[Joint House and Senate Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
CONFRONTING KREMLIN AND COMMUNIST CORRUPTION
=======================================================================
HEARING
BEFORE THE
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
U.S. HELSINKI COMMISSION
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 18, 2021
__________
Printed for the use of the Commission on Security and Cooperation in
Europe
[CSCE117-7]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via www.csce.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
55-432 WASHINGTON : 2024
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
U.S. HELSINKI COMMISSION
U.S SENATE U.S. HOUSE
BENJAMIN L. CARDIN, Maryland STEVE COHEN, Tennessee Co-Chairman
Chairman
JOE WILSON, South Carolina Ranking
ROGER F. WICKER, Mississippi Member
Ranking Member ROBERT B. ADERHOLT, Alabama
RICHARD BLUMENTHAL, Connecticut EMANUEL CLEAVER II, Missouri
JOHN BOOZMAN, Arkansas BRIAN FITZPATRICK, Pennsylvania
MARCO RUBIO, Florida RUBEN GALLEGO, Arizona
JEANNE SHAHEEN, New Hampshire RICHARD HUDSON, North Carolina
TINA SMITH, Minnesota GWEN MOORE, Wisconsin
THOM TILLIS, North Carolina MARC A. VEASEY, Texas
SHELDON WHITEHOUSE, Rhode Island
EXECUTIVE BRANCH
Department of State - to be appointed
Department of Defense - to be appointed
Department of Commerce - to be appointed
C O N T E N T S
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Page
COMMISSIONERS
Hon. Benjamin L. Cardin, Chairman, from Maryland................. 1
Hon. Roger F. Wicker, Ranking Member, from Mississippi........... 3
Hon. Joe Wilson, Ranking Member, from South Carolina............. 4
Hon. Steve Cohen, Co-Chairman, from Tennessee.................... 6
Hon. Ruben Gallego, from Arizona................................. 23
WITNESSES
Representative Tom Malinowski [D-NJ], Co-Chair, Congressional
Caucus Against Foreign Corruption and Kleptocracy.............. 7
Representative Maria Elvira Salazar [R-FL], Member, congressional
Caucus Against Foreign Corruption and Kleptocracy.............. 10
Leonid Volkov, Chief of Staff to Alexei Navalny.................. 12
Scott Greytak, Advocacy Director, Transparency International U.S.
Office......................................................... 14
Elaine Dezenski, Senior Advisor, Center on Economic and Financial
Power, Foundation for Defense of Democracies................... 15
CONFRONTING KREMLIN AND COMMUNIST CORRUPTION
----------
COMMISSION ON SECURITY AND COOPERATION IN
EUROPE,
U.S. HELSINKI COMMISSION,
HOUSE OF REPRESENTATIVES,
Thursday, November 18, 2021.
The hearing was held from 10:34 a.m. to 12:11 p.m. in Room
G-50, Dirksen Senate Office Building, Washington, DC, Senator
Benjamin L. Cardin [D-MD], Chairman, Commission for Security
and Cooperation in Europe, presiding.
Committee Members Present: Senator Benjamin L. Cardin [D-
MD], Chairman; Representative Steve Cohen [D-TN], Co-Chairman;
Senator Roger F. Wicker [R-MS], Ranking Member; Representative
Joe Wilson [R-SC], Ranking Member; Representative Marc Veasey
[D-TX]; Representative Brian Fitzpatrick [R-PA]; Representative
Ruben Gallego [D-AZ].
Witnesses: Representative Tom Malinowski [D-NJ], Co-Chair,
Congressional Caucus Against Foreign Corruption and
Kleptocracy; Representative Maria Elvira Salazar [R-FL],
Member, Congressional Caucus Against Foreign Corruption and
Kleptocracy; Leonid Volkov, Chief of Staff to Alexei Navalny;
Elaine Dezenski, Senior Advisor, Center on Economic and
Financial Power, Foundation for Defense of Democracies; Scott
Greytak, Advocacy Director, Transparency International U.S.
Office.
OPENING STATEMENT OF BENJAMIN L. CARDIN, CHAIRMAN, U.S. SENATE,
FROM MARYLAND
Chairman Cardin: Let me welcome everyone to this hearing of
the Helsinki Commission on "Confronting Kremlin and Communist
Corruption." We have a really distinguished panel, including
two of our House colleagues that have been champions in regards
to the anticorruption issues. At the dais, I am joined by
Senator Wicker and Congressman Wilson, the Senate and House
leaders on the Republican side on the Helsinki Commission. It
is my understanding that Congressman Cohen will be joining us
by WebEx and other members of our--of our Commission.
