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Friday, December 3, 2021

American Law Firms Are Enabling Foreign Kleptocrats

Over the past week, some of the strangest responses to the Pandora Papers—the leak of nearly 12 million global financial secrecy documents, offering an unprecedented look into the broader world of offshore finance—have centered on the belief that the disclosure is some kind of Western, and especially American, plot. Such rhetoric found a home in outlets like Jacobin, which suggested that the leak “might be a CIA op,” pointing to the leading Russian figures featured and the lack of American politicians alongside.

Such a claim completely fails to explain why the CIA would endeavor to out, say, the secret nine-figure purchases of Jordanian King Abdullah II, or how former British Prime Minister Tony Blair used an offshore company to link up with a high-ranking official in Qatar’s dictatorship. And you could just as easily claim the Pandora Papers were some kind of secret Namibian, or Kyrgyz, or Vietnamese plot, given the lack of politicians outed from those countries in this tranche of documents. But more to the point, such a claim misses the forest for the trees of modern financial secrecyand how clearly the Pandora Papers illustrated how responsible the United States actually is for fertilizing the growth of these offshoring networks in the first place.

We’ve known for years that American states like Delaware, Nevada, and Wyoming have led the global descent into the modern offshoring economy, thanks to the introduction and refining of shady financial tools such as anonymous shell companies. We also know that the American real estate sector has been all too happy to soak up the proceeds of that anonymizedand often illicitwealth. (Just look through the Jordanian king’s California estates, or the Florida real estate empire revealed last week with secret ties to Saudi royalty.) For those covering the world of international money laundering, we’ve also known that American states such as South Dakota have introduced the world to a bevy of new financial secrecy tools like “perpetual trusts,” which allow perpetual ownership and perpetual control of untold wealth, free for anyone in the world to take advantagea fact that the Pandora Papers helped reveal to a far wider audience.

And thanks to the Pandora Papers, we also now have an unprecedented look at the so-called “enablers” who open these doors to American financial secrecy, and to the wider wonders of the world of offshoring. Few U.S. industries are suddenly in the glare more than American lawyers, newly revealed as little more than henchmen for a range of oligarchic figures and despotic regimes around the worldincluding those investigated and sanctioned by American authorities for launching some of the greatest money laundering schemes the world has ever seen. Far from letting the U.S. off the hook, the Pandora Papers shine a bright and unstinting light on how American lawyers and legal firms have transformed over the past decade into one-stop shops for the kleptocrats around the world racing to the U.S. for all of their laundering needs—and for all those hoping to get their own slice of the swelling offshore world.


First, a bit of context as it pertains to American lawyers and dirty money around the world flocking to the U.S.: Like real estate agents, escrow fund managers, private equity or hedge fund firms, or an entire range of other American industries, American lawyers remain under no compunction to have to check the source of any funds with which they work. Part of that rests on the notion that everyone is nominally entitled to equal representation in American courts; as such, according to those defending lawyers’ ability to work with whomever they choose, the source of funds paying for such legal defense should be immaterial.

There’s some truth within that reality. Unfortunately, as researchers in the spiraling world of offshoring and kleptocracy have uncovered over the past decade, legal defenses are by no means the only services American law firms now provide those who pillage populations abroad, immiserate entire countries, and then use their ill-gotten gains to build real estate or luxury goods or private equity empires in the U.S. Where lawyers of yore were limited simply to courtroom proceedings, we’ve seen in recent years how American law firms have become the central nodes of far broader kleptocratic networks and of entrée into the U.S. in the first place.

It’s a tough job just trying to keep up with all of the myriad services American legal teams now provide these figures. Some lawyers, for instance, freely coordinate with shell company operators, real estate agents, and luxury goods dealers on behalf of their kleptocratic clients, helping them to navigate around America’s fledgling anti–money laundering policies (while also providing additional layers of secrecy via attorney-client privilege). Some lawyers now combine legal services with P.R. representationthus taking skillful advantage of foreign lobbying exemptions that remain wide open. (One of the first hires the Jordanian king-cum-kleptocrat made after his offshore holdings were revealed was American firm DLA Piper, which will now help him with “media matters.”) Some American firms even push pro-offshoring policies, helping craft new secrecy tools and further entrenching the kinds of legal infrastructure needed to move, to hide, and to launder even more funds.

It was this latter point that the Pandora Papers highlighted so well. As the International Consortium of Investigative Journalists, or ICIJ, detailed, few firms stand out for their offshoring help more than Baker McKenzieone of America’s largest firms, billing itself as “the original global law firm.” As the Pandora Papers document, Baker McKenzie helped clients link up with offshore services providers time and again, and advised “corporate giants” elsewhere on offshoring tactics. Along the way, Baker McKenzie specifically crafted policies stripping away transparency in notorious offshore havens like the United Arab Emirates. And in the U.S., Baker McKenzie “sought to exempt more foreign customers from due diligence rules meant to prevent money laundering.”

Baker McKenzie also worked with some of the most notorious alleged kleptocrats of the past decade, from Malaysia’s Jho Low (the man behind one of the biggest asset forfeitures the world has ever seen) to sanctioned Ukrainian oligarch Ihor Kolomoisky (accused by the Justice Department of plowing hundreds of millions in illicit wealth into the U.S.). As the ICIJ summed, “Baker McKenzie is an architect and pillar of a shadow economy, often called ‘offshore,’ that benefits the wealthy at the expense of nations’ treasuries and ordinary citizens’ wallets.”

None of this is necessarily surprising. We’ve known for years that American law firms play key roles in formulating the kinds of policy necessary not only for offshoring economies to thrive but for oligarchs and budding dictators and all of their cronies to take full advantage of those services. Thanks to the Pandora Papers, however, we now have names and figures directly responsible for these developmentsand can properly identify firms like Baker McKenzie that stood at the center of this whirlwind of transformation.

Moreover, because of the Pandora Papers, there’s a chance that this corrupt status quo won’t last for long. Last week, Congress introduced the ENABLERS Act, which would force American lawyers to comply with basic anti–money laundering regulations. Put another way, it would force the U.S. finally to implement the anti–money laundering requirements for lawyers that Washington has already agreed to in international fora.

Thanks to the Pandora Papers, the halcyon days of American lawyers freely rolling in as much dirty money as they wantand setting up and overseeing as much offshoring policy, provisions, and profit as they couldmay soon be behind us. And American firms like Baker McKenzie will only have themselvesand not the CIA, or any of the other conspiratorial culpritsto blame.

BFIA Admin
The big boss.

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