January 5, 2021 at 5:00 am ET
The headlines around the recently passed National Defense Authorization Act for 2021 have focused on components beyond the core subject of military spending, including special legal protections for tech companies like Facebook and the removal of Confederate leaders’ names from some bases. But below hot-button issues like these was the inclusion of landmark anti-money laundering reform representing not only the United States’ biggest anti-corruption push in years, but also a massive boost for human rights efforts around the world.
Key provisions in this year’s NDAA tackle a tool that isn’t often linked to human rights and conflict: anonymous shell companies. These companies – which remain perfectly legal, and which are often easier to establish than a library card – are churned out in the United States at a greater clip than anywhere else. Because of their anonymity, criminal networks have flocked to the United States to use them to launder gobsmacking amounts of money, effectively assured that investigators can’t track them or their finances.
But it’s not just gun-runners and drug traffickers who have regularly turned to anonymous shell companies for their money laundering needs. As we’ve seen time and again, the bloodiest regimes in the world – the greatest threats to basic human rights on this planet – have grown reliant on anonymous shell companies formed in the United States to launder their loot, to entrench their regimes, and to brutalize their population even further.
Pick almost any regime you’d like, and you’ll find a dictatorship saturated in anonymous shell companies, regardless of ideology and regardless of how much they’ve immiserated entire populations.
Our work has focused on regimes in sub-Saharan Africa that have relied on shell companies around the world, including in the United States, to obtain contracts, gather windfalls and move ill-gotten gains through the financial system. Although we have had success in advocating with Washington and other governments, as well as global and regional banks, to apply pressure to specific individuals and networks, it can be challenging to keep up with the pace of new company formation.
We can also look at regimes from China to Russia to Iran to North Korea and beyond. These regimes and their enabling networks, responsible for some of the worst human rights abuses of our time, have collectively used thousands of anonymous shell companies in the United States to cycle money, evade sanctions, purchase real estate and other assets, and conduct other financial transactions that allow them to continue their genocidal campaigns and other atrocities.
The NDAA provision ensuring corporations disclose beneficial ownership information will arm banks, other companies, and key government agencies with the information they need up front, rather than only after money has been laundered. Knowing who effectively owns companies may not seem like an indispensable tool in the human rights and anti-genocide toolbox, but it has become one of the most critical of the 21st century. Now that we have seen how much perpetrators rely on financial incentives to commit atrocities, we can look to measures like these to make it much harder.
The importance of beneficial ownership to the fight to promote human rights and end genocide led to a campaign almost unprecedented in its size and scope. From bankers to state government officials to the Pentagon to student activists coming from around the country to visit congressional leaders and ultimately gain bipartisan support, this fight involved many actors who can now turn to ensuring this law is effectively implemented and lives up to its promise.
With the implementation of this historic legislation, no longer will the world’s worst dictators be able to hide their finances behind U.S. shell companies. Finally, we’ll be able to track their assets that much more easily – and begin holding them to account for their human rights atrocities.
John Prendergast is co-founder of The Sentry.
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