Securing the Peace and Safeguarding Democracy: Why President Biden Must Prosecute the Global Fight Against Kleptocracy and Illicit Trade

Elevating a more robust bi-partisan agenda to combat cross-border kleptocracy (theft with impunity) and criminality across economies, e-commerce marketplaces, and financial centers 

In these tumultuous times around the world with the pernicious effects of COVID-19, kleptocracy, climate change, storming insurrections and conflicts, illicit economies, and other wicked harms, American leadership is needed more than ever to restore not only faith in our democratic institutions and the rule of law, but to address economic recovery, and tackle an array of transnational security threats. 

In his Inaugural Address (January 20, 2021) and remarks at the US Department of State on America's place in the world (February 4, 2021), President Joe Biden has signaled that “America is Back” and "Diplomacy is Back". President Biden expressed a strong foreign policy commitment to peace and security anchored in dynamic diplomacy and working through alliances, public-private partnerships, and global institutions to address many of today’s global challenges and to restore democracy:

And so — so is the message I want the world to hear today: America is back. America is back. Diplomacy is back at the center of our foreign policy.

Such a statement of policy is a welcomed signal across international circles and communities, but especially those working the frontlines to strengthen cross-border cooperation and responses to confront converging threats such as corruption, organized crime, and terrorism.

American leadership is needed more than ever to restore not only faith in our democratic institutions and the rule of law, but to also address the impacts of COVID-19, our economic recovery, climate change, and an array of other transnational threats that endanger our collective security.

Repression of Democracy and Subversion of the Rule of Law

As we have witnessed in the United States in recent weeks, democracy cannot be taken for granted, and is constantly tested as corrupt leaders who abuse their power, subvert the will of their people, and other coercive forces of chaos destabilize our collective welfare, prosperity, and security.

In Mexico, cartels and organized criminals have co-opted the government at the federal, state, and local levels, and have diversified into other sectors such as agriculture, mining, and transportation. They also control strategic and critical infrastructure such as the country’s major ports. 

In recent years, for example, the Jalisco New Generation Cartel has killed judges, police officers, politicians, and thousands of civilians. The cartel controls significant trafficking routes into the United States, and is expanding operations into Europe and Asia. The significant infiltration and penetration of these criminal groups have destabilized the Mexican economy, rule of law, and regional stability.

Across the Sahel, authoritarian kleptocrats, ungoverned spaces, lawlessness, and conflicts have created the perfect storm for criminals and terrorist groups to exploit and expand their illicit trafficking and smuggling operations. The lucrative business of illicit trade has been militarized. These bad actors have bribed complicit government officials to shield their illicit enterprises from scrutiny and coerced soldiers to protect their illicit markets.

In other parts of the world, ruthless leaders are similarly engaging in criminality and coercive actions, repressing democracy, arresting dissidents and those who expose corruption, profiting from illegal activities, undermining global security, co-opting the state, and creating illicit economies.

Make no mistake: Illicit wealth and malign influence remain the lifeblood of today’s corrupt bad actors, criminal organizations, and terrorist groups. Through dirty money derived from criminality and kleptocracy, these malefactors finance corruption, chaos, insecurity, and violence.

Fighting the Twin Devils of Kleptocracy and Illicit Trade

In the middle of the deadly pandemic and dark days of subversive criminality and aggressive actions across borders, in early 2021, we are now at a critical moment in time where leadership is sorely needed. 

To provide more secure and stable economies, we need to develop better policies and strategies to fight against today’s corruptive and criminal influences subverting the rule of law, penetrating markets, and harming our communities.

Corruption corrodes the underpinnings of democracy, good governance, clean markets and supply chain security, and economic development efforts. It also impedes progress on human rights and implementation of national sustainability strategies.

Illicit trade, which includes a convergence of numerous trafficking, smuggling, financial, cyber, and fraud crimes, fuels a multi-trillion-dollar illegal economy globally every year. It is a fact that illicit trade is booming, fueling transnational crime and corruption. It corrodes the rule of law and undermines social stability and the welfare of our people.

Illicit trade further hampers economic development by preventing the equitable distribution of resources that provide for sustainable futures. It enables kleptocrats to pillage their countries, violent trafficking organizations to expand their operations, terrorist groups to finance their attacks against our communities, and rogue regimes to underwrite their nuclear programs.  