In the last few months alone, the fight against corruption
has advanced more than ever before. This is thanks to the
efforts of President Biden, who this June declared corruption a
national security threat, and members who we have testifying
before us today who have addressed the threat aggressively in
the House of Representatives. It is also thanks to the efforts
of corruption fighters like Alexei Navalny and his chief of
staff, Leonid Volkov, who we will hear from in the second
panel, and the many corruption fighters and investigative
journalists around the world who have exposed how corruption
underpins modern dictatorships.
Corruption is but--is both what sustained dictatorships and
helps dictators conduct foreign policy. It is the enemy to
democracy, corroding our system from within. Today we will
focus on the Kremlin and Chinese Communist Party, but also all
strongmen who would be strongmen through corruption. Whereas
democracy relies on the vote of the people, dictators must pay
off their cronies to retain power.
This leads to a patronage-based system of kleptocracy, but
modern dictatorships are unique: Kleptocracy does not remain
within national borders. Rather, as the Pandora Papers most
recently revealed, it travels west. With the help of
unscrupulous Western enablers, money stolen in countries like
Russia or the People's Republic of China is laundered to the
West, where the cronies of autocrats live opulent lifestyles
even as they steal from their people and deny them basic
rights. This is the bargain of strongmen. In exchange for
loyalty, cronies are privileged to steal at home and spend the
money abroad.
Indeed, modern dictatorships relies on access to the West.
This access is a national security threat. It taints our system
and undermines democracy.
The reliance of kleptocrats upon our system is also our
strength. By denying access to kleptocrats and their ill-gotten
gains, we force them to live in the system they have created.
We also protect ourselves and provide a measure of justice to
those denied it.
We have many tools for this. The Global Magnitsky Act
public visa ban law enforcement is perhaps the strongest tool
we have. As we all well know, by creating--by creating even
more this Congress with no fewer than six counter-kleptocracy
bills in the House NDAA and negotiations ongoing to place--to
place these in the Senate NDAA as well, we have a powerful
signal that we are united in our fight against corruption.
I want to commend our colleagues who are with us today,
Representatives Tom Malinowski and Maria Salazar, for their
bipartisan leadership, innovative, and passion in this fight.
Your caucus against--fighting corruption and kleptocracy in the
House has proven itself as a standout with its group of
members.
I also wanted to thank you for your leadership in together
introducing the Combating Global Corruption Act, the sponsor of
that legislation in the House. This bill would create a
country-by-country tiered reporting requirement on compliance
with international anticorruption norms and commitments. We are
now very close to making this bill law, and I remain optimistic
it will be included in the House NDAA bill. It is a powerful
tool, as we have seen in trafficking in humans. When we do
these ratings, countries respond. They respond because they do
not want to be shamed and they respond because there is
consequences if they are not taking the right steps to fight
corruption.
We have other bills that are included in the NDAA that we
have championed: The Global Magnitsky Reauthorization Act that
Senator Wicker and I have been the champions on the House side,
also included in the NDAA bill. The Global Magnitsky
Reauthorization would renew and expand the Global Magnitsky
sanctions, which have been our primary tool for targeting human
rights abusers and kleptocracy.
The CROOK Act--again, sponsored by Senator Wicker and
myself--would rework U.S. rule-of-law aid to be faster on its
feet and take advantage of windows of opportunity for reform.
We have also introduced the Navalny 35 sanctions review,
which would require the administration to review all of the
Navalny 35 kleptocrats and human-rights abusers for inclusion
in the Global Magnitsky list. These are individuals identified
by Navalny's Anti-Corruption Foundation as those responsible
for looting of Russia and the current historic repression. I
want to thank Representative Malinowski for his leadership on
this initiative in the House.
At the Summit for Democracy scheduled to take place on
December 9 and 10, countering corruption is one of the three
pillars. For me, it is the most important pillar. The report
ordered by President Biden on what the executive branch will do
to counter corruption is also due in December. I urge the
administration to prepare the most ambitious possible agenda on
countering corruption and announce aggressive actions against
kleptocrats and their enablers, including sanctions.
