Protecting Democracy, Weakening Putin’s Kleptocracy

The Problem:

Given the threat he poses to democracy, Russian President Vladimir Putin may be Kleptocrat #1. Through corruption and coercion, he steals public assets from his own citizens and government and from other countries where he maintains strong influence. Experts on Putin’s stolen wealth estimate his assets at between $100 and $200 billion, money that is hidden behind a maze of offshore ownership structures tied to his closest family and friends. When these cronies get overthrown by pro-democracy, anti-corruption movements — as in Ukraine — we see just how far Putin will go to protect his power.

Like other corrupt officials, traffickers, tax dodgers, and criminals around the world, Putin and his fellow kleptocrats require one thing: stable but opaque, ask-no-questions financial systems where they can hide, grow, and protect their assets.

Over the last few decades, some important reforms to the U.S. banking sector have been implemented to prevent kleptocrats from using our financial system to launder their money. But there are still plenty of loopholes in U.S. anti-money laundering policies. For example, financial advisors in a variety of industries, from private investment funds to luxury goods retailers, are not required to find out who the real investors are behind the purchases and investments they make for clients. They’re not even required to report suspicious activity to law enforcement.

The last few years have helped shine a light on this problem, from a 2020 leaked FBI report citing a “reliable source” that alleged a New York private equity firm’s links to Russian organized crime, to a Senate report that same year showing how sanctioned Russian oligarchs had lawyers create anonymous shell companies in the U.S. that traded in high-end art, to the 2021 Pandora Papers link detailing over 200 U.S.-based trusts with assets linked to people or companies publicly accused of fraud, corruption, or human rights abuses.

But we must recognize that this problem doesn’t stop with profit. We already know that Putin and his cronies work very hard to “weaponize corruption” abroad. Once they’ve established ways to secretly move money through a country’s financial system, the next step is to begin targeting people who are close to power in that country.

We know they want to use corrupt, illicit flows of wealth to influence U.S. policy, and they’re using U.S. financial professionals to help them. That’s why it’s critical that our elected representatives take the steps necessary to stop this process — now.

The Solution:

• Expand the number of financial sectors that require customer due diligence, including real estate, luxury goods, trusts, and private investment funds.
• End the practice of anonymously-owned shell companies.
• Make it much harder for U.S. citizens to serve as covert conduits of Russian malign influence.
• Strengthen the capacity of law enforcement to investigate, prosecute, and adjudicate money-laundering and malign influence by foreign actors.

What You Can Do: