Secretary Statements & Remarks

Remarks by Secretary of the Treasury Janet L. Yellen at the Summit for Democracy

As prepared for delivery

This gathering is a remarkable cross-section of the world’s democracies and, as we have heard so far, we share a common adversary: corruption. Whether it’s public officials on the take or laws that apply to everyone except the well-connected, corruption makes a mockery of our free and fair institutions. 

That is one thing all acts of corruption have in common, but today, I would like to focus my remarks on another shared link – and that is the global financial system. 

Corruption, after all, is just a form of financial alchemy. It’s the transformation of power into illicit money or illicit money into power, and in order to catalyze that transformation, bad actors usually need an intermediary, a place to store or launder their ill-gotten gains: a shell company, a real estate transaction, an art purchase. 

For this reason, combatting corruption is not just the work of the justice ministries – of prosecutors and law enforcement agents. It is also the work of finance ministries – of financial regulators and economic development experts. And we believe that our finance ministry, in particular – The United States Treasury – must play a leading role. 

The U.S. financial system is the backbone of the world economy. Enormous amounts of illicit funds can pass through – or land – in our markets. But just because bad actors want to launder money through the United States does not mean we need to make it easy for them. 

There are far too many financial shadows in America that give corruption cover. We need to throw a spotlight on them, and that is what we are doing through many of the measures that are part of the government’s holistic strategy to combat corruption, which we released this week. 

One crucial measure is exposing who owns shell companies and other illicit funds. 

In the popular imagination, the money laundering capitals of the world are small countries with histories of loose and secretive financial laws. But there’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States. And that’s because of the way we allow people to establish shell companies. Since Andrew Jackson, individual states have been free to set their own rules for incorporating companies, and since the early 20th century, some states have allowed anybody to establish a shell company without disclosing who really owns it, what we term “the beneficial owner.” This is about to change. 

Thanks to Treasury’s Financial Crimes Enforcement Network – FinCEN – we’re now in the process of implementing the Corporate Transparency Act. A big bipartisan majority passed the law last year, and it allows us to build a national database of who owns what shell company. On Tuesday, FinCEN, issued a proposed rule to collect the necessary information that will help us build this database. It will require many U.S. and foreign companies to report their true beneficial owners to FinCEN and to update that information when those beneficial owners change. 

We’re also ensuring a similar principle applies to real estate because many corrupt actors can hide their money in Miami or Central Park skyscrapers the same way they do in shell companies. An LLC or trust can be listed as the owner. A lawyer can sign the paperwork. Indeed, sometimes the only thing these luxury properties are home to are ill-gotten gains – they’re money laundromats on the 81st floor. And so, we’re also soliciting public feedback on a future rulemaking, one that will make sure that when someone buys one of these properties with all cash, they can’t hide their identity. 

Of course, these are just a few of our efforts. Once we shine a light on places where corrupt actors operate, we need to go after them, like when we see people pocketing money that is meant go towards crucial public efforts like fighting the pandemic. Today, Treasury sanctioned several corrupt actors, including two who did exactly this. 

We’ve also established a kleptocracy fund to reward people who can provide intelligence about where corrupt foreign leaders are hiding their money in the United States. This work – the work shutting kleptocrats out of American markets and pursuing them abroad – is work we’re carrying out with partners at State, Justice, and USAID. In fact, today, the State Department announced a new coordinator on Global Anticorruption Issues and committed a substantial amount of funding to support members of the media and other activists who expose bad actors. USAID is launching a series of programs with similar goals. 

But let me close by saying this: It’s very important that we recognize that it’s not only foreign actors who abuse our financial system. There is corruption here at home. Especially when it comes to how people pay taxes – or rather, how they don’t. Last year, more than $600 billion was withheld from public coffers because of our broken tax system, which effectively lets the country’s top earners and largest corporations get away with evasion. 

Obviously, there’s a difference between a tax evader and autocrat who drains the public treasury, but the financial implications are similar: The country is deprived of funding for things that benefit everyone – education, childcare, roads and bridges. The dollar that stays in a tax cheat’s account is also the dollar denied to the child who needs subsidized kindergarten. 

After all, the United States cannot be a credible voice for free and fair government abroad if at the same time, we allow the wealthy to break our laws with impunity. The idea of democracy is bound up in the idea of America. If we want free institutions to thrive the world over, then first, we must model what they look like at home. 

And with that, I am happy to turn the discussion back to our moderator. Andrea, thank you again.