Report: New York lawyers happy to help move dirty money into U.S.

A global watchdog group this week released undercover recordings showing New York real estate lawyers giving advice on how to move dirty money into U.S. financial markets.

Global Witness unveiled the findings on 60 Minutes following a two-year investigation, the latest in the group’s long-running effort to combat anonymous shell companies, which have flourished in the United States.

“In almost every investigation into corruption or organized crime that Global Witness has carried out, we find the same thing: lawyers or other professionals set up impenetrable corporate structures using layers and layers of paper companies, and banks turn a blind eye to suspect money,” said Mark Hays, a Global Witness senior adviser.

Global Witness, a London-based nonprofit, approached 13 New York lawyers—including the then-president of the American Bar Association (ABA)—with a fictitious story about an African minister who wanted to anonymously purchase U.S. assets. The pitch was meant to raise red flags, but almost every lawyer freely offered advice on how to get around U.S. banking regulations.

“We could provide you with a list of the countries where the banking systems require less detail on ownership or source of funds,” said James Silkenat, president of the ABA in 2013-14. “The usual banking havens I think would be the ones you would want to consider.”

Although the meetings were preliminary and none resulted in a business agreement, only one lawyer turned down the potentially lucrative offer.

“This ain’t for me,” said attorney Jeffrey M. Herrmann, who also declined to give a referral. “My standards are higher.”

Global Witness, which posted the full undercover videos online, noted none of the attorneys broke any laws. Although banks are required to report potential money laundering activity, lawyers and realtors are not.

Last year WORLD reported on how the New York City real estate market has become a favorite place for corrupt foreign actors to stash their ill-gotten gains. They often use shell companies to make the purchases—and lawyers are an essential part of the setup process.

Last month the U.S. Treasury Department announced it would enact regulations requiring buyers to disclose their identity when purchasing high-end real estate in New York City or Miami.

“This is a real scandal,” said Rep. Carolyn Maloney, D-N.Y., who announced plans to introduce bipartisan legislation this week requiring new companies to disclose their beneficial owner(s) when forming. Maloney has filed similar bills in the past, but she expects the new publicity to attract more support and co-sponsors.

Sen. Sheldon Whitehouse, D-R.I., plans to file companion legislation in the Senate on Wednesday.

Anonymous companies often are the nexus between terrorism financing, human trafficking, drug trafficking, and a host of other nefarious activities around the world. Many countries have moved to improve financial transparency laws, but watchdog group reports show the U.S. is moving in the wrong direction.

Although the story Global Witness used to set up meetings was fictitious, it was based on real events: Teodoro Nguema Obiang Mangue, the son of Equatorial Guinea’s dictator, purchased a fleet of luxury cars, yachts, a $38 million Gulfstream jet, and a $30 million California mansion—all while most of the oil-rich country’s residents live on less than $1 a day. In 2014 the U.S. Justice Department reached a deal with Obiang, who surrendered some of the assets, but the use of shell companies made it virtually impossible to prove wrongdoing.

“Anonymously owned shell companies are like the getaway cars for the world’s criminal and corrupt, allowing them to use the U.S. financial and legal system as a safe haven for their suspect funds,” said Global Witness deputy U.S. director Stefanie Ostfeld.