With just weeks left in his final term, U.S. Sen. Pat Toomey played a key role in blocking sweeping anti-money laundering legislation that was created to choke off the billions of dirty dollars pouring into the United States from shady operators, including drug traffickers, oligarchs and corrupt foreign leaders.
The outgoing Pennsylvania Republican pushed last week to halt the reforms from being included in the nation’s annual defense spending bill in a blow to advocates who had gained bipartisan support to wage the most comprehensive crackdown on money laundering in a generation.
Citing the flow of suspicious money into the country, lawmakers say the ENABLERS Act targets the people who have long helped drug kingpins and others move their money into the U.S. – and hide it — including some lawyers, accountants and financial advisers.
Toomey declined an interview request through his staff, but a top Republican aide on the Banking Committee said the veteran lawmaker objected to the legislation being tucked into the National Defense Authorization Act — a must-pass bill — without any hearings.
One of the richest men in Ukraine, 59-year-old Ihor Kolomoisky, is accused of setting up shell companies, cleaning the money through U.S. properties and ultimately leaving a trail of boarded-up buildings, failed steel facilities and millions in unpaid property taxes, court records show.
He noted that two recently enacted laws “gave regulators immense new powers” to take on those who hide corrupt money in the U.S. financial system.
“Before expanding (the U.S. Treasury’s) authority yet again, there should at least be a hearing and a markup, as well as a discussion amongst lawmakers of the concerns raised by administration officials on this bill,” said Brad Grantz, GOP staff director for the Banking Committee.
Toomey is the ranking member of the Senate Banking Committee.
While there is no record of Senate sessions on the bill, advocates say the key issues over the roles of enablers, including financial advisers and others who set up trusts and other conduits to take in shadowy money, has been debated for decades.
The alarm over enablers — or go-betweens — in moving the money has led to “thousands of hours of congressional discussions,” said Nate Sibley, a research fellow with the Hudson Institute’s Kleptocracy Initiative.
He said the troubling concerns about people who help kleptocrats and others secretly plow their money into the U.S. dates as far back as 9/11, but the most recent surge to pass reforms was triggered by explosive reporting in the Washington Post and the International Consortium of Investigative Journalists which showed how the U.S. has increasingly become one of the world’s foremost havens for dirty dollars.
The series by the Post and ICIJ, known as the Pandora Papers, tracked billions of dollars held in dozens of U.S. trusts that were linked to people or companies accused of fraud, bribery, human rights abuses and other crimes.
States such as Delaware and Wyoming have emerged as secret shelters for criminal organizations, the series showed, while it also identified several global clients who moved their funds into trusts in South Dakota, including a Colombian textile magnate implicated in a scam to launder drug money.
Among the findings cited in the bill: A prominent Philadelphia-based law firm, Cozen O’Connor, aided Masrour Barzani, the autocratic prime minister of Iraq’s Kurdistan Region in purchasing a $18.3-million retail store in Miami Beach. Barzani has reportedly tortured and killed critics of the Kurdish regime, including journalists and university students.
Representatives from Cozen O’Connor did not respond to inquiries from the Post-Gazette.
The Senate version, which is co-sponsored by Sen. Sheldon Whitehouse, D-R.I., and Sen. Roger Wicker, R-Miss., has gained the support of numerous conservatives, including former Secretary of State Mike Pompeo, who tweeted: “Americans shouldn’t be helping corrupt CCP (Chinese Communist Party) officials or fentanyl traffickers hide their money in America. Congress has a chance to act in the NDAA — The Enablers Act will correct loopholes that allow China’s genocidal regime to hide stolen money in America.”
The bill gained momentum six months ago after it was included in the House version of the defense spending legislation, a move experts considered a “fast-tracking” that greatly boosted its chance of passage.
Lawmakers and others seized on the movement by singling out Russian President Vladimir Putin’s favored oligarchs, who managed to move millions of dollars into the United States on behalf of themselves and their companies, despite sanctions imposed on them after Russia’s invasion of Ukraine in 2014.
Scott Greytak, director of advocacy for Transparency International’s U.S. office, said it was troubling that Congress might not move forward this year with reforms that could stop middlemen from acting as straws for kleptocrats and others.
“We’re at a real political moment to do the right thing and take the U.S. out of its place as being the number one country in the world for hiding dirty money,” Greytak said. “On the one hand the U.S. government is rightfully providing the funding to defend Ukraine’s democracy, yet at the same time they are allowing Russia’s oligarchs to hide their dirty money in the U.S.”
The Enablers Act “raises the bar” and creates a new defense against dirty money by taking on lawyers, accountants and other professionals who have long escaped scrutiny, said Thomas Creal, a forensic accountant who has assisted the United Nations Security Council and the U.S. military on money laundering inquiries.
If those professionals “are required to do background checks, they’re going to say, ‘No, I’m not taking you as a client,’” Creal said.
Under the legislation, the provisions would amend the half-century-old Bank Secrecy Act, and expand the legal definition of “financial institution” to include individuals or entities that provide corporate formation or trust services, among others.
Though the measures have gained endorsements from law enforcement groups, including the National District Attorneys Association and the National Association of Assistant U.S. Attorneys, the American Bar Association was one of the Enablers Act’s most vocal opponents.
The ABA objected to the bill’s expanded definition of “financial institutions,” fearing that this would require some lawyers and firms to disclose protected client information to the government.
The push for the ENABLERS Act followed another major anti-money laundering bill, the Corporate Transparency Act, which was passed last year. The law requires small companies to report beneficial owners and other information to the federal Financial Crimes Enforcement Network, or FinCEN.
Though Toomey kept the ENABLERS Act from being folded into the defense spending bill, it could still be included in the government’s omnibus spending bill for 2023.
Greytak said it will be up to the Senate leadership “to make it a priority when they negotiate the bill.”
Otherwise, the sweeping reform will have to be reintroduced to Congress next year.
Despite the efforts to crack down on laundering, critics say the bill will have to undergo revisions, referring to it as “poorly drafted” and in need of further discussion.
To transparency advocates like Erica Hanichak of the FACT Coalition, the failure of lawmakers to pass the legislation this year would be yet another missed chance to combat a threat that has been growing for decades.
“By not passing the ENABLERS Act, Congressional leaders send a signal to the rest of the world ... that the United States isn’t eager to counter money laundering through our system. That would be the wrong message for Congress to send,” Hanichak said.
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(Post-Gazette Assistant Managing Editors Michael Sallah and Mike Wereschagin contributed to this report.)
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