The Combative Nature of US Tax Haven Legislation Relating to International Measures to Curtail Money Laundering Schemes

Analysis

The proliferation of corruption and money laundering schemes, both domestically and abroad, has been one of the most corrosive mechanisms in undermining international law. The tenuous balance of the enforcement of international law requires the active participation of the countries that agree to enforce such laws. However, if even just one nation refuses to partake in such prosecution, or even take active measures to undermine it, these systems become essentially useless over time. Contrary to public statements of support, the United States has been a driving force in the undermining of these agreed upon practices and has acted in a way that is at odds with international conventions regarding corruption and money laundering. United States tax haven policies, both on the state and federal level, establish domestic tax havens that foster international money laundering schemes that have corroded the efficacy of measures implemented by individual foreign states and international organizations. This raises the question of whether or not individual U.S. policies are impeding the best efforts of international organizations to curtail and prosecute the international money laundering schemes shielded under state legislation.

In this paper, the United States’ complex, and often nefarious, history of passing state and federal legislation that fosters the use of tax havens for the purposes of corruption and money laundering will be explored. Additionally, the ineffective measures to combat global financial fraud on the behalf of the U.S. will be evaluated. Furthermore, the measures and responses by international organizations will be highlighted and their relative efficacy will be reviewed. Finally, the victims that are impacted by the money laundering schemes will be detailed, the true impact of the United States’ interference with the prevention of these practices will be analyzed, and the actors involved in such practices in relation to the lack of enforcement will be discussed.

Roadmap

In order to evaluate the international impediment that the United States is placing on the prevention of corruption and money laundering activity, such measures of deterrence should be evaluated on the state and federal level within the United States and on the international level. The first section of this paper will detail the U.S. federal laws that address venality and will explore their relative effectiveness. Next, individual state laws that foster these nefarious practices will be discussed, particularly the laws found in South Dakota and in Florida. Following this, the procedures taken by U.S. organizations to combat corruption will be compared to the state laws that seemingly facilitate such practices. In the subsequent section, specific methods taken by various international public organizations will be highlighted and the ways in which these processes are curtailed by US laws will be explored. Finally, the individual non-state actors that work to foster these money laundering schemes will be evaluated in the context of their relationship with various governments and the impact that their actions have on the international community. This will then raise the final question of what steps that United States and other governing bodies can take to remedy these practices and which legal mechanisms can be implemented to prescribe some type of change on an international level.

Argument

I. United States Federal Laws Regarding Corruption and Money Laundering Schemes are Insufficient to Properly Address this Pervasive Issue

From a legislative perspective, the United States federal government, on its face, is committed to the prosecution of corruption and money laundering. According to 18 U.S. Code § 1956 – Laundering of Monetary Instruments, money laundering is prosecutable when an individual performs or seeks to conduct a financial transaction with the knowledge that the property involved in the transaction constitutes the proceeds of some sort of illicit activity. Furthermore, according to the statute, the violation of 18 USC 1956(a)(1) and (2) carries a fine of up to $500,000 or twice the value of the monetary instruments involved, whichever is greater, or a sentence of up to 20 years in prison, or both; and a violation of 18 USC 1956(a)(3) carries an undetermined fine or a sentence of up to 20 years in prison, or both. However, according to the United States Sentencing Commission, not only have money laundering convictions decreased since 2016, but the average amount of money laundered was about $300,000. This represents that predominantly smaller scale cases of money laundering are being prosecuted in the United States. Put in context, according to the United Nations Office on Drugs and Crime, it is projected that anywhere between $1-2 trillion are laundered globally every year. The UNODC further acknowledges that it is difficult to identify fiscal figures regarding money laundering by nation given the often cyclical and evasive nature of these practices.

