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Last year was momentous for the breadth and depth of corruption revealed globally. Among the many remarkable events of 2016, the massive Panama Papers release, the multinational Odebrecht settlement, and Global Witness’ Undercover in New York investigations were all remarkable for pointing out the depth and breadth of international corrupt networks, and the degree to which they pass through a variety of jurisdictions, including—most notably—the United States.
If 2016 was the year of bombastic revelations, 2017 seems to have brought growing consensus about how to fight transnational corruption, especially grand corruption and kleptocracy. Kate Bateman and Charles Davidson recently expressed the emerging consensus about reforms that the United States might undertake, including:
- Limit anonymous “shell” companies, which hide the identities of true beneficial owners and permit corrupt actors to “move and hide assets, launder money, and evade law enforcement”;
- Halt anonymous ownership of real estate in the United States, which has too often turned a blind eye to the kleptocrats in our midst;
- Tighten the enforcement of the Foreign Agents Registration Act;
- Use emerging bipartisan congressional support for anticorruption efforts to invest in greater U.S. government capacity to tackle international corruption by the Justice, Treasury, and State Departments;
The first two recommendations, particularly, seem to be generating widespread support—including in Congress. One anonymous author was so expectant of change as to pen a book entitled “Offshore Apocalypse,” predicting the end of the offshore banking business.
But this seems far too optimistic. The Trump Organization is reported to be doing more business than ever with shell companies, raising questions about the administration’s willingness to clamp down. Congress is not exactly a well-oiled legislating machine, so adding one more project to the dauntingly crammed legislative agenda may be a non-starter. Further, when it does act, Congress seems to be moving backward on anticorruption: one of legislators’ few achievements this year was to roll back the Cardin-Lugar provisions in section 1504 of the Dodd-Frank Act, which had required U.S. oil and gas companies to disclose payments to foreign governments. And of course, certain U.S. states rival Panama in the opaqueness of corporate disclosure requirements, suggesting that their representatives may not sign on to transparency-enhancing legislation.
There are practical problems, meanwhile, with limiting shell companies and anonymous ownership, including the simple fact that even legitimately named owners are often hard to link to the political actors and prominent business leaders that may be a source of their wealth. If a beneficial owner is a relative of a major political figure but has a different surname, establishing key links across layers of international jurisdictions and legal entities that are purposely created to obfuscate the proceeds of corruption will still be a daunting task. This is particularly the case because there is so much illicit money sloshing around the world: the law firm at the heart of the Panama Papers, Mossack Fonseca, alone was responsible for creating 214,000 offshore accounts, a huge haystack for investigators to dig through.
What is to be done? As an innovative recent paper by Mike Donaldson points out, the ethical rules for lawyers do too little to prohibit U.S. lawyers from helping their clients to break the laws of foreign jurisdictions. In part because lawyers are trained to believe that everyone deserves legal advice and in part because the rules are not focused on what may happen outside the jurisdiction where a lawyer practices, there is not clear guidance—for example in the American Bar Association’s Model Rules of Professional Conduct—that would unambiguously prohibit American lawyers from assisting a client in a breach of foreign law. In addition, these Rules suggest that if a lawyer only reasonably believes (and doesn’t know for certain) that a client is breaking the law, she is entitled to continue acting on their behalf. And ABA Rules don’t explicitly require lawyers to ask enough questions in suspicious circumstances, such as the embarrassing scenes in the Global Witness videos when only one of thirteen New York lawyers immediately refused to help the supposed representative of a dubious foreign government official bring highly suspect money into the U.S.
Donaldson offers a number of commonsense solutions for tightening the existing ethical rules of the legal profession to make it harder for lawyers to help suspicious transactions – or to phrase it another way, to help honest lawyers push back against pressure to take on bad business. There is, of course, a reasonable case to be made that we can’t expect U.S. lawyers to know the applicable laws of all global jurisdictions. But in a world in which offshoring and shell companies increasingly look ethically indefensible, perhaps a combination of greater awareness of the costs of international corruption, increasing harmonization of international anticorruption law, and tighter ethical standards for lawyers can contribute to moderating corruption’s terrible human costs.
 Donaldson, Mike. “Lawyers and the Panama Papers: How Ethical Rules Contribute to the Problem and Might Provide a Solution,” Law and Business Review of the Americas, 22:4 (Fall 2016), 363-382.