The reality is that both corruption and illicit trade are threat multipliers that ripple across borders and imperil democratic freedoms and institutions and systems of open, free, and just societies.

While COVID-19 has brought economic malaise to most sectors, the illicit economy continues to thrive. This is especially true across e-commerce marketplaces that are generating tremendous prosperity for scammers, fraudsters, and other bad actors and threat networks.

Other profitable criminal activities include the trafficking of narcotics, opioids, arms, and people, fake medicines, counterfeit and pirated goods; illegal tobacco and alcohol products; illegally harvested timber, wildlife, and fish; pillaged oil, diamonds, gold, natural resources and precious minerals; stolen antiquities; and other contraband or commodities.

These are all sold on our main streets, on social media, online marketplaces, and the dark web every hour of every day.

Illicit networks not only distort the legal economy and corrupt public officials, but they also divert revenue from legitimate market drivers such as businesses and governments.

According to the OECD and the EU’s Intellectual Property Office (EUIPO) the value of counterfeit and pirated goods amounts to 3.3% of world trade ($509 billion). WEF estimates that over 3% of global GDP (US$2.2 trillion) will be lost due to illicit trade leakages in 2020. The International Monetary Fund (IMF) has estimated that money laundering comprises approximately 2 to 5 percent of the world’s gross domestic product (GDP) each year, or approximately $1.74 trillion to $4.35 trillion in 2019.

But this goes beyond just economic harm.

Kleptocracy and criminalized markets incur a significant negative social cost, and in some cases, help to foment economic instability, enslave our human capital, desecrate our environment, and endanger national efforts to implement sustainable development goals (SDGs).

Kleptocracy and the embezzlement of national revenue and natural resources (e.g., extraction of oil and minerals) impair the ability of communities to make the investments necessary to stimulate economic growth especially during these hard economic times.

Revenue that could be used to build roads to facilitate commerce, hospitals to fight pandemic outbreaks and diseases, homes to raise and protect families, or schools to educate children and future leaders is instead siphoned away for private gain, stashed in financial secrecy jurisdictions.

Illicit commerce, fueled by anonymous shell companies, puts the safety and health of communities in danger when criminals put counterfeit medicines, electronics, tainted food, fake automotive and airplane parts, toxic toys, pirated film and other illegal goods into our distribution networks and supply chain.

The dumping of toxic waste contaminates our food and water supplies. Illegal mining, logging and deforestation or poaching harm vital ecosystems and habitats, exacerbate climate change, and undermine policies to advance inclusive, green, sustainable development. Poaching and trafficking of endangered wildlife robs economies of their natural assets and their future.

The corruption that allows counterfeit medicines or ineffective pharmaceuticals, personal protective equipment (PPE), and fast-moving consumer goods (FMCG) to enter our communities endangers public health, denying the sick effective treatment and permitting deadly viruses and disease to infect our communities. We must be vigilant against such predatory criminality as countries begin the distribution of COVID-19 vaccines, securing our global supply chains and shutting down illicit websites selling possible fakes.

The OECD Task Force on Countering Illicit Trade has highlighted how COVID-19 policies and governance gaps have contributed to increasing organized crime in some vulnerable sectors. Countries like South Africa, Malaysia, Philippines, and Mexico, which banned alcohol, tobacco, and food products during the pandemic, have seen more problems than benefits. Such bans have resulted in boom for the illicit trade in alcohol, cigarettes and food that was falsely labelled as medicinal cures providing more opportunities for organized criminals to exploit.  While demand has generally remained the same, the supply has only changed hands from legal routes to illegal ones.

The corruption that allows traffickers to move contraband and illegal goods across borders and global supply chains and exploit them with impunity further fuels instability in armed conflict zones and stymies law enforcement efforts including in Central America, North Africa, the Middle East, and other hot spots of violence.

Bi-Partisan Congressional Support is Vital

In securing the peace and democracy, President Biden and his Administration should make the global fight against kleptocracy and illicit trade a higher priority including working with the US Congress to pass new legislation that helps our law enforcement and intelligence communities confront today's transnational threats.

On January 1, 2021, the US Senate joined the House of Representatives in overriding -- by significant bi-partisan votes in both Chambers -- the presidential veto of the National Defense Authorization Act for Fiscal Year 2021, which includes the Corporate Transparency Act to end the formation of anonymous shell companies that are abused by kleptocrats, criminals, terrorists, and other bad actors and threat networks.

