From the horrors of Afghanistan withdrawal, to the collapse of the Iran nuclear deal, to slow-walking support for Ukraine — the Biden administration is broadcasting American decline to a global audience.
Alongside failures of such historic magnitude, the botched rollout of a technocratic anti-money-laundering law might seem insignificant.
But to America’s most dangerous adversaries, it signals open season for exploiting the US financial system — with frightening implications for national security and all Americans’ safety.
The measure was to tackle widespread abuse of US shell companies. These are the getaway vehicles of all contemporary financial crime and corruption, enabling a multitude of bad actors to transfer illicit funds across borders and through our economy with almost total anonymity.
Russian oligarchs use them to evade sanctions and stash stolen wealth. Iran used one to secretly maintain ownership of a Fifth Avenue skyscraper for two decades, claiming rent payments from unsuspecting American tenants.
Above all, shell companies are a major conduit for China’s increasingly aggressive efforts to infiltrate America and undermine our national security — from purchasing farmland near sensitive sites, to flooding our streets with fentanyl, to stealing high-tech military secrets.
The last major update to America’s outdated financial defenses was 2001’s USA PATRIOT Act, but it did not directly address the shell-company threat.
So after two decades of hand-wringing in Washington, and long after our British, European and Ukrainian allies had implemented their own solutions, even the dysfunctional 116th Congress felt compelled to act.
It passed the bipartisan Corporate Transparency Act in January 2021 as part of the National Defense Authorization Act. It requires the owners of shell companies registered in the United States to disclose their true identity, rather than simply naming crooked lawyers or other associates as frontmen on the paperwork.
This information will be stored securely in a Treasury Department-administered registry, accessible only to law-enforcement agencies and US banks for the purposes of combating illicit finance.
We know this model works because it’s already operational in other countries — indeed, the United Kingdom’s world-leading registry is accessed almost every day not only by UK law enforcement but US counterparts too.
After Congress overrode President Donald Trump’s NDAA veto (one of his last acts in office), the task of implementing this critical national-security measure fell to the incoming Biden administration.
So far, so good: President Joe Biden repeatedly committed to robust executive action against shell companies throughout his campaign as part of his commendable plan to combat corrupt authoritarian regimes.
But fast forward to February 2023, and not only was Biden’s Treasury Department a year late in delivering its plans for the scheme — it inexplicably watered it down to the point of uselessness.
Under Biden’s bureaucrats’ final rules, state, local and tribal law enforcement — those on the front lines of the fight against fentanyl — will face a mountain of paperwork to access information that could be time-critical in saving American lives.
US banks legally required to identify and report suspicious transactions by cartels, terrorists and spies have also had their access severely restricted.
As if that weren’t enough, trusted allies like the United Kingdom that readily share their registers with our law-enforcement agents will also be blocked.
Congressional Republicans worked hard to ensure the final legislation addressed concerns about privacy, undue business burdens and secure access by foreign partners.
But the bureaucratic hurdles thrown up by Biden’s Treasury go far beyond the reasonable safeguards Congress mandated. And they certainly don’t square with Biden’s previous boasting about getting tough on illicit finance.
It seems the Treasury Department has either bungled the process or caved to the demands of corporate lobbyists who instinctively resist new regulation because they care more about personal profit than America’s long-term prosperity and security.
Luckily, it is not too late for Treasury officials to put this right. They can amend their plans to reflect Congress’ intention for a more robust anti-money laundering system that helps law enforcement and the private sector work together to keep Americans safe.
Failure to do so will put the United States drastically out of step with allies busy strengthening their own financial defenses.
And that means America will become an even more attractive place for the cartels to sell fentanyl, for Iran and Russia to evade the very sanctions we impose on them and for China to keep stealing our commercial and military secrets.