← The Lawfare Podcast
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- [00:01]
Podcast Host
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Alexis Loeb
We've also seen the Department of Justice dismissing certain FCPA cases, so the dismantling of the kleptocracy initiative really is one one piece of the Administration's the Administration's move away from foreign corruption enforcement.
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Olivia Manis
It's the Lawfare podcast. I'm Olivia Manis, associate editor of lawfare, speaking with Alexis Loeb, a former deputy chief of the January 6th capital siege section at the US Department of Justice and a current partner at Varela, Braun and Martel.
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Alexis Loeb
It sends a message that corruption is not really on the United States radar anymore. I think you've seen some countries already start to respond. Several countries have announced that they are going to be stepping up their anti corruption efforts, and I think it's because they are recognizing that the United States won't be a partner in the same way.
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Olivia Manis
Today we're talking about kleptocracy. More specifically, we're talking about Alexis's latest Lawfare article outlining how recent actions by the Justice Department have affected the US Government's ability to prosecute grand corruption and money laundering crimes and why this matters for national security. Alexis, from. From 2013 to 2015, you were a trial attorney with the Kleptocracy Asset Recovery Initiative at the Department of Justice. Can you tell us a little about the work that you did as part of the Kleptocracy Asset Recovery Initiative? You know, obviously we're going to dig into this a little bit more throughout the pod, but I just wanted to get a little bit of a sense of what you did there. Sure.
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Alexis Loeb
Thanks, Olivia. And thanks for having me on the podcast today. As a trial attorney with the Kleptocracy Asset Recovery Initiative, the ultimate goal was to seize the proceeds of foreign official corruption. So money that had been stolen from other countries by corrupt rulers or money they had taken in bribes and then laundered through the US Financial system to find that money and seize it and return it to really its rightful owners, which are the people of those countries that were under the rule of kleptocrats.
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Olivia Manis
Yeah, thank you. I mean, I think we're going to definitely dig into this a little bit more concretely later in our discussion, but in really broad strokes, how does this kind of work prosecuting sort of white collar crime. White collar crime more generally, but specifically the work that you did as well, how does that intersect with national security? Because I think we have a notion of it as sort of odious in the abstract. Right. But on a really concrete level, how does this actively undermine foreign policy and national security?
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Alexis Loeb
Well, I think foreign corruption is at the base of a lot of US Security concerns where foreign governments are corrupt. I think we've seen that. Then that creates opportunities for extremist groups to come in and gain sympathy with the public by promising to clean up that corruption. I think to a certain degree, ISIS was able to. To use that appeal to. To strengthen its foothold in certain parts of the world. In addition, corruption undermines, I think, particularly if the corrupt country is seen as a partner of the US That I think that also of hurts support for, for America, for American abroad, and then that can lead countries to turn more to countries like China that might be promising an alternative in those situations.
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Olivia Manis
Yeah. And once again, you'll. You'll get the opportunity to talk about this a lot more in depth. I just wanted to kind of frame the conversation with that because I think some people might wonder, you know, what does this have to do with. With lawfare and lawfare discussing, you know, national security? And I Think it's. It's very clear, actually.
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Alexis Loeb
I mean, I guess I'd also say that I think corruption can then pave the way for other kinds of criminal activity, like, you know, like drug trafficking or like weapons smuggling, to take a. To take another crime that can then in turn, have a very direct effect on US Security concerns.
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Olivia Manis
Right. Yeah. So I want to provide, you know, a little bit of background to the kleptocracy team and to this discussion that we're going to have about, you know, about kleptocracy. So let's go back to the memorandum that Attorney General Pam Bondi issued on February 5 and kind of talk a little bit about what it kind of effectively did and how it dismantled the kleptocracy team.
