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The ENABLERS Act, a major piece of legislation that seeks to end a legal loophole in the US anti-money laundering (AML) framework, has been blocked by Republican senators.
Senators have blocked a proposal to attach the AML measure to the 2023 defence spending bill, which needs to be passed in the coming weeks.
The bill requires professionals who serve as key gatekeepers to the US financial system, such as certain lawyers, accountants and people who register companies or trusts, to report suspicious transactions and set up AML procedures.
The legislation was introduced last year in the wake of the Pandora Papers, which revealed that trust companies formed in Wyoming, South Dakota and Delaware have become a popular tool for the elite to hide their wealth.
The war in Ukraine and subsequent sanctions packages have reignited interest in the ENABLERS Act. In June, the House of Representatives voted to attach it to the defence bill.
But senators have now struck down the amendment proposal. According to Reuters, outgoing Senator Pat Toomey, who sits as the top Republican on the Senate Banking Committee and is reportedly behind blocking the bill, spoke out against attaching the proposal to the budget bill.
The senator argues it would be premature and the bill should instead go through the regular legislative process.
Some large industry groups, such as the American Bar Association (ABA), share Toomey’s views.
The association has serious concerns regarding both the haste with which the ENABLERS Act amendment is being advanced in Congress and the harmful effects it would have on the legal profession, Deborah Enix-Ross, ABA president wrote in an October letter to Congress.
Organisations that have lobbied against the bill include crypto-exchange Coinbase and auction house Sotheby's, Reuters said.
Meanwhile, supporters include legislators on both parts of the aisle. Some worry about illicit Chinese activities, while others warn against potential evasion of Russian sanctions.
In an October Twitter post, former Secretary of State Mike Pompeo wrote: “Americans shouldn’t be helping corrupt CCP officials or fentanyl traffickers hide their money in America.
“Congress has a chance to act in the NDAA — The Enablers Act will correct loopholes that allow China’s genocidal regime to hide stolen money in America,” Pompeo said.
Democratic Senator Sheldon Whitehouse, who is leading the bipartisan effort in the Senate, said the bill would close the loopholes that “Putin's cronies and other criminals and kleptocrats have used to launder money into America”.
“It makes no sense to have money laundering rules for banks, to have disclosure for shell corporations, but to let somebody run into a lawyer’s office or a hedge fund and dodge all of that protection,” Whitehouse said at a conference last week.
The bill has also been backed by a bipartisan group of foreign policy experts, as well as anti-corruption organisations including Transparency International.
Regardless of their stand on the bill, supporters and opponents all agree that the bill would be the most ambitious update to US AML efforts in at least 20 years.
Now that supporters have failed to include the ENABLERS Act in the defence spending bill, it will likely be re-introduced as a standalone bill next year, but with a divided Congress lawmakers face hurdles to get the bill passed in both the Democratic Senate and the Republican House.
