Helsinki Commission hearing: ​Top Senators, Citing "Azerbaijani Laundromat", Raise Alarm over Kleptocracy Threat

Top U.S. Senator Sheldon Whitehouse on Tuesday opened his remarks to the Helsinki Commission hearing on combating kleptocracy with incorporation transparency by highlighting the case of the vast money laundering scandal known as the "Azerbaijani Laundromat," Turan's Washington D.C. correspondent reports.

"From 2012 to 2015 the Azerbaijani government reportedly funneled €2.5 billion from four UK-based shell companies through an Estonian branch of a Danish bank to bribe European politicians and Azerbaijani elites, in a scheme dubbed the "Azerbaijani Laundromat", he said. The money reportedly bought silence during a time when the Azerbaijani government threw more than 90 human rights activists, opposition politicians, and journalists into prison on politically motivated charges.

Sen. Whitehouse, who also serves as Ranking Member on the Senate Judiciary Crime and Terrorism Subcommittee, chaired the Helsinki Commission's hearing to examine the EU's beneficial ownership transparency provisions and its success in limiting the use of shell corporations as a vector for authoritarian regimes" influence in Europe.

The Azerbaijani Laundromat, he said, "is not a unique scheme." In 2015, the "Panama Papers" exposed what many in the law enforcement and anti-corruption world already knew: that corrupt officials, tax cheats, drug traffickers, terrorists, and criminals from around the world routinely use shell companies to hide assets and obscure illegal activities.

American"s lax corporation laws have made the US a favorite destination for money laundering. Make no mistake, he said, "we are now a facilitator, as well as a target, in this racket"

"With every passing day, we learn more about how Russia and Russian kleptocrats exploit opaque business laws to hide the ill-gotten riches, bribe corrupt officials, and undermine the world economy and democratic institutions," he added.

For Whitehouse, foreign kleptocrats, drug dealers, and international tax cheats all use the same tool to launder their ill-gotten gains and evade law enforcement: the shell corporation: "A shell corporation serves no economic purpose and conducts no real business. Instead, these entities exist to hold legal title to bank accounts, real estate, or other assets, hiding the true owners."

America, he added, is "a haven for those doing mischief through shell corporations."

In his statement Helsinki Commission Ranking Senator Ben Cardin highlighted the fact that sometimes foreign government are trying to use culture as an excuse for corruption. "There is no justification for corruption and lack of transparency," he said, urging for U.S. leadership in fighting kleptocracy.

Russia, he said, uses corruption as fuel for their own system and operations around the world.

Another Senator Jeanne Shaheen, who recently introduces a bill to investigate Russian propaganda outlets as foreign agents, urged for more outrage about kleptocracy: "We can't let America become a new dark home for corruption and risk losing our place as that 'city on the hill'"

In his testimony before the Commission, Charles Davidson, Hudson Institute's Kleptocracy Initiative director, said that today the most dangerous threat to the U.S. national security is the aggression of authoritarian regimes "that actively seek to undermine our freedom and democracy, and to export authoritarianism into the OSCE region and around the globe."

"Let us not be mistaken: What is at stake is the survival of our civilization. These regimes have already upended the post World War II international order via invasion and violation of treaties, perverted a rules - based global system of relatively fair economic exchange via intellectual property theft and corrosive business practices, and attacked our government"s computer systems... And these regimes are sharing best practices and increasingly behaving like an axis of evil."

For Davidson, it is essential to understand that those authoritarian regimes have all adopted the business model of 21st century authoritarianism, a model whereby those who govern, usually a very small group, family, or even individual, loot their own country, and store the proceeds in free and democratic nations such as ours, whose rule of law and reliable institutions serve to pr otect their ill - gotten gains.

"21st century authoritarianism cannot be dissociated from kleptocracy," he said. "They have tied the knot. Where we find one, we find the other. And the situation is serious. Authoritarian kleptocracy has been growing, while freedom and democracy has been in recession. But the authoritarian/klepocratic model has an obvious vulnerability. Given that kleptocratic loot is stored within our shores, we have huge leverage over this business model."

For Davidson, when kleptocrats find their ways to the western capitals, "they bring along their values, which are not ours." "Most dangerous threat to national security is aggression of authoritarian regimes that actively seek to undermine freedom and democracy."

In her testimony Caroline Vicini, deputy head of EU delegation to the US, said that Brussels and Washington should continue working together on combating kleptocracy to achieve international success.

The European Union at forefront of global efforts to make corporate transparency to combat global financial crime effective, she added.


Washington, D.C.

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