It should also work to aggressively implement the Corporate Transparency Act to end the abuse of anonymous companies by malign influencers, kleptocrats, cartels, and terrorists to finance their criminal activities and to export violence abroad. Breaking the corruptive power of such bad actors and stripping them of their illicit wealth can end their impunity and expose their criminal activities hidden behind the veil of secrecy. 

The US Congress should introduce other legislation that provides further authorities and tools to fight kleptocracy and illicit trade needed to protect our homeland, markets, and communities against determined bad actors and threat networks.

Corruption is a fundamental obstacle to peace, prosperity, and human rights all around the world,” Senator Ben Cardin said introducing the bi-partisan Combating Global Corruption Act. “Where there are high levels of corruption, we find fragile states, authoritarian states, or states suffering from internal or external conflict. Combating corruption should be elevated and prioritized across our foreign policy efforts. I look forward to working with my colleagues and the Biden administration to ensure fighting corruption is a central U.S. national security priority.

In January 2021, US Senators Ben Cardin (D-MD) and Todd Young (R-IN) introduced bipartisan legislation, the Combating Global Corruption Act (S.14), that would elevate the fight against international corruption as a national security priority. Senator Cardin and Senator Roger Wicker (R-MS), incoming Chair of the U.S. Helsinki Commission and Co-Chair, respectively, have also re-introduced legislation that would elevate the federal government’s anti-corruption activities. S.158, the Countering Russian and Other Overseas Kleptocracy Act, or CROOK Act, would establish an anti-corruption action fund to provide extra funding during historic windows of opportunity for reform in foreign countries and streamline work strengthening the rule of law abroad. In the House of Representatives, Congressmen Brian Fitzpatrick (R-PA-01) and Bill Keating (D-MA-09) reintroduced H.R. 402, the Countering Russian and Other Overseas Kleptocracy (CROOK) Act.

Leaders in both the US Senate and US House of Representatives may also want to establish a Commission or a Congressional Caucus that examines the harms and impacts of kleptocracy and illicit trade to US national security, the American economy, the health and safety of our citizens, and our national interests around the world.

Revitalizing Alliances and Leveraging Whole-of Society Approaches

President Biden can also work with allies across the Atlantic, and internationally, to elevate the fight against the webs of corruption and criminality that are undermining global democracy, security, and justice.

We need to ramp up coordinated efforts against these bad actors and threat networks including through investigations, prosecutions, sanctions, and seizing their assets across source, transit, and demand markets.

President Biden should promote more dynamic public-private partnerships to counter illicit trade, corruption, and money laundering including in NATO, European Union (EU), European Commission (EC), the Group of Seven (G7) the Group of Twenty (G20), the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the Financial Action Task Force (FATF), World Customs Organization (WCO), INTERPOL, EUROPOL, the Asia Pacific Economic Cooperation (APEC), Association of Southeast Asian Nations (ASEAN), Pacific Islands Forum (PIF), Organization of American States (OAS), African Union (AU), the Arab League, Gulf Cooperative Council (GCC), the Business Twenty (B20), World Economic Forum (WEF), International Chamber of Commerce (ICC), US Council for International Business (USCIB), US Chamber of Commerce (USChamber), and other inter-governmental and business organizations.

In cooperation with other dedicated partners, renewed American leadership can lead a global effort to promote greater transparency, prosecute high-level corruption, deny safe haven to kleptocrats, and dismantle illicit networks. 

The international community should leverage instruments such as UN Convention against Transnational Organized Crime (UNTOC), the UN Convention against Corruption (UNCAC), the Financial Action Task Force’s Recommendations on combating money laundering and terrorist financing, and other international frameworks. Energies to recover and return stolen assets can also put bad actors on notice and provide accountability.

Through stronger holistic frameworks, whole-of-society approaches, information-sharing arrangements, and smart global supply chain solutions, we can use targeted intelligence to fight corruption, transnational criminal organizations, and threat networks.

Investing in our diplomacy isn’t something we do just because it’s the right thing to do for the world. We do it in order to live in peace, security, and prosperity. We do it because it’s in our own naked self-interest. When we strengthen our alliances, we amplify our power as well as our ability to disrupt threats before they can reach our shores.  