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Alexis Loeb
So really, on her very first day of taking office, Attorney General Bondi issued this memo that is ostensibly directed at combatant cartels and transnational criminal organizations. And then kind of buried in the memo, it said that the Kleptocracy Asset Recovery Initiative, as well as Task Force klepto capture. And I'm happy to explain the difference between those two, but it said that those programs or initiatives were dismantled. I think we're, in the case of the Kleptocracy Asset Recovery Initiative, I think we're still learning exactly what that means in practice. But at a basic level, it's fair to say that the kleptocracy prosecutors have now been directed to focus on drug trafficking and transnational crime offensives. So the focus has been directed away from really kind of the kinds of corruption cases that were the bread and butter of the initiative for all these years. I haven't yet seen a wave of departures from the Department of Justice. So it's my understanding that most of the prosecutors who were in that unit are still there and are still part of the money laundering section, but they have been directed to do other. Other kind of work. Other kinds of work?
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Olivia Manis
Yeah. So it was sort of framed as we're reshifting the focus. Right. We're shifting the focus to immigration. We're shifting the focus to kind of domestic affairs. You know, we can't be dealing with sort of corruption. It's not that important. Right. It was sort of how it was framed, in my understanding. So there was the sort of kleptocracy team element, and then there was another element which was the Foreign Corrupt Practices Act. Can you talk a little bit about that element as well?
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Alexis Loeb
So let me step back for a second. So between the Foreign Corrupt Practices act, or fcpa and the Kleptocracy Initiative, you kind of have two sides of the coin. So the FCPA criminalizes the supply side of bribery. So the companies or individuals who would pay bribes. The Kleptocracy Initiative focuses on the corrupt officials who would receive bribes as well as just embezzling money from. From their countries. So what we've seen from the Justice Department on the FCPA side, even since AG Bondi's memo, is right now there's. We're in the middle of a pause on FCPA enforcement. And we've also seen the Department of Justice dismissing certain FCPA cases. So the dismantling of the Kleptocracy Initiative really is one, one piece of the administration's, the administration's move away from foreign corruption enforcement. And, you know, I'll also add that those aren't the only two pieces. I think the administration has also taken steps to dramatically limit prosecutions under the Foreign Agents Registration act, which is another tool that the, at least the Kleptocracy Initiative would use. That's a statute that was used to prosecute lobbying on behalf of foreign governments by people who didn't kind of register and publicly reveal themselves as doing that kind of work. The Department of Justice has now said that that enforcement under that statute has to be criminal enforcement has to be limited to situations where the person is essentially committing espionage. So that. That is another kind of narrowing of a statute that had been used to get at the problem of foreign corruption. And there are other examples, too, that I'd be happy to discuss. Just to go into one more recently, we've seen, we've seen the Department of Justice move away from enforcement of what it calls regulatory violations under the Bank Secrecy act and the prohibition on unlicensed money transmission. And again, those are also statutes that the Kleptocracy Initiative at least had used as part of its toolbox, because those are statutes that can be used to target individuals in the US who are acting as gatekeepers for corrupt foreign officials. The individuals who are helping those corrupt officials get access to the US Financial system and buy assets here. The DOJ has suggested that enforcement of those statutes might be available for violations that involve certain kinds of underlying criminal activity. But again, the examples it. It names are things like drug trafficking and human smuggling, not the kind of foreign corruption that is at the heart of FCPA work or the kleptocracy initiatives work.
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Olivia Manis
Yeah, thank you for pointing out those other examples. And I definitely do Want to kind of talk a little bit later about the extent to which all of these things kind of come together to form a broader strategy. Right. A broader kind of turn from this type of crime and what that means more broadly and how that will have sweeping impacts. But for now, I would really like to dig into the work that the Kleptocracy Team did, because I think that's. As you wrote an entire article about this, it's really incredibly important work, and it is work that is incredibly complicated as well. So I'd like to dig into that for now. So can you kind of delineate the kind of work that the Task Force Klepto Capture, the department's Kleptocracy Team, and the Kleptocracy Asset Recovery Initiative did and maybe delineate, you know, kind of to the degree that they can be separated, what each kind of component did?
