Putting an end to the spread of corruption from kleptocratic autocracies into the United States will be one of the most significant challenges for the incoming presidential administration. Still, we believe President-elect Joe Biden will have a chance to reshape how U.S.-based jurisdictions approach doing business with economic actors based in kleptocracies. To succeed, the White House will need to connect this foreign policy priority with a domestic agenda of financial regulation. Fortunately, this issue may have enough bipartisan goodwill for these efforts to produce a major legislative win for the incoming administration.

While Americans have been gripped by the psychodrama of the Trump years, governments of China, Russia, Saudi Arabia, and Turkey have become more autocratic while also expanding their influence thanks to the global power vacuum left by Washington. The United States still possesses an immense source of leverage against these powers, because even as they entirely abandoned democratic aspirations, they have become even more dependent on the global financial system centered on the American economy and its legal-regulatory apparatus. Corrupt officials, oligarchs and state-owned firms from around the world flock into Western democracies with longstanding rule-of-law traditions and deep financial markets in search of legitimization, tax “optimization,” and property rights protections. In particular, U.S. banking, accounting, and law firms are still without rivals in helping these actors accomplish their goals.

Wall Street banks have had a long history of legitimizing the inflow of questionable capital into the global pool of money. Just look at the recent $3 billion settlement between the Justice Department and Goldman Sachs over misconduct at Malaysia’s sovereign wealth fund, which highlighted one of the most egregious, but entirely commonplace, examples of U.S. banks facilitating this process.

The Trump years also made it clear that the interconnectedness between the West and autocratic kleptocracies presents a security challenge for the United States. The Trump experience showed that top officials in the U.S. government can be corrupted by wealthy elites from foreign nations. Not only did we see such dynamics play out during the lead-up to President Donald Trump’s impeachment, but immediately after Trump’s failed re-election, the son-in-law of Turkey’s president resigned his post as finance minister, in part because his friendship with his U.S. counterpart, Trump’s son-in-law Jared Kushner lost its utility to Mr. Erdoğan. Biden and Michael Carpenter, former deputy assistant secretary of defense for Russia, Ukraine, Eurasia, concluded their 2018 essay on this subject by saying that “as matters of national security, these are issues that should be of interest to both Democrats and Republicans who want to reduce our vulnerability to foreign corrupt influence.”

We agree enthusiastically.

The Biden administration has an opportunity to deal a real blow to global kleptocracy, but it must adopt a comprehensive plan that would deploy domestic financial regulation as a vehicle to combat corruption at home and abroad. To that end, here are several recommendations for immediately confronting the problem of global kleptocracy, while also unwinding the United States’ ongoing role as one of the centers of offshoring and financial secrecy.

1. Put an end to financial secrecy.

The United States must, above all else, end its role as the world’s leading generator of anonymous shell companies. Thanks to states like Delaware, Wyoming, and Nevada, the United States produces millions of anonymous shell companies annually, allowing kleptocrats, oligarchs, arms dealers, human traffickers, and others to hide behind anonymity to successfully launder their money. Anonymous shell companies are the key linchpins in most financial and money laundering-related crimes. The process of obtaining an anonymous shell company in the United States is often easier than obtaining a library card. There is absolutely no reason for anonymous companies to exist — nor is there any reason whatsoever for the United States to continue its role as the leading provider of anonymous shell companies in the world.

Congress may be ready to act in the coming weeks. After the House passed the Corporate Transparency Act in late 2019, banning anonymous shell companies, the Senate appears close to passing similar language within the National Defense Authorization Act. However, even if such legislation comes to pass, numerous steps remain to battle America’s role in facilitating corruption across the globe.

Following the banning of anonymous shell companies, the United States must move directly toward banning the anonymous purchase of real estate, whether commercial or residential. Language in the 2002 Patriot Act explicitly required the real estate industry to put in place basic anti-money-laundering checks. But thanks to a “temporary” exemption — an exemption that’s now nearly two decades old — the American real estate industry never had to implement these requirements. As such, the American real estate industry, buoyed by innumerable anonymous purchases, remains perhaps the largest single industry profiting from the rise of modern kleptocracy – all to the delight of post-Soviet oligarchs, sanctioned Iranian officials, and corrupt Malaysian tycoons, among innumerable other kleptocrats, arms dealers, and human traffickers.

The Geographic Targeting Orders, implemented under the Obama administration, prevent anonymous purchases for most residential real estate in certain select U.S. cities. But this program is just a band-aid on a far larger problem — a problem that, thanks to the continued influx of dirty money into the American real estate sector, continues to grow by the day.

