Implications of Biden’s Crusade Against Money Laundering: Analysis

United States President Joe Biden has stated several times during his election campaign and since taking office that fighting corruption and money laundering in the United States and globally is a central security priority. national and an important part of its “foreign policy for the middle class”.
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Biden intends to clamp down on the cryptocurrency industry, which is often described as “the wild west,” to fight global money laundering chains and highlight corruption as the greatest threat to democracies.

The change in attitude in the White House feels good in the Middle East. The rulers of the region will have to adjust, or they will lose credibility and the support of the US administration, while the United States will have to choose between its vital interests and a coherent foreign policy.

The money laundering challenge

In 2020, seven countries in the Middle East, some in the Gulf and others in North Africa and the Levant, were on the top 50 list of the Basel AML Index that ranks money laundering and terrorist financing risks in all the world. This phenomenon is certainly not new. However, it seems that due to new technologies and the rise of cryptocurrencies, money laundering has become easier and more accessible than ever.

The recently leaked Pandora documents shed more light on the incredible level of state-led corruption in the Middle East. One of the “stars” of the AML Index was Turkey, well ranked 41st between Barbados and Macau. In recent years, Recep Tayyip Erdogan’s AK Party has been severely affected by a series of corruption allegations, including money laundering, drug trafficking, and arms smuggling, while the state-run Halkbank was Accused of participating in a multi-million dollar plan to evade US sanctions on Iran. In early October, the United States Court of Appeals in New York ruled that Halkbank can be prosecuted on these charges. After a few days, the Financial Action Task Force (FATF) took action.

US PRESIDENT Joe Biden and Prime Minister Naftali Bennett shake hands during a meeting at the White House in August. (credit: JONATHAN ERNST / REUTERS)

“This is the second time that the Financial Action Group has added Turkey to its gray list. In 2012, Turkey came close to being blacklisted, along with Iran and North Korea. This shows that under the Erdogan government, Turkey has had a persistent illicit financing problem, ”Aykan Erdemir, senior director of the Turkey Program at the Foundation for Defense of Democracies and former member of the country’s parliament, told The Media Line. .

Mali and Jordan were also recently added to the FATF gray list.

Erdemir explains that Washington fights illicit finance on two levels, saying: “There is an international effort through the FATF lists and United Nations designations. At the same time, US Treasury designations and US Department of Justice prosecutions are putting pressure on sanctions evasion and money laundering schemes.

“For the US efforts to have a greater impact, the European Union must be more vigilant in looking for illicit financial transactions. There is an urgent need for concerted transatlantic action, ”he says.

A threat to democracy and global development

How different is President Biden’s attitude on money laundering and illicit finance from that of his predecessor? In 2017, Donald Trump told then-Secretary of State Rex Tillerson that the Foreign Corrupt Practices Act (FCPA) is bad for US business interests and should therefore be scrapped.

While the Trump administration apparently shared the view that is common among many in business about the FCPA “tying the hands of Americans abroad,” Biden believes that corruption is dangerous for global development and for democracies, and you intend to act on this belief. Speaking at a democratic summit in Denmark in 2018, he said: “Corrupt money is the preferred tool of authoritarian regimes that seek to undermine democratic governance across the board, especially in fledgling democracies that lack strong institutions to defend the state of right”.

In the White House “Memorandum on Establishing Anti-Corruption as a Fundamental National Interest of the United States” released in early June, Biden promised to “lead efforts to promote good governance, bring transparency to the United States and global financial systems, prevent and combat corruption at home and abroad, and make it increasingly difficult for corrupt actors to protect their activities.

Simona Weinglass, an Israeli-American journalist who writes on financial crime and corruption, explains that money laundering often comes in one package with organized crime, drug trafficking, and human trafficking. Money laundering is dangerous for any country, he told The Media Line.

“If your country is the destination for a lot of laundered money, it can be a kind of deal from the devil – the immediate effects seem wonderful – you have all this money flowing into your country, into your housing market, into the private sector. So everything seems wonderful at first. It can create what seems like a lot of economic dynamism, ”he says.

But with any deal from the devil, there is a hidden price that society pays later. First, if your country’s dynamism comes from criminal or kleptocratic dirty money and not legitimate money, it exacerbates inequality and corruption. Suddenly, the institutions of your government become less receptive to the common people because all these politicians are winning the favor of the wealthy classes. If this goes on long enough, it can lead to a situation where there really is no difference between criminals and the government, as in Russia, ”he continues.

“Also, life is becoming increasingly difficult for people who earn their money honestly. Corruption feels like it’s spreading. For example, if there is a lot of dirty money in your housing market, this is an important factor that contributes to prices being out of reach for citizens, ”says Weinglass.

Erdemir adds: “The Turkish case shows the intricate links between money laundering, sanction evasion, terrorist financing, drug trafficking and human trafficking. Once the problem becomes so pervasive, criminal networks make heavy inroads on the political elite and the law enforcement system. Then, state actors, such as Iran and Venezuela, and non-state actors such as Hamas, Islamic State, al-Qaida, the IRGC and others exploit that vulnerability ”.

Some Middle Eastern countries responded quickly to Biden’s “foreign policy for the middle class”, seeking to advance their interests in Washington and improve their global record. On August 22, 2021, by order of Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Defense Minister of the United Arab Emirates and the ruler of Dubai, Dubai announced the establishment of a new specialized court that will focus on the fight. against money. Whitening. The announcement came just months after the UAE cabinet approved the establishment of the Executive Office for Combating Money Laundering and Combating Terrorism Financing.

“The UAE’s understanding of the risks it faces from money laundering, terrorist financing and the financing of weapons of mass destruction is still emerging, following its recent national risk assessment. The risks are significant and are the result of the UAE’s extensive financial, economic, corporate and commercial activities, including as a world leader in oil, diamond and gold exports, ”the FATF report said in 2020.

“The UAE’s strategic geographic location between continents, in close proximity to conflict zones, and its own jurisdictional complexity of seven emirates, two financial free zones, and 29 trade free zones further increase the UAE’s risk of attract funds with links to crime and terror, “says the report. keep going.

Says Weinglass: “Interestingly, some of the first major events that took place after the peace between Israel and the UAE were conventions for the currency industry. You have to wonder why. Why were they so desperate to meet up during the coronavirus crisis? “

And on April 30, 2021, Saudi ministers passed a new law to combat financial fraud and deception that is designed to enhance the kingdom’s efforts to combat financial crime.

It remains to be seen how effective these new measures will be, and whether they will be used only against critics or political enemies rather than against cronies of the regime, say many money laundering experts in the Middle East.

From December 9-10, Biden will convene a Leaders for Democracy Summit in Washington, where human rights, illicit finance and regulation will be discussed. The three issues are closely interconnected and clearly prioritized by the Biden administration, which promises to connect the dots and use its full weight to protect democracy.

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