types of entities off the hook,” he wrote. “That was a practical accommodation to private equity and hedge funds. Otherwise, the act would never have gotten off the ground. There’s no point in making foes of Wall Street if you don’t have to.”

Reporting by the Washington Post confirmed that narrative: The exemption for private investment advisers was included in the law thanks to “lobbying by the private-equity and hedge-fund sectors.” Indeed, federal lobbying records show the American Investment Council — the trade association representing the private equity industry — lobbied on the bill.

By now I'm sure that you get the picture. Unless the politicians stand up to Wall Street and dramatically tighten the financial rules, then all of this "crackdown on Russian oligarchs" is nothing but posturing.
So unless you hear Wall Street screaming about how Washington is hurting their profits (by cutting into their money laundering business) then nothing significant is being done. Period.

Share
up
14 users have voted.

Comments

I hope you publish this far and wide. It's so important. And I haven't even finished reading it.

With my limited understanding of such things, doesn't the fact that Russian oligarchs take their money out of Russia mean Putin taxes them more than they would be taxed here?

up
9 users have voted.

@Linda Wood
Why would they bother to move their assets to the U.S. except to avoid taxes?

up
2 users have voted.
CB's picture

@gjohnsit
they also moved their asses to the US and UK. If Putin caught them their asses would now be sitting in a Russian jail. These Russian oligarchs had been pillaging Russia with the assistance, training and expertise of the US oligarchs. It took Putin almost 10 years to put a stop to it.

up
2 users have voted.
thanatokephaloides's picture

When in fact if you really wanted to save the environment you would work to stop mountain-top removal mining, fracking, drift-net fishing, and strengthening environmental regulations of corporations, to give a few examples.
The former makes you feel good about yourself without doing anything measurable. The latter interferes with the profits of very powerful people,

..... and therefore will never occur, will or nill howsoever many of us 99-percenters would have it otherwise.

I daresay that the most effective actions of the global 99 against the Russian plutocrats are taking place in Ukraine and Russia itself right now.

So if you're serious about punishing the Russian oligarchs that support Putin, don't bother with the pittance in your 401k. You need to go after the primary enablers of the Russian oligarchs - specifically American oligarchs on Wall Street.

Your writing is excellent and quite factual, gjohnsit. Therefore, I beg this favour pf you: Please DO NOT hold your breath waiting for this to happen!!

Wink

up
11 users have voted.

"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

that if we rooted out the corruption, here in America, our entire economy would collapse. It doesn't seem to run on anything else.

up
4 users have voted.
Sima's picture

@Snode
ain't that the truth.

up
1 user has voted.

If you're poor now, my friend, then you'll stay poor.
These days, only the rich get given more. -- Martial book 5:81, c. AD 100 or so
Nothing ever changes -- Sima, c. AD 2020 or so