Defense Bill Targets Wallets of Rogue States, Terrorists

Congress is weighing new disclosure laws to close a financial loophole that has been exploited by the United States' enemies to fund terrorist and trafficking operations.

The National Defense Authorization Act before the Senate includes a measure that would require shell companies to identify owners and store their names in a private database. Previously, rogue states and terrorists used lax disclosure requirements to circumvent U.S. sanctions, allowing Chinese, Russian, and terror-related entities to conduct transactions within the United States and with American dollars.

The U.S. financial system is regularly ranked among the largest tax havens in the world, allowing terrorists and regimes to bankroll extensive operations at the expense of American consumers. Adversaries such as Iran, China, Russia, Hezbollah, and trafficking organizations regularly use this to their advantage to move billions of dollars in U.S. markets. Scott Greytak, advocacy director of the nonprofit Transparency International, said that new registration laws would strike a direct blow against illicit finance.

"A lot of that money that is connected to and funding authoritarian regimes is parked in the United States," Greytak told the Washington Free Beacon. "This is something that hits every part of the economy, every part of American life."

As early as 2011, federal authorities discovered that Hezbollah employed used-car sales as a front to launder money for drug trafficking operations and terror financing. Chinese drug traffickers pumped the lethal synthetic opioid fentanyl into the United States through shell companies, leading to millions of dollars in profit and the deaths of scores of Americans by drug overdose.

Non-state actors are not the only groups striving to game the American system, said Nate Sibley, a research fellow for the Hudson Institute's Kleptocracy Initiative.