Corruption is corroding democratic systems around the
world, including our own, but we can fight back. Congress'
counter-kleptocracy legislative agenda and today's hearings are
demonstrations of our resolve to end global kleptocracy and to
cut off all vectors of authoritarian influence.
At this time, let me yield to my colleagues. Senator
Wicker.
STATEMENT OF ROGER F. WICKER, U.S. SENATE, FROM MISSISSIPPI
Senator Wicker: Well, thank you very much, and I do look
forward to co-chairman Cohen joining us also. As two former
House members, Senator Cardin and I are delighted to be
participating in this hearing with four of our friends and
fellow Congress members from the House of Representatives.
Corruption has become a pernicious foreign policy tool in
the hands of foreign dictators, as Senator Cardin has just
said. [Phone rings.] Excuse me. As the--you could see what my
ringtone is.
The corruption has become--the Chinese Communist Party, the
Kremlin, and other American adversaries use corruption to
undermine and coopt our system and those of our democratic
allies. We need to recognize this national security threat and
do all we can to curb its influence.
This effort to coopt our systems is nowhere more evident
than in Interpol, the international police organization. This
organization, meant to accomplish the important mission of
coordinating global law enforcement, has instead been hijacked
by mafia states and weaponized to pursue political opponents
and dissidents around the world. The Chinese Communist Party
and the Kremlin are two of the most prolific abusers of
Interpol. The TRAP Act, which I have cosponsored, would mandate
that the United States work with allies to counter this abuse
as well as to prevent our own law enforcement from becoming
unwitting henchmen of foreign despots.
Blocking corrupt officials and their illicit money from our
system is the most important thing we can do to confront
corruption. To that end, I am currently co-leading the Global
Magnitsky Act reauthorization and the Navalny 35 sanctions
review bills with my friend Senator Cardin. Unfortunately, the
Treasury Department has been reluctant to use the full force of
U.S. economic power in the fight against corruption and human
rights abuse, and this has been true during Democrat and
Republican administrations. We have not seen any Russia
Magnitsky sanctions since 2019, and no targeting of oligarchs
under Global Magnitsky since this administration began. These
are long-term national security threats that should receive the
highest priority from U.S. policymakers.
I want to welcome our distinguished witnesses today,
Representatives Malinowski and Salazar, two House members who
have demonstrated strong bipartisanship--as Senator Cardin and
I have tried to do--in the fight against corrupt dictatorships.
I also want to welcome our second panel of witnesses:
Leonid Volkov, Elaine Dezenski, and Scott Greytak. They are--we
are honored to have--particularly honored to have Mr. Volkov
with us today. He serves as chief of Staff to Alexei Navalny.
Mr. Navalny's Anti-Corruption Foundation has shown that
corruption is not only a strategic tool of dictators, but also
a vulnerability for those who practice it. Bringing high
corruption into public view exposes the true nature of these
despots, and we intend to continue doing that.
Mr. Chairman, the bipartisanship on display today is
something the public may not know a lot about, but it is vital
as we confront this national security threat. I look forward to
the testimony and the legislation and congressional action that
it will beget. Thank you, sir.
Chairman Cardin: Thank you, Senator Wicker.
Congressman Wilson?
STATEMENT OF JOE WILSON, RANKING MEMBER, U.S. HOUSE, FROM SOUTH
CAROLINA
Representative Wilson: Thank you, Chairman Ben Cardin and
Senator Roger Wicker, for holding this very critical hearing.
Corruption has replaced the failed system of communism as
the uniting force of the world's dictatorships. Nothing better
reflects the Helsinki Commission's mandate to promote universal
values than putting our efforts into countering this pernicious
menace. Corruption sustains the rule of the Chinese Communist
Party, the Kremlin, the Iranian mullahs, and various socialist
dictators of Latin America including Maduro of Venezuela,
Ortega of Nicaragua, and the Castro regime in Cuba. It is not
an exaggeration to say that corruption is the new communism.
Like communism, we can only defeat it by leading our democratic
allies in opposing it, which is what we are doing today in a
very bipartisan manner.