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Alexis Loeb
Sure. So Task Force Klepto Capture is a much more recent. Recent innovation. So that was the department's task force that was set up in response to Russia's invasion of Ukraine to prosecute or seize assets of Russian oligarchs who were seen as really playing a role in that act of Russian aggression. So Task Force Klepto Capture brought together people with money laundering expertise and national securities sanctions expertise focused on Russian oligarchs. The Kleptocracy Initiative has been around much longer. It was formally launched in 2010, although individuals within the department had been using the statutory tools and pursuing those kinds of cases even before that. And I guess I'll say I'm a little bit puzzled about why the memo mentions the Kleptocracy Asset Recovery Initiative and the Kleptocracy Team. My understanding is that those are the same thing. The Kleptocracy Team carries out the Kleptocracy Asset Recovery Initiative. And so what, I'll just call it the Kleptocracy Team. It's a little bit less to say. So what the Kleptocracy Team does, again, is it focuses on the corrupt foreign officials and. And it investigates. It investigates their bribery, embezzlement, the theft of public funds, their extortion that they've committed, where they've somehow laundered the proceeds of that bribery, embezzlement, extortion through the United States. And in some instances, it will prosecute those individuals. But the real aim is to find those laundered funds and seize them and ultimately, you know, if possible, to return them to the government, the country that they were stolen from.
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Olivia Manis
Yeah. And you kind of talk about there are sort of two. Two prongs to this, Right. There are two main types of efforts. One is conducting its own investigations into foreign officials who laundered these corruption proceeds. And the other is kind of assisting other countries when their investigations sort of led to the United States. Can you talk about both of those prongs a little bit more?
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Alexis Loeb
Really, When I talk about the two prongs, I think it's that the investigations can be initiated, could be initiated by the United States or they could be initiated by a foreign government. And in each place, they're really leading to. To the same place. And the investigations tend to focus on kind of two main issues. One is proving the act of bribery, theft, extortion in violation of a foreign law. And the second part is proving the laundering of the proceeds of that act through the United States, which could include buying a mansion in Malibu or buying a fish restaurant in Florida to list examples from two cases. Or even just sending wire transfers around the globe that are dollar denominated, which may pass through a bank in New York at some point.
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Olivia Manis
Yeah, definitely with that kind of in mind. The end goal in mind. Right. What kind of tools did the kleptocracy team have at its disposal, statutory or otherwise, in order to kind of achieve those ends?
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Alexis Loeb
So the kleptocracy team had at its disposal the full range of tools that are available in white collar prosecutions. So they're in the case of a criminal investigation, those would be all the grand jury tools. So they could issue subpoenas to banks to collect financial records. There's sort of a whole range of other tools related to that. If there were transactions that kind of triggered the bank's suspicion, or there were large, large cash transactions, those might trigger the required filing of reports by financial institutions that kleptocracy prosecutors could then access. Of course, there could be witness testimony. Witness interviews were quite common. But really at the heart of the investigations are these kind of sophisticated financial investigations tools that the government will use to get records both in the United States and then when the United States has cooperative relationships with other countries where the assets might have passed through those countries, then the prosecutors would also work through treaties or international agreements to obtain records from those countries, too. So there's. There's a really intensive financial analysis piece on the side of. Well, and I guess also there, I will say that of course, when the foreign official has acquired tangible assets in the United States, then there would be kind of obtaining title records for real estate, property or for other kinds of assets. That would also be something the government, the government would gather in terms of proving up the actual act of foreign corruption. That's where things like witness interviews, grand jury testimony, testimony in foreign proceedings, that's where those kinds of tools would come into play more. One other area I should of course mention is obtaining access to communications of people involved, which could be emails, text messages, other forms of electronic communications. Of course, the kleptocracy team would also try to gather all of those sorts of relevant communications to prove their cases.
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Olivia Manis
Yeah, so it would require experts in pretty much every realm and every element of law, it seems.
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Alexis Loeb
And of course, it's not just the prosecutors. So the kleptocracy team had access to agents with forensic accounting expertise who are helping analyze the years of bank records and tracing the funds and tax records. So I mean, that was crucial to me. Prosecutors really conduct these investigations in partnership with agents and analysts because they are. I mean, that is often true of prosecutions, but it's especially important in kleptocracy prosecutions because they are such a massive international years long undertaking.