President Joe Biden

The sharing of actionable intelligence can help law enforcement communities in real-time to more quickly target and disrupt illicit threats across borders. Active and coordinated responses by customs, police, revenue enforcement and tax authorities within and across borders can help to put bad actors behind bars.

American Leadership: America is Back

In an interconnected world, there are no global problems that can be solved by any one partner working alone. Through our collaborative partnerships and collective action, we can more effectively combat the twin devils of kleptocracy and illicit trade.

President Biden and his administration’s commitment to a comprehensive multi-dimensional approach and whole-of-government national security strategy – with strong Congressional bi-partisan support – to prosecute kleptocracy and illicit trade that corrupt governance structures and markets would be much welcomed, and needed; as is a forward-looking foreign policy that advances the greater good: democratic values, honest government, openness, integrity, the rule of law, and peace that keeps our community of democracies more prosperous, secure and safe.

David M. Luna is President and CEO of Luna Global Networks & Convergence Strategies LLC. He is a former US diplomat and national security official; current Chair of the Business at OECD Anti-Illicit Trade (AIT) Expert Group; Chair of AIT Committee of the US Council for International Business (USCIB); Member of The Business 20 (B20/G20) Integrity & Compliance Task Force; and a Senior Fellow for National Security and co-Director of the Anti-Illicit Trade Institute (AITI), at the Terrorism, Transnational Crime, Corruption Center, Schar School of Policy and Government, George Mason University.

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LUNA GLOBAL NETWORKS MEDIA RELEASE

WASHINGTON, February 5, 2021 (Newswire.com) - In a statement released today, David M. Luna, CEO & President of Luna Global Networks, encouraged President Joe Biden and the US Congress to make the fight against kleptocracy and illicit trade an important US national security and foreign policy priority.

Luna will be further amplifying this important message in his upcoming participation at meetings and webinars including by the Association of Certified Anti-Money Laundering Specialists (ACAMS), Meridian International Center, the OECD Task Force on Countering Illicit Trade, The Business 20, the Anti-Illicit Trade Institute, and at other events by intergovernmental and business organizations.

During his Inaugural Address on January 20, and remarks earlier this week at the US Department of State on America's place in the world, President Biden underscored the importance of strengthening alliances to disrupt threats before they can reach the shores of America. President Biden expressed a strong foreign policy commitment to peace and security anchored in dynamic diplomacy, whole-of-society partnerships, and global institutions in order to address many of today's global challenges and to restore democracy. In January 2021, US Senators Ben Cardin (D-MD) and Todd Young (R-IN) introduced bipartisan legislation, the Combating Global Corruption Act (S.14), that would elevate the fight against international corruption as a national security priority.

In these tumultuous times around the world with the pernicious effects of COVID-19, kleptocracy, climate change, insurrections and conflicts, illicit economies, and other wicked harms, American leadership is needed more than ever not only to restore faith in our democratic institutions and the rule of law, but to address economic recovery and tackle an array of transnational security threats. 

"The reality is that both corruption and illicit trade are threat multipliers that ripple across borders and imperil democratic freedoms and institutions and systems of open, free, and just societies," said Luna. "Corruption corrodes the underpinnings of democracy, good governance, clean markets and supply chain security, and economic development efforts. It also impedes progress on human rights and implementation of national sustainability strategies. Illicit trade, which includes a convergence of numerous trafficking, smuggling, financial, cyber, and fraud crimes, fuels a multi-trillion-dollar illegal economy globally every year."

Illicit trade further hampers economic development by preventing the equitable distribution of resources that provide for sustainable futures. It enables kleptocrats to pillage their countries, violent trafficking organizations to expand their operations, and terrorist groups to finance their attacks against our communities.

"A firm commitment by President Biden and the US Congress to prosecute the twin devils of kleptocracy and illicit trade would be welcomed, as is a forward-looking foreign policy that advances the greater good, democratic values and collaborative partnerships that help keep our community of democracies more prosperous, secure, and safe," emphasized Luna.

David M. Luna is a former US diplomat and currently Chair of the Business at OECD's Anti-Illicit Trade Expert Group; and Senior National Security Fellow, Terrorism, Transnational Crime, and Corruption Center, George Mason University.

Source: Luna Global Networks