SHORT TAKES #13: STOPPING CORPORATE CORRUPTION: GUNS AND MONEY
Here are short takes on two important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. The first is an update on an effort to hold gun manufacturers accountable for illegal gun sales. The second is an update on efforts to stop international, corrupt money laundering via the U.S. financial system, which is a multi-billion-dollar issue.
STORY #1: You may remember that earlier this year the Indiana legislature passed a bill that retroactively banned Gary Indiana’s 1999 lawsuit against gun manufacturers for illegal gun sales. Good news! In August, an Indiana Superior Court judge ruled that the retroactive ban was unconstitutional!
The judge ruled that banning lawsuits by cities against gun manufacturers was legal. However, he ruled that the retroactive ban on Gary Indiana’s suit would “violate years of vested rights and constitutional guarantees” and that the city’s rights should be protected and upheld. The gun manufacturers have announced they will appeal, but for now the suit will go forward. The discovery phase of the trial was nearing completion earlier this year before the legislature attempted to block the suit. The gun manufacturers want to stop the suit from moving forward now so the thousands of documents they have had to share as part of the suit’s pre-trial discovery process won’t be made public. The documents will presumably reveal embarrassing, if not illegal, decisions, actions, and polices of the gun makers. [1]
STORY #2: The U.S. financial system is probably the largest vehicle for money laundering in the world. Hundreds of billions of dollars flow through the U.S. financial system each year from terrorists, international criminals and gangs, corrupt government and business officials, and drug and human traffickers. [2]
A major step to crack down on money laundering and the corruption it enables was taken recently by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). New regulations were issued that will stop money laundering via residential real estate and private investment firms, such as private equity firms and hedge funds. [3]
Currently, money is laundered through cash purchases of expensive residential real estate and large cash investments with private investment firms. These transactions receive little, if any scrutiny. The new regulations will require reporting and scrutiny of these large cash transactions. For example, since the collapse of the Soviet Union in 1991, Russian oligarchs have moved billions of dollars of their ill-gotten wealth into the U.S., where they knew it could be laundered through the U.S.’s deregulated financial system and would be protected by the U.S. legal system.
After the September 11, 2001, terrorist attacks on the World Trade Centers in New York, the U.S. did crack down on money laundering and funding for terrorists by requiring financial institutions to report and scrutinize large cash transactions. However, most real estate transactions and investments in private, largely unregulated, investment firms were exempted.
In 2011, then-FBI Director Mueller noted that organized crime had changed with globalization and technology. It had become a multi-national, multi-billion-dollar enterprise involving cooperation among criminals, corrupt government officials, and corrupt business leaders. It was a significant national security threat and engaged in widely diverse activities including computer hacking, copyright infringement, human trafficking, health care fraud, and manipulation of prices for commodities such as oil, natural gas, and precious metals. The perpetrators also work to corrupt officials at the highest levels of governments and businesses to aid and abet their illegal activities.
In 2021, President Biden declared that the fight against such criminal and corrupt activity was a core national security priority. As a first step, Congress passed and Biden signed the Corporate Transparency Act. It requires shell companies (i.e., business entities that have no real business activities and are used as passthroughs for financial transactions) to provide detailed identification of all persons who own 25% of more of the company or exercise substantial control of it. The Act also increases penalties for money laundering and enhances cooperation between U.S. and foreign financial and law enforcement authorities. (For more detail see this previous post.)
In 2023, the U.S. Treasury Department announced that money laundering by Russian entities, including the government, state-owned enterprises, organized crime, and oligarchs posed a significant threat to our national security and to the international financial system. This concern was an important factor driving the new anti-money laundering and anti-corruption regulations.
[1] Coleman, V., 8/13/24, “Historic gun suit survives serious legal threat engineered by Indiana Republicans,” (https://www.propublica.org/article/gary-indiana-lawsuit-guns-gunmakers-gop-glock-smith-wesson)
[2] Richardson, H. C., 8/29/24, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/august-29-2024)
[3] U.S. Treasury Department, 8/28/24, “FinCEN issues final rules to safeguard residential real estate, investment advisor sectors from illicit finance,” (https://www.fincen.gov/news/news-releases/fincen-issues-final-rules-safeguard-residential-real-estate-investment-adviser)