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Olivia Manis
Yeah, I mean, it seems as though it really takes a village for investigations of these, of these types. You know, I want to talk a little bit about. You've conducted the investigation, you're gathering the evidence, and now it's time to prosecute. As you've mentioned, a lot of the people that are being targeted are heads of state, and heads of state often have immunity under international law. So how did the team kind of contend with this? What was their solution to this problem?
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Alexis Loeb
Well, really the bread and butter of the initiative as it started off was civil forfeiture. So cases not involving a criminal prosecution at all. In a civil forfeiture case, what happens is the department would file a case against the assets, the US assets themselves. So that's where you see, you know, a case entitled United States vs House on 123 Main St. For example. So those assets are not immune from seizure even if the individual is, has some kind of head of state immunity. And I'll also say that, you know, even if the individual isn't a head of state, they may be in a country where the US will never be able to extradite them. So even if they don't have formal immunity, as a practical matter, it might be difficult if you do bring a criminal case to ever actually bring that person to the US to be prosecuted. So really the initiative started off focused on Civil forfeiture on making it so that committing those kinds of crimes didn't pay. Taking away the criminal proceeds. And the civil forfeiture actions have remained a focus of the initiative throughout, even though it did also prosecute individuals criminally.
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Olivia Manis
Yeah. So seizing assets, making it not lucrative, was sort of integral to this initiative. So you've kind of walked us through how the team might go about prosecuting a case. As you've noted, this is a years long endeavor. It takes immense resources. This has kind of been presented by the administration, by Bondi, as a way of refocusing on American issues as part of sort of America first ideology. Right. In what ways is this actually antithetical to the same. Right, right. In what ways does this actually undermine the sort of America first notion of security?
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Alexis Loeb
Well, I think it goes back to what we were talking about earlier. So a lot of the issues that the administration does think undermine security, like drug trafficking and human smuggling and transnational crime. Corruption is the underlying problem. Foreign corruption is the underlying problem that allows those sorts of criminal organizations often to fester in the first place. So it is sort of the root problem in a lot of ways. I think. While the kleptocracy initiative did have an altruistic mission, at the same time, I think it is another form of American soft power. I think it is a way for the country to build, first of all, goodwill with its law enforcement partners around the globe. Law enforcement partners who the country needs to turn to when it's investigating transnational crime cases or drug smuggling cases. I mean, what better way to earn the goodwill of foreign law enforcement than to assist them in prosecuting corruption that has affected their own country and potentially even returning large sums of money to the countries that were stolen? And beyond the message that it sends to law enforcement authorities, of course, just to people on the ground, to see that America is standing for democracy, standing for rule of law, and is not blind to the fact that citizens may be unjustly living in poverty while their rulers enrich themselves. I mean, that is exactly the kind of enforcement that I think promotes support for American interests abroad that also plays an important role in protecting American national security.
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Olivia Manis
Yeah, absolutely. You know, I think we've talked about this in sort of broad terms, but I really want to. I would love to hear some of your stories. I'm sure you have many, maybe about some of the cases that the team successfully brought or that you worked on, just so people can understand the scope of this and the magnitude of this. And I know there have been cases in Equatorial guinea and Nigeria. So maybe if you could discuss a few really concrete cases for our listeners.