An additional legislative measure that the US is taking on the federal level is through 26 U.S. Code § 951A - Global intangible low-taxed income included in gross income of United States shareholders. From an enforcement standpoint, this statute serves to ensure that for each taxable year in which a person is a United States shareholder of a controlled foreign firm, such shareholder’s worldwide intangible low-taxed income must be included in gross income. In a 2021 presentation from the Internal Revenue Service, they explain that this statute functions to assume a 10% rate of return on the CFC’s tangible assets, and any revenue exceeding that “normal return” on assets is effectively classified as intangible income, instead of requiring a filer to expressly declare intangible income. Once again, however, these measures only seem to address tax avoidance and money laundering schemes on a relatively small scale. For instance, a recent analysis from the Institute on Taxation and Economic Policy highlighted that under Trump era tax policies, some of the most profitable companies in the Fortune 500 managed to legally avoid paying federal income taxes at all. It is clear that if, on the federal level, there are already mechanisms in place for individuals and institutions to legitimately circumvent their civic financial obligations, attempts to prosecute nefarious methods are not truly done in earnest.

II. State Legislation in the United States Actively Fosters the Facilitation of Tax Havens both Domestically and Abroad

It is on the state level that these fully legal tax haven mechanisms accentuate the combative relationship that US tax policy has with international methods of preventing corruption and money laundering. Looking to South Dakota first, it is clear from their legislative language that the state values individualism over the prevention of corruption. Interestingly, if not anecdotally, the South Dakota Department of Revenue Sales and Use Tax Guide includes a “Taxpayer’s Bill of Rights” which stresses confidentiality and one-sided transparency. According to the Tax Justice Network (TJN) the United States is ranked second globally in tax havens for money laundering purposes. This is in large part due to the tax laws found in states like South Dakota. Such practices can be found in trusts like the South Dakota Trust Company. South Dakota has had a relatively long history of fostering tax havens for individuals and in 1983 it was the first state to pass a law explicitly rejecting the enforcement of any Rule Against Perpetuities statutes. According to this law, which is a minority norm in most US states, the value of trusts can be passed down generationally without being affected by inheritance tax regulations. This fundamental tax avoidance mechanism creates an intergenerational buffer between possibly ill-gotten gains and any subsequent probing following the death of a bad actor.

Furthermore, through these statutory mechanisms, states like South Dakota have replaced common international money laundering locations. As detailed in the ICIJ’s Pandora Papers, tens of millions of dollars that had been previously housed internationally are now being channeled through the mid-western state. Additionally, South Dakota-based trusts have seen rapid growth in assets over the past twenty years, amounting to an estimated total value of over $360 billion. It’s unclear what, if any, actions the South Dakota state government is taking to prevent these legal channels from being exploited for malicious ends. In fact, over the past ten years, the state has passed laws making it even easier for individuals and corporations to keep their assets out of the eye of the federal government. According to former State Senator Gene Abdullah in 2007, many of the laws passed in the state during the 1990’s and 2000’s were lobbied by these South Dakota trust companies and were passed into law unopposed, primarily due to a lack of understanding by the state legislators. However, it is hard to believe that these pieces of legislation were so technical or financially complex that the ambivalence of the law makers was due to an absence of knowledge.

Although the thirty-seven trusts found in Florida that were connected to some type of financial secrecy pales in comparison to the over eighty found in South Dakota, the Sunshine State has its own complex, and often underhanded, history of using its legislation as a means to launder money. Even dating back to the Prohibition Era, Florida has had an intimate relationship with finance and crime. A financial haven for many famous individuals involved in organized crime, much of the money laundered through the state was used to finance illicit endeavors in both Cuba and Las Vegas alike. In fact, it would be the money laundered through Florida by the Gambino crime family that funded the regimes of Caribbean dictators like Cuba’s Fidel Castro or the Dominican Republic’s Rafael Trujillo in later decades. In more recent years, the state courts in Florida have ruled that the use of online currencies, like Bitcoin, within the context of hiding funds from the eye of the government is not considered laundering because such currencies are not “monetary instruments”.