Besides the position I have of ranking member of the
Helsinki Commission in the House, I am also a member of the
Republican Study Committee's Task Force on Foreign Policy and
National Security. The RSC has made a major effort to
prioritize corruption for the national security threat that it
is. We have supported many of the policies we will discuss
today and are fully committed to countering the corruption that
dictators attempt to export into our system. Indeed, my RSC
colleague Congressman and Chairman Jim Banks and I just
introduced an initiative to update the truth in testimony
requirements to require greater transparency from those who may
be secretly taking CCP or Kremlin money. I urge and encourage
my colleagues to support this measure. It is a clear, smart,
bipartisan move.
All such measures to increase transparency among those
taking foreign money are critical because dictators today are
different from dictators of the past. Where in the Cold War we
were two hermetically sealed systems, capitalism and communism,
now corruption from dictatorships seeps into our system through
opaque financial channels and unscrupulous enablers willing to
accept dictator cash. In so many ways, this is even more
insidious than the Soviet threat ever was because the enemy is
already here influencing us from within. We need to block
corrupt dictators, their cronies from our system, and crack
down on their blood money, who practice crony capitalism as
they have seen Soviet socialism fail.
This is the reason I have joined with my colleagues
Congressman Malinowski--Tom Malinowski, who is here today,
Representative Salazar, and Cohen in the introduction of the
ENABLERS Act. This bill would create basic due diligence
requirements for lawyers, investment advisors, and other
professionals who help dictators get their malign money into
our country. This is the commonsense kind of reform that we
badly need in the United States to protect ourselves from the
threat of corruption.
As a member of the House Armed Services Committee, I am
also grateful to see no fewer than six counter-kleptocracy
measures from the Helsinki commissioners and counter-corruption
caucus members in the House NDAA. I was very pleased to work
with my Armed Services Helsinki colleague Ruben Gallego to help
place two of these bills in the NDAA through the committee
markup a couple of months ago, including the Justice for
Victims of Kleptocracy Act, which my colleague Tom Malinowski
here today introduced; and the Foreign Corruption
Accountability Act, which Representative John Curtis introduced
along with Congressman Malinowski.
This strong bipartisan alliance on fighting corruption is a
demonstration that Congress is still delivering for the
American people and still standing up for American values. We
may look polarized from the outside, but as you can see today
we are working together to fight corruption as we are of one
mind.
To protect American families, we must have--we must fight
corruption. I urge my colleagues to keep building out this
emerging alliance and move together with the international
group of democracies to close the door to dictators and their
corrupt cash. The key reason that democracy did not triumph
after the end of the Cold War was global corruption, but we can
stop it now--and with that, stop dictatorship at the source. I
yield back.
Chairman Cardin: Thank you, Representative Wilson.
We are joined by the co-leader of the U.S. Helsinki
Commission, Congressman Cohen, by WebEx.
Representative Cohen: Am I muted? I am mute.
Chairman Cardin: You are live.
Representative Cohen: I am live. Can you hear me?
Chairman Cardin: We hear you fine, yes.
STATEMENT OF STEVE COHEN, CO-CHAIR, U.S. HOUSE, FROM TENNESSEE
Representative Cohen: Great. Thank you. Thank you. I am
pleased to be here by WebEx. I have had every problem you can
imagine this morning with--but I am here. I thank you for
holding this hearing. It is such an important hearing and
topic, and I thank all the witnesses for being here as well.
Corruption can be found worsening just about every global
issue we face, and it is extremely far-reaching. It ranges from
climate change, COVID response, human rights, individual
freedoms. It just--it is ubiquitous. Authoritarian regimes
survive on cronyism and corruption, and they take care of their
pals, and their pals probably take care of them. Authoritarian
regimes are rising in Eastern Europe and other places, and they
are a threat to democracy in other places and certainly a
threat to the world order.
Kleptocrats steal from their citizens and hide their wealth
in places where they know they will be--it will not be taken
from them, like in the West because the West respects property
rights and the rule of law. They take advantage of systems that
they do not have in their own countries to protect the wealth
they have stolen from others.
The Helsinki Commission and the counter-kleptocracy caucus,
of which I am a proud member, is doing its part to fight
corruption. Four of the seven bills included in the omnibus
Counter-Kleptocracy Act, which we put in, passed the House as
part of the annual defense bill, including the TRAP Act to
fight Interpol abuse, which I sponsored. This was achieved
through an amendment which I introduced. It included the TRAP
Act, the Combating Global Corruption Act, and an amendment to
Helsinki Ranking Member--put in by Representative Joe Wilson,
who we worked together with on this well. I appreciate
Congressman Wilson's efforts here, as he is expressed himself.