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Alexis Loeb
Sure. So you mentioned Equatorial Guinea. This was not a case I worked on personally, but it was one of the initiatives earlier, more prominent cases. So Theodore Obiang was the Vice President of Equatorial Guinea. His father was the president, and he had control over large concessions and in various ways would basically shake down companies hoping to do business there. And Equatorial guinea is a good example of a country that had immense natural resources and it had a very high percentage of its citizens living below the poverty line. While Mr. Obiang amassed, you know, mansions not just in. Not just in the US but mansions in Paris and then, you know, just in the US I mentioned the Malibu Mansion. There were the private jets, the white crystal studded glove that Michael Jackson wore on one of his tours. I mean, I believe he spent over $1 million. I'd have to check that number to be sure. But he spent untold sums of money on Michael Jackson memorabilia with the proceeds of his corruption. So the Kleptocracy initiative. Prosecutors, together with partners from local U.S. attorney's offices, filed actions to seize his assets in California and in D.C. and also, I'll say there were actions against his assets filed by other foreign counterparts, for example, in, in France. So that action ended with a settlement where the United States was able to recover millions of dollars that arose from the proceeds of his. Of his corrupt schemes. One case I worked on personally that involved a slightly smaller recovery involved Mamadi Ture, who was the wife of the president of guinea, alonsana kante. And Ms. Toure had sort of positioned herself as an intermediary where she accepted millions of dollars of bribes from a company hoping to obtain lucrative iron ore rights in. In Guinea. She then, after he died, she left guinea and made her way to Florida, where she used that money to buy a couple of houses and a fish restaurant. So the Department of Justice traced that money and seized the assets of the fish restaurant as well as that real estate. I will say that the article mentions some of the Department's other initiatives, and I think any discussion of the kleptocracy initiative should mention its largest case, 1mdb, which involved just the theft of billions of dollars from Malaysia's sovereign wealth fund. And in that case, the Department was successful in seizing substantial amounts of money around the globe that it was able to return to the people of Malaysia.
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- [32:42]
Olivia Manis
The characters that the team dealt with. I think a lot of this has been presented as people who worked really hard and people who worked hard for their money. That's been the sort of discourse. What these examples are demonstrating is these characters are really unsavory to say the least, and actively were taking from the people of their country and using that that money for their own aims, whether that be a fish restaurant or a mansion. So thank you for those really interesting examples. As I said, I'm sure you have a lot of stories. So to shift gears slightly, a recent Washington Post article kind of talked a little bit about the kleptocracy team. And it talked a little bit about how it talked about how these investigations of the team had involved several trump Allies. Right. Accused of doing business with kleptocrats. It had entangled them in various fashions. Do you think it's significant that Trump stands to personally gain, or at the very least his associates stand to personally gain from a Justice Department that kind of turns a blind eye to these kind of crimes?
- [33:52]
Alexis Loeb
So I've read the Washington Post article, and I can't really speak to specific individuals who may or may not have been involved in, in investigations. You know, if, if that was never something that was public. But I will say, I mean, there's, there's kind of a, a striking similarity between the underlying behavior of, you know, a corrupt foreign official and then an administration ceasing enforcement of a program that potentially could financially benefit his own allies. I mean, I think it's, there is a parallel there that is quite difficult to ignore.
- [34:35]
Olivia Manis
Yeah, definitely. I want to dig a little bit into. We've talked about the kind of work that the kleptocracy team did and the kind of things that these sort of prosecutions produce. Right. I want to talk a little bit, and we've already touched on this, but I want to really lay out the implications of dismantling this team. What are the really concrete implications? And so one thing that you've alluded to, I think, throughout this is the immense institutional expertise that was sort of embedded within this team. Just the scope of the kind of investigations, the partnerships that had to be established, the knowledge of different countries, just immense knowledge and expertise that, you know, is not easy to replace. So can you speak to this kind of institutional knowledge and speak to the kind of knowledge that's at risk as a result of the order? And I think you've talked about these people haven't necessarily been fired, but they've been reassigned. Maybe you could talk a little bit about what the implications of that is.