III. International Measures to Combat Money Laundering Schemes are Being Negated by U.S. State Law

Despite the best efforts of American states to undermine the federal government’s measures to combat money laundering, many international organizations are working to limit the erosive spread of such activity. For instance, the Organisation for Economic Co-operation and Development, which currently has a membership of 38 countries, has been taking active steps to curtail money laundering worldwide. According to the OECD, one of the biggest obstacles that international organizations are encountering is the use of base erosion and profit shifting (BEPS) to avoid financial accountability. Many governments lose between 4 and 10% of global corporate taxable revenue because of these tactics, amounting to roughly $200 billion in yearly losses. On its face, to combat BEPS, a 15-action plan and accompanying remedies are being developed by the OECD. Some of these measures include preventing monies from being transferred in an unsuitable manner and the banning of treaty shopping. Additionally, a joint meeting of the FATF and the G20 Anti-Corruption Working Group was conducted to address these concerns. According to the OECD, this joint meeting signaled a commitment from delegates of the FATF and the G20 ACWG to explore the practical implications of different approaches for improving beneficial ownership information, and the challenges facing numerous actors. The joint meeting highlighted the level of interest in improving beneficial ownership transparency across sectors and institutions and demonstrated the need for a multilateral approach to tackling concealment of beneficial ownership. However, despite the steps being taken by these collaborative international organizations, it is unclear if they are yielding any substantive results.

The Financial Action Task Force, a France-based intergovernmental organization, in an ongoing report provided a series of recommendations that nations should take to combat money laundering. According to the FATF, their recommendations were created to combat money laundering and terrorist financing, but they can also help combat corruption by safeguarding the integrity of the public sector. Furthermore, they are attempting to protect designated private sector institutions from abuse by increasing financial system transparency, by facilitating the detection, investigation, and prosecution of corruption and money laundering, and by recovering of stolen assets. One of their first recommendations is for individual states to implement policies that actively fight these venal practices. When compared to the policies that the US has implemented on the state level, it is clear that such pledges made by the US, as a member of the FATF, were not done in sincerity. Additionally, according to the Preventative Measures section of the recommendations report, financial institution confidentiality regulations should not prevent countries from implementing the FATF Recommendations. This is similarly at odds with the South Dakota’s Tax Guide that emphasizes one-sided transparency and the discretion of private institutions.

Moving on to a recent report by the International Monetary Fund (IMF), Tackling Tax Havens, the organization addressed changing understandings and expectations of international money laundering mechanisms. The report further addresses the evolving ways in which bad faith actors have utilized legal loopholes in recent years to avoid detection or legal scrutiny. The US is once again identified as a tax haven for nefarious financial activity. The IMF further acknowledges some of the efforts taken by international organizations like the OECD and criticizes the United States for its hesitation to formally acknowledge the role it has as a major player in the global economy and the repercussions of not making a stronger effort to curtail corruption. Furthermore, the IMF cites proposed steps by the Tax Justice Network to combat these pervasive mechanisms. The steps are “automatic cross-border financial data sharing, public registers of beneficial ownership of financial assets, country-by-country reporting, and now a unitary tax with formula apportionment are all on the horizon”. These goals appear to be aligned with the desires of groups like the OECD, however it is unclear just how many nations have taken the steps to incorporate them into their legislation.

IV. Domestic Measures to Curtail Tax Havens and Money Laundering Schemes are Ineffective and are not Being Implemented in Earnest

To provide some framework for the legal basis of prosecuting money laundering, it is useful to look at the United States Internal Review Manuals section on Money Laundering and Currency Crimes. In this manual, the IRS states that there is no condition in 18 USC 1956(a)(2) that the financial device or assets be the direct result of illegal behavior but that the defendant was aware that such funds were in some way connected to illicit activity. Moreover, this provision does not place the burden of proof on the government to establish that said funds were derived illegally, meaning that originally “clean” funds that were later used in connection to illegal activities are prosecutable. However, this provision does not extend to funds that are in connection with tax evasion, arguably placing more strength in legal tax havens on the state level.

