I close a great number of real estate transactions every year and know first hand how easily such transactions done as "cash purchases" without bank confirmation of identities could be used to launder money. Indeed, there have been numerous stories on Russians buying Trump properties as a likely method to launder dirty money from questionable sources. In addition, since I set up numerous limited liability companies each year, I also know that in many states - Virginia being one of them - there is no public records that identify the actual owners of the company. All that is shown is the name of the registered agent and a physical address - which may in fact be a UPS store "office." A piece in Politico looks at the threat foreign money routed through such entities and/or PACs' to circumvent bans on foreign campaign contributions is to the security of our election system. Indeed, the NRA has been documented to have received foreign funds during the 2016 election. With corrupt politicians like Der Trumpenführer, it is crucial that more be done to stop foreign interference in our elections by this so-called dark money. Here are article highlights:
Whatever Special Counsel Robert Mueller’s investigation ends up revealing about Russia’s efforts to subvert our democracy, one thing is already clear from the media attention this topic has received: America’s democratic institutions are highly vulnerable to foreign influence.
Foreign powers use three basic tools to interfere in democratic politics: cyber operations, disinformation and dark money. Thanks in part to Mueller’s indictments of members of Russia’s military intelligence agency (GRU) and the St. Petersburg troll farm known as the Internet Research Agency, we have begun to address election-related cyber attacks and foreign disinformation. But when it comes to foreign dark money – money from unknown foreign sources – we remain woefully unprepared.
The lack of transparency in our campaign finance system combined with extensive foreign money laundering creates a significant vulnerability for our democracy. We don’t know how much illicit money enters the United States from abroad or how much dark money enters American political campaigns, but in 2015, the Treasury Department estimated that $300 billion is laundered through the U.S. every year.
While foreign funding of campaigns is prohibited by federal statute, the body that enforces campaign finance laws – the Federal Election Commission (FEC) – lacks both teeth and resources. Sophisticated adversaries like Russia and China know how to bypass the ban on foreign funding by exploiting loopholes in the system and using layers of proxies to mask their activities, making it difficult for the FEC, the FBI, and the Treasury Department’s Financial Crimes Enforcement Network to follow the money.
One of the key loopholes is the ability of so-called super PACs to accept money from U.S. subsidiaries of foreign corporations. And while super PACs are required to file financial disclosure reports, non-profit 501(c) organizations (for example, the National Rifle Association or the U.S. Chamber of Commerce) are not. So if a foreign entity transfers money to a 501(c), that organization can in turn contribute funds to a super PAC without disclosing the foreign origin of the money.
The last time Congress took on dark money was after 9/11, in the Patriot Act, when we made it illegal for banks to be “willfully blind” to money laundering and requiring them to verify their customers’ identities. But the lack of any requirement to disclose the beneficial (i.e. “true”) ownership of limited liability companies (LLCs) makes it easy for foreign entities to establish shell companies in the United States.
Fortunately, there are steps we can take to secure our system and shine a light on these murky transactions.
In August, two dozen state attorneys general asked Congress to pass legislation to disclose the beneficial owners of LLCs. A federal solution to this issue is necessary because individual states compete for incorporation revenue and therefore have little incentive to reform on their own. In Nevada, for example, the process of registering a company has been described as “easier than getting a library card.” A federal requirement to disclose the true owners and controlling interests of LLCs would allow law enforcement to scrutinize the “ghost corporations” that pop up overnight in states like Nevada or Delaware – and that could be used to funnel dark money into our politics.
Real estate deals are also susceptible to foreign money laundering because they are largely exempt from the “know your customer” rules that apply to the banking industry.
This allows foreign entities to use shell companies to park their wealth in the United States or to channel that money to U.S. political interests (for example, by purchasing real estate at above-market prices). Implementing more comprehensive disclosure requirements in high-end real estate and prohibiting all-cash sales above certain thresholds would help create transparency in this sector.
The fact that we don’t know exactly how much foreign dark money is being channeled into U.S. politics is precisely why we need to reduce our vulnerabilities. There is ample evidence of dark money penetrating other democracies, and no reason to believe we are immune from this risk.
[W]e can’t ignore the threat posed by foreign dark money. With a new Congress about to be sworn in, there’s an opportunity to finally end the permissive environment for foreign dark money in this country. Campaign finance reform is certainly a necessary part of the solution, but so too is disclosure of beneficial ownership and greater transparency in real estate transactions. As matters of national security, these are issues that should be of interest to both Democrats and Republicans who want to reduce our vulnerability to foreign corrupt influence.