But shell companies and real estate aren’t the only industries benefiting from this rampant anonymity. American hedge funds, American private equity funds, American art and auction house markets, American escrow agents — all of these industries are preferred playgrounds for corrupt foreign actors looking to launder dirty money. Eliminating the anonymity in these industries is an absolute must, and everything from sanctions programs to America’s broader fight against corruption writ large will continue to fail until these industries are required to identify those with whom they do business.

2. Fund the effort to modernize the ant-money laundering (AML) regime

And then there are the American banks and the regulatory structures behind them. The American banking sector is one of the few quasi-successful stories regarding anti-kleptocracy measures. Thanks to the Patriot Act, American banks have to conduct internal anti-money-laundering checks and to identify those with controlling stakes in accounts linked to shell companies.

However, these measures are insufficient. As illustrated by the recent “FinCEN Leaks,” the Treasury Department remains severely under-resourced when it comes to monitoring the anti-money laundering and Suspicious Activity Reports (SARs) submitted by the banks. Because institutions like the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) remain severely understaffed, these banks can continue working for years and years with suspect figures.

Some skeptics may  argue that the current system works, that industry is already heavily regulated and tightly monitored. They will claim, with some good reason, that banks process billions of electronic transactions, so there is simply no way to scrutinize every wire transfer. They will also argue that “draconian” measures would likely push transactions to other jurisdictions, leaving U.S. officials without the ability to oversee a substantial chunk of the vast system. They will also promote the idea that since most new growth in the global economy will come from emerging markets, where the rule of law is weak, “neutering” the American banking system will make it less competitive. They will also say that getting caught in money-laundering schemes is against their self-interest, hence battling kleptocratic money should be left up to their own internal processes.

Yet, the track record of American banks undermines many of these assertions. After all, these were the exact same arguments banking lobbyists put forth during the negotiations surrounding the Patriot Act. As we’ve seen over the past two decades, those anti-money-laundering checks have not prevented the American banking sector from thriving. The banking industry in the United States earned on the order of a quarter-trillion dollars in profits in 2019 alone. Successfully curbing money-laundering in the system will reduce those profits, but it will also improve the credibility of Western rule of law. If successful, these actions will spur movement among non-American banks, helping shore up broader anti-corruption and anti-kleptocracy efforts abroad.

This will be a difficult endeavor, and we should not make perfect the enemy of the good. It is true that the scale of the interactions between domestic and international financial systems is simply too vast to be surveilled by even the most capable and well-intentioned bureaucracy. The AML system is need of modernization. Additional compliance burden and regulatory requirements will disproportionately affect small community banks. Some level of suspicious financial activity will always be present in the system. This is why we suggest an approach to regulation that creates a lasting credible threat of punitive action against the banks long after the deals are closed. This means (1) creating a modern, comprehensive and secure data tracking system and information – sharing system between the banks, Treasury and law enforcement agencies ; (2) raising the size of the fines for wrongdoing, among both domestic and international banks; (3) and introducing oversight over deferred prosecution agreements and including criminal liability as punishment in especially egregious cases. As the most immediate consequence, this might force investment banks to change the way they compensate their employees, who currently earn the bulk of their salaries in bonuses. Making these bonuses recoverable if the deals that generated them are proven to have links to money laundering should discourage excessive risk-taking by the industry.

The Treasury Department’s own bureaus—including the Committee on Foreign Investment in the United States (CFIUS), the Office of Foreign Asset Control (OFAC), and FinCEN—as well as the Justice Department, the Federal Reserve, and New York State Department of Financial Services all must coordinate efforts to put an end to the era of global kleptocracy relying on the American legal-financial system. More law enforcement energy should be devoted to scrutinizing money laundering at local and federal levels. If free-market advocates choose to see this as an affront on private free-market enterprise, the Biden administration can begin by prioritizing scrutiny of transactions involving foreign state-owned entities like Malaysia’s sovereign wealth fund or the Russian Direct Investment Fund. Even the most radically pro-market advocates of globalization cannot be happy with its current condition as a playground for government-controlled corporations.

3. Make money-laundering unseemly again

None of the new laws and regulations will change the fundamental incentive structure of the global capitalist system. Money earned through corruption will always seek ways to cleanse itself of its past. Ultimately, it must become unbecoming of prestigious American institutions (from banks and museums to universities and think tanks) and prominent individuals (former prime ministers, children of high-ranking officials, academics, and CEOs) to receive money and to accept seats on board of companies who explicitly make money in arbitraging corruption opportunities.

The United States is stumbling out of the Trump era with its reputation tarnished, especially in the anti-corruption space. Biden pledged to restore America’s global reputation. He can begin by letting kleptocrats around the world know that American banks, foundations, universities, and its real estate industry will no longer launder their dirty money — shoring up American national security, and restoring America’s leading place in the world of anti-kleptocracy, along the way.