For the purposes of addressing some of the hurdles that the United States and other nations might encounter in fully stopping corruption and money laundering schemes, it is useful to look at the obstacles detailed in Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies from Griffith University. They first address the issues of policing power within the US, citing a lack of jurisdiction to act across international borders. However, following the passing of the US PATRIOT Act, particularly section 319(b) (further discussed below), it is clear that the US government is willing to take the steps to legally support any attempts at international intervention, whereas the actual practice of such may be a different issue entirely. Conversely, it is addressed that on a practical level, lacking some clear enforcement directly connected to the US government, there are limited guarantees that such laws will be prosecuted. This raises an interesting question of international law, even if just on principle alone. Given the presence of an already eroded sense of trust with the US as an inconsistent actor and other intergovernmental organizations as prescribers of change, how exactly can one expect these laws to be upheld in foreign lands? Furthermore, even with a possible good-faith effort on behalf of the US to curtail these nefarious financial practices, what will happen when the first line of administration, like the local police in a different nation, are in fact part of the web of bad actors? This is often the case. Given that cases of money laundering rarely ever grab widescale attention, if they manage to even make it onto the radar of governing bodies, it is difficult to think of a scenario in which public outcry would garner the attention necessary to effectuate administrative interference.

The other obstacle cited is the “passive” and often “archival” nature of corporate registries, like those used by the Financial Crimes Enforcement Network. This once again raises an interesting question, however this time regarding the duties of government. It would not be especially insightful to identify the inefficiencies of government administration but there is a question to be asked about the expectation of latency in synthesizing. To possess an expectation beyond an archival function following a government agency obtaining some type of information creates an inference which borders on that of an authoritarian regime. Additionally, that is not even considering the sheer quantity of resources that it would take for such an expectation to become a reality. Furthermore, in order for such a practice to occur, the concerns mentioned above would then have to be woven into some type of global police force that utilizes highly efficient monitoring mechanisms. There is, nonetheless, a more collaborative path of lesser resistance that would not throw the world into a police state, and that would just be an agreement to work from the ground up to prevent these corruptive practices. Of course, this is an exercise in the extremes, juxtaposing a wholly cynical suggestion with a more optimistic one.

Moving on to specific enforcement agencies, the Financial Crimes Enforcement Network is a bureau of the Department of Treasury that specializes in the investigation of financial crimes. In 2007, the FinCEN released a report called Money Laundering Strategies which is meant to highlight the efforts from the agency regarding the combat of these types of crimes. Within the report, they detail nine goals that the bureau plans on executing to address the primary issues within financial crime enforcement. Within these proposed goals, they include specific risks and vulnerabilities within the world of commerce and detail clear strategies that could be implemented. Of particular note within this report are Goal 1 – Continue to Safeguard the Banking System, Goal 2 – Enhance Financial Transparency in Money Service Business, and Goal 4 – Attack Trade-Based Money Laundering at Home and Abroad. It should be noted, however, that this 2007 report occurred prior to the Great Recession and lacks the perspective of such a substantial mark in recent history. It also fails to address more modern issues in the prosecution of financial crimes, like the evasive use of digital currency for nefarious purposes.

Goal 1, which addresses the security exposures within banking, demonstrates difficulties in monitoring funds once they are placed in financial institutions due to intermingling and the ease of relocation through the use of wire transfer. They further identify the susceptibility of laundering by creating online accounts through fraudulent means. To combat some of these threats, the FinCEN has historically taken advantage of the probing mechanisms granted in the USA PATRIOT ACT, specifically section 312 which requires that financial institutions are given the additional responsibility of maintaining and documenting the information of non-US accounts, of both private individuals and of private organizations. This can include tracking and submitting the information of international political figures, their families, and their known associates. However, this action item does not explain the consequences for a bank’s failure to meet these record keeping requirements and it is unclear if there are any.