While it is important we hold kleptocrats accountable and
disable their networks, the problem of global kleptocracy will
not be solved until we act against the professionals who enable
it. These include lawyers, lobbyists, accountants, real estate
professional[s], consultants, and others who keep--help
kleptocrats launder their money and reputations in the U.S. and
other Western countries--lobbyists, real estate professionals,
accountants with good names who you think of, oh, those are
nice folks and quality people. Well, sometimes they are not
because they work with these folks to poison the system, and in
essence they are agents of the corruption themselves. They do
not have to do due diligence on their clients' funds because
that is not a duty. Only banks are required to do due
diligence, while all of the gatekeeper professions, some of
which I mentioned, can and do accept dirty money, help people
with their dirty money, and put it with impunity. This is out
of step with American values and our international obligations
under the Finance [sic; Financial] Action Task Force.
If we are going to get serious about cleaning up
corruption, it is not enough just to target the kleptocrats. We
must also clean up our act at home, reinforce our own financial
defenses against this national security threat--defenses we
have--[inaudible, technical difficulties]--for decades because
dirty money's poured in.
I thank our witnesses, who are outstanding, for being here
with us today. They have all done extensive work to fight the
threat of corruption. We look forward to what you can help us
do with your advice. We look forward to it.
Particularly pleased there are two representatives from the
House here. I believe Representatives Malinowski and Salazar,
who have worked with us on the floor, have strong support also
of the Helsinki Commission and our missions.
I am pleased to welcome our other witnesses, in particular
Mr. Volkov, who is the chief of staff to Alexei Navalny, a hero
of the world for his standing up to Putin and the authoritarian
regime there and returning to Russia--his home--after he had
been poisoned, and now he is in prison in what is, in my
opinion, an unlawful step. It may be within the laws of Russia,
but it was obviously done to keep him quiet and to try to
stifle competition to Putin and stifle his party. He is bravely
stood up. He is somebody we have to admire and he is in a
terrible condition. I look forward to Mr. Volkov telling us
about Mr. Navalny's health, views on this topic, as well to the
future of our--of his organization, the Anti-Corruption
Foundation.
Only when it is unthinkable for an American to accept dirty
money from abroad will we have accomplished our goal, and we
need to do that. I yield back the balance of my time.
Chairman Cardin: Thank you, Congressman Cohen. Appreciate
that very much.
We are also joined by Representative Veasey from Texas, who
is a member of the Commission, and Representative Fitzpatrick
from Pennsylvania, a member of the Commission.
We are now going to hear from the--our colleagues from the
House, the founding members of the Caucus Against Foreign
Corruption and Kleptocracy, Congresswoman Salazar and
Congressman Malinowski.
Tom Malinowski is the Congressman from New Jersey's Seventh
District. He served as a senior director on President Clinton's
National Security Council, the chief advocate for Human Rights
Watch, and in the Obama administration as assistant secretary
of State for democracy, human rights, and labor. He has been
deeply involved in the human rights agenda his entire life.
We are also pleased to have Representative Salazar with us
from Florida's 27 District. She serves on the House Committee
on Foreign Affairs as well as the Committee on Small Business.
She is well known for advocacy for human rights and democracy
around the world, especially for the people of Cuba, Venezuela,
Bolivia, and Nicaragua.
We will start off with Representative Malinowski.
TESTIMONY OF TOM MALINOWSKI, CO-CHAIR, CONGRESSIONAL CAUCUS
AGAINST FOREIGN CORRUPTION AND KLEPTOCRACY
Mr. Malinowski: Thank you so much, Senator Cardin, Senator
Wicker, Congressman Cohen, Congressman Wilson, members,
commissioners. It is my honor to be here with you to talk about
this incredibly important issue, and I--and I want to really
thank the Helsinki Commission for leading this fight over the
last several years, for your persistence in exposing how
corruption and kleptocracy threaten America's national security
interests.
I very strongly believe that the defining contest today--
the contest that will determine above all how our children and
grandchildren live in the years to come--is the contest between
democracy and dictatorship, between democracy and kleptocracy.
There is not a week that goes by when I do not read an article
somewhere that argues that the bad guys are winning that fight.
There is a lot of bad news around the world today for champions
of democracy. We see the evisceration of freedom and the rule
of law in Hong Kong at the hands of the Chinese Communist
Party. We see Russia under Putin snuffing out the last vestiges
of dissent and opposition. We see what has happened in
Venezuela and Egypt and Saudi Arabia and Iran, country after
country.
