The Illicit Finance Threat to Democracies: A Transatlantic Response

Isabella Chase, Maria Nizzero, Olivia Kearney and Sarah Manney

‍22 September 2022

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A fresh approach to countering illicit financial flows is needed to counter new and emerging threats.

Executive Summary

In July 2021, RUSI established the Taskforce on a Transatlantic Response to Illicit Finance (TARIF). TARIF set out to explore the rising acknowledgement in US and UK governments that illicit finance, generated by corruption and kleptocracy, is not only having a negative impact on their own societies, security and financial integrity, but also on that of the wider democratic world. The Russian invasion of Ukraine and subsequent economic response emphasised the need to restrict the financial influence of corrupt actors and ensure that the US and the UK are hostile environments for illicit finance.

TARIF explored the domestic vulnerabilities of both countries to illicit finance, their responses to the international element of illicit finance and how ‘active financial measures’ undermine democratic societies. TARIF developed a set of principles and actions that US and UK governments must implement to better detect and disrupt illicit finance linked to corruption and kleptocracy.

The proposed actions, summarised below, are grounded in three underlying principles which should be the foundation of any future transatlantic response to illicit finance: honesty; cross-border collaboration; and ambition.

• Come clean. The US and the UK must be honest about the deficiencies in their responses to illicit finance and how these have enabled wider international illicit finance.
• Lead by example. The US and the UK must set ambitious benchmarks for key pillars of the global anti-financial crime architecture. This must start with high-quality, transparent ultimate beneficial owner (UBO) registers and then focus on strengthening the response of designated non-financial businesses and professions (DNFBPs, often referred to as ‘enablers’).
• Elevate information sharing. The US and the UK must establish a joint and permanent public–private partnership (PPP) to share information on corruption and kleptocracy in addition to strengthening domestic PPPs.
• Enable new technology. The response to illicit finance can be accelerated by the wider adoption of new technologies to enrich the understanding of threats.
• Invigorate asset recovery and return. The international system for asset recovery and return urgently needs to be streamlined and investment sustained to recover the proceeds of corruption and kleptocracy.
• Embolden and protect civil society. Increase the capacity of and protection for civil society, which plays a vital role in identifying and exposing illicit finance.
• Strengthen deterrent measures. Lessons must be learned from the Russia experience on the benefits of coordinated sanctions. Moreover, other deterrent measures must be developed to make it more difficult to profit from corruption and kleptocracy.

In applying these principles and actions, the US and the UK will increase their resilience against the ‘dirty money’ that has taken root in their societies and defend against that which is to come. Many of the recommendations within this Policy Brief are not new, but rather the result of ongoing conversations on the shortcomings that have been present for decades and are yet to be properly fixed.

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p/o Virginie Gastine Menou

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