Goal 2 identifies the risks posed by individual and organizational use of money services businesses. According to the IRS, a money services business (MSB) is anybody that sells money orders, travelers’ checks, or pre-paid access items for more than $1,000 per person, per day, in one or more transactions, regardless of the quantity of money transmission activity. Since only 1/5 of MSB’s are registered with the federal government, it is arduous, if not impossible, for the FinCEN to monitor the origin and destination of many of these funds. Although some MSB’s qualify for registration exemption, the FinCEN has had a difficult time determining how many actually do. Based on their reported action plans, however, it would appear that FinCEN did not have any clear legal avenues to address the issue of MSB’s and their ease in existing under the radar of the federal government. Although they provided some plans to work with other governmental agencies like the Internal Revenue Service and Immigration and Customs Enforcement, it is not clear that these measures resulted in increased prosecution or even increased MSB registration.

Finally, Goal 4 discusses the threats that come from participation in trade-based money laundering, more specifically involvement in the Black-Market Peso Exchange (BMPE). As defined by Immigration and Customs Enforcement (ICE), the BMPE is the largest money laundering scheme in the world, in which individuals and organizations trade “dirty” US dollars for “clean” Colombian pesos. This is often done through bribery and corruption within Colombian banks, leaving no clear indication that such a transaction occurred. In response, FinCEN, in partnership with ICE, have created Trade Transparency Units (TTU) in Argentina, Paraguay, Brazil, and Colombia, with the cooperation of the US Department of State, and they are working with the governments of Mexico, the Philippines, and Malaysia to do the same. Contrary to Goal 2, the steps taken by these government agencies appear to be more tangible and extend beyond nebulous administrative aspirations. However, following additional research, it is unclear if this action item yielded an increase in prosecution or subsequent conviction for participation in these black-market exchanges.

Last year, Congress passed the Anti-Money Laundering and Corporate Transparency Act, which falls under the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”). In its own summary, the CTA describes its purpose to compel individuals establishing a corporation or an LLC to disclose any “beneficial owners”. Under 17 CFR § 240.13d-3, a beneficial owner is an individual with voting and investment power within a corporation or LLC. This act, which relied directly on the advice and criticisms of the FATF, worked to broaden the legal scope of the federal government in its ability to investigate and prosecute corruption and money laundering crimes. One of the first changes made in the legislation was to increase the transparency in incorporation practices. This would require businesses interested in filing articles of incorporation to provide some additional information, including a FinCEN registration number, thus addressing one of the goals set forth by the agency almost fifteen years ago. Additionally, the information disclosed to the FinCEN at the time of incorporation will not be available to the public but may be given to various government bodies upon request. However, the CTA also includes a list of entities that are exempt from being classified as “reporting companies”, which would put them outside much of the mechanisms implemented in this act. Most notably, exempt entities include banks, state and federal credit unions, individual brokers, and investment companies registered with the SEC. This once again raises the inference that the actions taken by the United States are not done with sincerity or are at least taken with the interests of groups taking advantage of these legal loopholes in mind. It is difficult to view the CTA as a good faith attempt to adjust the legislation based on the advisement of the FATF when many of the entities that exist outside of the grasp of law enforcement are again assisted by the governing body they are trying to evade. Furthermore, as identified by the American Bar Association, the CTA appears to place a larger burden on smaller sized businesses than that of larger ones. Considering the staggering amount of money that is laundered through the US, it is counterintuitive to create a body of law that governs the drops in the bucket but fails to regulate the rest of the water.