- [35:43]
Alexis Loeb
So, you know, I think best case scenario, the prosecutors in the initiative will be able to turn their attention to whatever the narcotics related corruption cases are. I'm not sure exactly what those specific cases are, but if they are able to just turn their attention to those in a couple of years, you know, wait it out, and then return to the initiative with its central focus. But I, I just am not that optimistic that that is, is going to be the case. I mean, I think this is all happening amidst the backdrop of a Department of justice that has been extremely inhospitable to career prosecutors. I mean, I think you have to see what's going on all around them. I mean, they work in the same Building with the Public Integrity section, where we all watched what happened with the Eric Adams prosecution. The, you know, the Department of Justice workforce has been kind of under attack during the administration. So. So they're operating in a difficult environment to begin with. And I admire the public servants who are in that section who continue to do their jobs. But I do think about the fact that a kind of narco trafficking is not. I mean, it certainly that is an important problem, but that is not the kind of grand corruption that has motivated and has been the driving force of prosecutors who joined that initiative. And I guess I will also say I'm not sure the degree to which they will be kind of scattered throughout the section and reassigned, which could also mean that the kleptocracy initiative will sort of lose the sort of teamwork that those kinds of cases require. So I, I guess I'd say in summary, I think it's. It's possible that the prosecutors will remain in the Department of Justice and may be able to return to this work eventually. But it's just really is a very open question whether, whether that will actually happen. And I guess I'd say, you know, in the meantime, I think there will be some real costs, especially in the area of foreign relationships in foreign cooperation is absolutely essential to kleptocracy cases. Kleptocracy prosecutors have to prove that a violation of foreign law occurred in a foreign country. They need access to foreign witnesses, foreign records. They need expertise in foreign laws. It's very difficult to do that without the cooperation of other governments. And if those foreign governments don't see the US As a partner in law enforcement, or if the prosecutors are focused on drug cartels in ways that kind of don't affect some of their foreign partners, or that they have a different focus than their foreign partners, I also could see those relationships kind of fading away. And I think that can also. That could also do kind of longer term institutional damage to the kleptocracy effort.
- [39:06]
Olivia Manis
Yeah. And I think you touched on this earlier, but I'd really like to kind of hammer it in, which is what kind of message do you think this sends to our partners? Right. Like, what kind of message do you think it sends to our allies that we're permitting these kind of crimes to take place? We're allowing these kind of crimes to take place.
- [39:24]
Alexis Loeb
It sends a message that corruption is not really on the United States radar anymore. I think you've seen some countries already start to respond. Several countries have announced that they are kind of going to be stepping up their anti corruption efforts. And I think it's because they are recognizing that the United States won't be a partner in the same way.
- [39:47]
Olivia Manis
So turning a little bit from the more foreign policy sort of element, I want to talk about how domestically this has implications as well. So you know, there's the kleptocracy team and similar efforts are designed to prevent financial crimes. Right. And in what ways does removing these sort of prosecutions and these sort of investigations, in what ways does that create the sort of market distorting forces that affect the U.S. economically?
- [40:17]
Alexis Loeb
Olivia, you bring up a good point. And that's probably something I should have mentioned earlier when you asked about kind of ways in which kleptocracy prosecutions advance American interests. And that is in protecting, you know, not just people abroad, but protecting our own financial system, the US Financial system, from abuse by corruption fueled abuse. I guess I'll put it that way. So what we've seen is that if kleptocrats are able to kind of amass great sums of wealth and then buy up assets in countries they see as safe, safe havens, you know, in Europe or in the US that can, for example, distort local real estate markets by driving, by driving prices up, they may also kind of buy up local businesses. So I believe one example is there was a New York Times study of the influence, particularly of some of the foreign controlled LLCs, which may be a popular vehicle for kleptocrats on local real estate. So it, it actually can have very, very local effects. At the end of the day, if we have these kind of both, we have kind of vast sums of money pouring into the country that are ill gotten gains. And then we potentially have this kind of cast of unsavory characters owning property, controlling local businesses. So there actually is quite a direct effect on the United States as well. And I guess another direct effect on the US is that then it creates a market for American gatekeepers who will assist with money laundering and who will help these foreign individuals get access to the US financial system, who will create LLCs, who will set up shell companies and who will set up bank accounts and who will buy assets for them. And, and it kind of increases the market for US money launderers. And those people may not limit their gatekeeping work just to corrupt foreign officials, but they may use their knowledge of money laundering to facilitate other kinds of, you know, criminal proceeds flowing through the US as well.
