Introduction and summary
The United States today faces a pressing threat to its national interests: the strategic use of corruption by autocratic and kleptocratic states to undermine the integrity of democratic institutions and interfere in the politics of democratic states for geopolitical advantage. Such strategic corruption is not a new phenomenon, but it has become more acute and sophisticated with the rise of offshore financial centers and the growing assertiveness of authoritarian competitors in using nontraditional means of projecting power and wielding influence. In recent years, strategic corruption has been deployed more systematically and with greater success against the United States and its democratic partners than in previous eras.
As with earlier threats that have been fueled by access to mobile capital, strategic corruption has thrived thanks to international financial connectivity. More specifically, it has risen because of enduring ungoverned financial spaces in the global economy and gaps in anti-money-laundering frameworks both in the United States and in many other advanced economies. These features of strategic corruption mean that an effective response will require the participation of a broad set of stakeholders within the national security community. In particular, curbing strategic corruption and the kleptocratic networks that enable it will depend critically on the analytic capabilities and regulatory power of the actors within the U.S. government tasked with supervision of the international financial system, above all the Treasury Department.
Over the past 30 years, the United States has become increasingly effective at using its influence over the global financial system to protect its national security. In the 1980s and 1990s, concerns over drug trafficking, nuclear proliferation, and terrorism led to the creation of an infrastructure aimed at identifying and disrupting the flows of funds that enabled those crimes.1 After the September 11 terrorist attacks, the Bush administration built on this foundation to create a formidable interagency mechanism, centered in the Treasury Department and supported by new legal authorities, to stop the financing of terrorist groups, and also deployed these capabilities to shut down the banks that were funding North Korean nuclear proliferation.2 More recently, the United States has used many of the same tools developed to combat terror financing to weaken the financial support networks of transnational criminal organizations and other malign actors that depend on access to foreign markets.3 Continue reading.