It should be noted, however, that the strongest legal steps the US has taken in the past twenty years to investigate and to enforce money laundering laws were following the US PATRIOT Act of 2001. Although many constitutional arguments have been made regarding the validity of the Patriot Act, its nearly systematic restructuring of governmental investigative power resulted in a broadened exploratory scope. Notably, Section 319(b) – Bank Records Related to Anti-Money Laundering Program which authorizes the Attorney General or the Secretary of the Treasury to order a summons or subpoena to any international bank that maintains a correspondent account in the United States for records related to such accounts, including records outside the United States referring to the deposit of assets into the foreign bank, and to aid the government’s ability to seize illicit funds of individuals and entities located in foreign countries. However, it is hard not to address that such an act grants the United States government a great deal of latitude in interacting with private foreign citizens. In a 2002 seminar, the International Monetary Fund released a report addressing the concerns of this seemingly unlimited scope. The seminar report acknowledges that there does not appear to be any language limiting the power of the Attorney General to interlope on the affairs of international citizens, a grant of power that had previously been unseen. However, at this stage in the timeline, given its short proximity to the passing of the Patriot Act, the IMF does not extend far beyond its general concerns for this far-reaching discretion. This is likely, in part, due to the pressures that the US was placing on other nations regarding their commitment to counterterrorism. Despite a mildly negative response by the IMF, Section 319(b) would produce some prosecutorial results, following an indictment by the Department of Justice against Banco Popular of Puerto Rico, which would result in a fine of over $21 million. However, this case does appear to be an outlier, given that Banco Popular was being fairly conspicuous with their money laundering practices and did not seem to fly under the radar like many of their laundering contemporaries.

In a report from 2011, the American Bar Association highlighted some of the recent instances of prosecution of money laundering in an entry called International Anti-Money Laundering. Within the report, there were numerous settlements from both organizations and individuals, adjustments in legislation and administrative orders, and international enforcement actions. Interestingly, in the first case discussed in the report, Hasie v. Off. of Comptroller of Currency of U.S., 633 F.3d 361 (5th Cir. 2011), despite the district court ruling in favor of the OCC, in many ways this case embodies a loss in a long-term effort to combat money laundering schemes. Here, the issue before the court was whether the OCC’s disclosure of a suspicious activity report to a criminal defendant made the report public information. If such an action were to render the reports public knowledge, then it would make them available upon request for use in civil litigation. The court ultimately ruled in favor of the OCC, reasoning that the reports were non-public information because the prospect of making such reports public information did not outweigh the importance of maintaining confidentiality.

The argument in favor of corporate confidentiality once again highlights an internal struggle pervasive within the American legal system; a struggle that creates a showing of inconsistency, if not hypocrisy among the international stage. When comparing the wide range of latitude, the federal government is willing to give with the intrusion of American investigative powers into the private information of international citizens, it becomes difficult to reconcile its emphasis on protecting the privacy of these corporate entities. However, there is an argument to be made that the emphasis on privacy can serve to shield these probing mechanisms since there is an assumption that once the government concludes its surveillance of an individual outside of their sovereignty, at least that information will be “protected”. It will likely be up to international bodies to determine whether such inconsistencies inspire or diminish confidence enough to allow such activities to continue.

Regarding the cases within the United States court system, the ABA report goes on to highlight two more cases in which civil penalties were awarded, in the sum of an $8 million and a $7 million sanction. The first case within this pair, involving Zions First National Bank, a Utah financial institution, was a result of their violation of the Bank Secrecy Act of 1970. According to FinCEN, the purpose of the Bank Secrecy Act is to ensure that financial institutions preserve records of cash purchases of negotiable instruments, make reports of cash transactions exceeding $10,000 (day cumulative total), and report suspicious behavior that might indicate money laundering, tax evasion, or other illegal acts, according to the statute. This case was of particular note within the narrative of successful money laundering prosecution because it highlighted the evolving methods of bad faith actors through the misuse of remote deposit capture technology. Similar to the Banco Popular case, however, Zions Bank conspiracy to commit fraud and launder money was so widespread and conspicuous, their prosecution could almost be seen as an inevitability. However, victories of enforcement are victories nonetheless and the clear monetary consequence for the financial institution should not go unnoticed.