- [42:31]
Olivia Manis
Yeah, absolutely. At sort of every level, on the foreign level, on the domestic level, on the economic level, this has sweeping implications. Right. You know, being optimistic, are there any viable alternatives to the kleptocracy team? Are there any kind of. Are there other actors who can sort of take up the mantle of what the team was doing for prosecuting this kind of crime? So, like, for example, local U.S. attorneys offices, could they. Could they do some of the work that the team was doing?
- [42:59]
Alexis Loeb
They certainly could. U.S. attorneys offices have been involved in these investigations and could continue to conduct them. I mean, that said, local US Attorneys offices are also run by presidentially appointed US Attorneys and are receiving directives from the department about what their focus should be. So I am not so sure that a U.S. attorney's office, being told that it should focus on immigration and drug smuggling, would choose to invest the amount of resources that you have to invest to conduct a kleptocracy investigation. And I guess I will say that while the U.S. attorney's offices were wonderful partners in kleptocracy investigations, the kleptocracy team often did bring a significant amount of resources to the investigation that might have been beyond what. What a local U.S. attorney's office could do. I mean, for example, the kleptocracy team might be able to have dedicated forensic accountants and might have kind of more prosecutors dedicated to a smaller number of cases who could really spend a lot of time digging through the evidence, working through relationships with foreign counterparts. And so it really would require a significant investment of resources on the part of a U.S. attorney's office to undertake that investigation. And the U.S. attorney's offices are certainly capable of doing the investigations. I am. I'm just not sure that that's how they will choose to spend their resources in the current political climate.
- [44:45]
Olivia Manis
Right. It seems as though the same forces that have, you know, precluded the work that, that the kleptocracy team did would also preclude local attorney's offices from. From doing that work.
- [44:57]
Alexis Loeb
I mean, and. And two other issues related to that, going back to our earlier conversation about relationships with foreign counterparts, some of those relationships are relationships that kleptocracy prosecutors had over years of working on multiple cases together. So I think in many of those cases, it really was. It was the kleptocracy prosecutors who would be more of the conduit to their foreign counterparts. You know, I think another challenge is that with the pause on FCPA enforcement, it may be harder to develop some kleptocracy cases that in the past would have grown out of an FCPA prosecution, also unearthing evidence of money laundering and bribery by. By a foreign public official. You know, another alternative potentially is state enforcement. We've just seen California announcing enforcement of the fcpa. So there also is a possibility that states could choose to try to fill the void here as well.
- [45:58]
Olivia Manis
Yeah, it sounds like there are options, but they're not great options. And they wouldn't be able to kind of conduct the scope of the investigations that the team was able to.
- [46:08]
Alexis Loeb
Well, and the issue I mentioned in terms of cooperation with foreign counterparts, you know, I think that the Department of Justice, with the. And with access to the State Department and its Office of International affairs, is. Is probably better positioned to interact with foreign counterparts than an individual state Department of Justice might be.
- [46:29]
Olivia Manis
Yeah, I think that's definitely safe to say. Yeah. And you, you, you mentioned the fcpa, and you mentioned that in addition to other measures taken by the administration to kind of turn away from these types of crimes, I think one of the things that maybe. I'm not sure if you could speak to this too much, but we're seeing a lot of drawing back from crypto enforcement. So Deputy Attorney General Todd Blanch recently issued a memo basically telling federal prosecutors to stop pursuing litigation or enforcement of regulatory frameworks on digital assets. Right. And this also involved the disbanding of the national cryptocurrency enforcement team. And we're seeing the SEC dropping charges against crypto companies like Coinbase and Kraken. So it seems like to bring this back to some of the other measures that you've. You've talked about, seems like this is part of a broader trend, and it seems like it's a part of a broader trend of dismantling these institutional safeguards. I mean, what are your kind of thoughts on this? I mean, obviously that's a big question, but to what degree do you think it can be kind of classified as that, and to what degree do you think it is part of a broader strategy? And what is that strategy? I guess.