In the Pacific National Bank case, the latter institution mentioned above, FinCEN fined the organization $7 million for their failure to comply with the BSA. Specifically, Pacific National, a bank based in Miami, Florida, refused to report suspicious activity to FinCEN, they failed to update FinCEN on the activity of accounts held by non-US individuals, they did not meet the due diligence requirement, and they refused to audit high-risk transactions. Furthermore, additional penalties were executed by FinCEN towards individuals within the bank. However, these penalties were relatively nominal and were below $15,000. This is consistent with how the courts have been ruling in this cluster of cases. Although the multimillion dollar fine may have had some impact on the bottom line for the bank as a whole, it is hard to believe that the penalties against the bank employees had a punitive effect. It would not be unreasonable to raise the inference that the bad actors at the bank put themselves outside of the law in exchange for several thousand dollars, so such a fine likely did not even negate their actions. However, this raises a larger question as to the purpose of punishment and whether the powers and purpose of FinCEN should extend that far. Given the pervasive theme of protecting individuals, more specifically within the scope of personal information, the courts, regardless, would likely reject an argument to increase the scope of FinCEN in such a manner.

V. The Individuals and Groups That Work to Prevent the Prosecution of Corruption and Money Laundering Schemes and the Impact of such Practices

In order to evaluate the ways in which specific individuals and independent organizations, like groups connected to organized crime, impede effective prosecution of crimes of corruption, money laundering, and tax evasion, it is useful to understand the relationship between these organizations and such crimes. In an educational module released by United Nations Office on Drugs and Crime titled Infiltration of Organized Crime in Business and Government, the UNODC specifically highlights the interwoven relationship between organized crime and money laundering, the impact that organized crime and corruption has on the prosecution of such crimes, and the ways in which crime syndicates utilize legal entities (described as “legal persons”) to evade liability. In an explanation of the inseverable connection between organized crime and money laundering, given the necessity for secrecy and clandestineness in organizations like the La Cosa Nostra, the UN’s educational manual also cites the diverse ways in which money is often laundered. Referencing a report from the National Crime Squad of the Netherlands Police Agency, the use of not only illicit markets, but also common businesses, like restaurants, and the use of independent professional money launderers were detailed. Such a comment by the UN was interesting because many successful instances of prosecution of money laundering in the United States involved medium-to-large sized financial institutions and less of what was described above. This raises an implication that these crime syndicates are either more successful at existing outside of government scrutiny or that they are using methods of corruption to evade prosecution.

Citing Section 7 of the UN Organized Crime Convention of 2000, money laundering counter measures are identified, which then provides a comparison to the methods taken by the US previously discussed. Interestingly, the UN takes a more pedagogical approach in recommending strategies for enforcing anti-money laundering laws. In their educational manual, they deconstruct the money laundering process into three distinct stages in which a governing body can intervene. The first stage they identify is the “placement” or movement of illicit funds, followed by “layering” or covering the path the funds have taken, and finally “integration” or commingling the money in a way that allows it to become accessible to the bad actor. On that last point, the integration stage, the United States has recently amended its federal laws regarding the commingling of funds in an attempt to hide it from governmental detection, which does emphasize a good-faith effort to place the advisement of intergovernmental organizations into action.

The use of “legal persons” as a mechanism to evade detection by the government is in many ways similar to the concerns addressed by the Corporate Transparency Act regarding increased scrutiny for beneficial owners in recently registered corporations and LLCs. The UN makes a point to draw a distinction between natural persons and legal ones, an interesting departure from that found in the language of the CTA. In Article 10 of the Organized Crime Convention, the parties of the convention agree to place liability on legal persons in violation of money laundering and anti-corruption laws, either on the criminal, civil, or administrative level. The UN further addresses some concerns that arise from this enforcement standard, particularly regarding discrepancies in legal systems. This raises a fascinating question of enforcement given that matters of finance can have ideologically different starting points across nations. Even just within commercial and contract law, nations will experience a variety of different approaches to how the courts will address the matter.