- [47:51]
Alexis Loeb
I mean, I think we are seeing a loosening of controls over the use of the financial system, particularly for corruption and foreign corruption. The Blanche memo did say that there could still be prosecution of cryptocurrency to the extent that it's used to, you know, say, launder drug proceeds. But again, absent from the list of offenses they're going to be targeting is foreign corruption. So, you know, between that and FinCEN's relaxing of kind of the beneficial ownership reporting requirements and the disbanding of the Kleptocracy Initiative, you know, with its specific focus on the use of the US Financial system to launder corruption proceeds, I think there is a wider relaxing of some of the institutional controls on foreign corruption, and certainly the FCPA pause is part of that, I think. I also, you know, relating to that memo earlier on, I mentioned that some of those, what are called regulatory violations, some of the violations of the provisions of the Bank Secrecy act are important tools that the kleptocracy Initiative would use. And one way the kleptocracy initiative would use that, I think, as I mentioned, is to prosecute US Gatekeepers. And that can also be an important step in a kleptocracy investigation because the gatekeepers may have important information relating to the person who's behind the foreign corruption in the first place. So those charges could be a way for kleptocracy prosecutors to kind of start lower down in the chain and sort of work their, work their way up, hopefully with the ultimate goal of proving the act of foreign bribery or corruption and finding, you know, what could be hundreds of millions, if not billions in, in assets and recovering them.
- [49:58]
Olivia Manis
Yeah, kind of to wrap things up a bit, and it's not a particularly cheery note to wrap things up on, but to what degree are these sort of measures reversible? You know, can we put, can we put Humpty Dumpty back together again? Right. Like, once we've, once we've made these changes, once we've lost some of this institutional knowledge, once we've, you know, disbanded these teams or stopped these type of prosecutions, once we've lost these partnerships. Right. How realistic is it to say, you know, a few years down the line we could, we could turn things around? Or is this something that is to some degree irreversible?
- [50:37]
Alexis Loeb
I don't yet think we're at a point where it's irreversible. As I mentioned earlier, since the memo came out, I haven't heard of mass departures of members of the kleptocracy team. So it is possible that many of them stay with the department, focus on transnational criminal organizations, narcotics related money laundering for a couple of years, and then there is a new administration that views this differently and that they're able to come back and start the work of the initiative again. I think, you know, it may also depend on what happens at some of the law enforcement agencies too, whether they're able to kind of return to working with their partners in FBI and IRS and Homeland Security. And what happens to, to everyone working in, in those agencies. But I think it's possible that they can come back and some of the relationships with foreign counterparts, you know, they, they may be able to continue some of those relationships through, you know, they may continue sort of on a, on a personal level or in the course of working on these other types of investigations. So, so I don't think yet that we're at a point where this expertise and institutional knowledge has been permanently lost. We are, though, I think at a place where it is in danger and certainly in this administration, it seems unlikely that we will see the kinds of grand corruption enforcement that we've seen in the past.
- [52:18]
Olivia Manis
Okay, so it sounds like there's not necessarily reason for optimism, but maybe not complete, complete pessimism. Right?
- [52:24]
Alexis Loeb
I don't. All is not lost yet.
- [52:26]
Olivia Manis
That's good to hear.
- [52:28]
Alexis Loeb
We take what we can get these days sometimes.
- [52:30]
Olivia Manis
Exactly. All right, Alexis. Well, I think this has been a really interesting conversation and hopefully our viewers have learned a lot about this kind of space and the kind of work that you've done.
- [52:41]
Alexis Loeb
Thank you so much and thanks for having me on.
- [52:47]
Olivia Manis
The Lawfair podcast is produced in cooperation with the Brookings Institution. You can get ad free versions of this and other Lawfare podcasts by becoming a LawFair material supporter at our website, lawfairmedia.org support. You'll also get access to special events and other content available only to our supporters. Please rate and review us wherever you get your podcasts. Look out for our other podcast podcasts, including Rational Security, Allies, the Aftermath, and Escalation. Our latest Lawfare Presents podcast series about the war in Ukraine. Check out our written work@lawfaremedia.org the podcast is edited by Jen Patya. Our theme song is from Alibi Music. As always, thank you for listening.
- [53:36]
Paige
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