You know that I have spent much of my career arguing on the
side of democracies in that contest as a diplomat, as a human
rights activist. I want to tell you that there is one central
lesson that I have learned in my engagement in this fight, and
that is that corruption is the key. Fighting corruption is the
key to winning this contest for reasons that many of you have
mentioned.
No. 1, corruption is the thing that sustains and empowers
dictators. It is what keeps them in power. Dictators use the
money they steal to pay off their supporters, to pay off police
and security forces, to take over legitimate businesses.
As Senator Wicker rightly said, corruption is also their
biggest vulnerability. Corruption is the one crime that
embarrasses Putin. It is the one crime that embarrasses Xi
Jinping. When we complain about their human rights abuses--when
we accuse them of locking up dissidents, shutting down
newspapers--they are not as embarrassed as they should be.
Sometimes they can rally public opinion in their countries
against the United States and other countries interfering in
their internal affairs. When we catch them stealing from their
people, and particularly when we catch them stealing from their
people and putting the money they steal in our banks, in our
real eState, in a villa in the Riviera or a fancy home in
London or a shell company in the United States, that is what
truly embarrasses them.
There is a reason why Alexei Navalny is enemy number one in
Russia. Yes, he talks about human rights. Yes, he wants free
elections in Russia, as we all do. The main reason he is enemy
number one, the main reason Putin tried to kill him, is because
he exposed Putin's corruption. He exposed the huge amounts of
money that Putin and his cronies have stolen and used to
purchase palaces and luxuries for themselves, the huge amounts
that have been taken out of Russia and stashed overseas,
something like half of Russia's national wealth stashed
overseas by these corrupt kleptocrats who support Vladimir
Putin.
We as a country have very potent tools to go after
corruption. We have laws that enable us to prosecute
kleptocracy around the world. We have sanctions thanks to the
Global Magnitsky Act that allow us to directly hold accountable
and expose those who engage in this kind of conduct.
I think the challenge before us to further strengthen those
tools and to ensure that the administration, whichever
administration may be in office at any given time, is using
those tools in the most effective possible way. I think that is
what we need to be focused on above all right now.
Senator Cardin, you and others mentioned that there are a
number of provisions that are before us as we consider the
NDAA, the defense bill. This is incredibly important. It is
very easy for us as members of Congress to go to a hearing and
to give a speech. It is very easy for us to cosponsor a piece
of legislation. It is very easy for us to issue a statement.
Where the rubber hits the road is when we can actually pass
legislation that does something real. The NDAA, as we all know,
is one of the best opportunities we have all year to do that,
because this is a piece of legislation that always moves.
We have several bills that made it into the House version
of the NDAA, that a number of commissioners have already
mentioned. It is important to stress, each of these bills is
bipartisan. Congressman Salazar and I, and our colleagues in
the House, have made a point of doing all of this in a
bipartisan way. Whether it is the Combatting Global Corruption
Act that Senator Cardin has championed, the bill regarding
Interpol, the CROOK Act, the Global Magnitsky Reauthorization
Act, the Justice for Victims of Kleptocracy Act, or the Navalny
35 bill.
Which is I think particularly important in that int will
require the Biden administration to do what it has
unfortunately not yet done, and that is to seriously evaluate
whether the Magnitsky corruption prong can and should be used
with respect to the people who are responsible for the
corruption Navalny exposed, responsible for the attempt to kill
him, and now his imprisonment has a hostage of Putin in Russia,
whether they should be and can be held accountable under our
laws.
I am, first of all, here to appeal to senators both sides
of the aisle to use your voice in the coming days to ensure
that all of these provisions end up in the Senate version of
the bill, or at the very lease are accepted by the conference
that we are apparently going to have. Then, second, a number of
commissioners have mentioned the incredibly important
bipartisan legislation that we have introduced, Congresswoman
Salazar and I, the ENABLERS Act, which is designed to close a
loophole in our laws that has enabled foreign kleptocrats to
continue to use the United States as a safe haven for their
money. It is incredibly important.
You need a rule of law state to be able to break the law in
a country like Russia. You need a safe place to stash your
loot. Unfortunately, America remains a safe place for too many
people. Our banks have due diligence requirements that force
them to ask, where is this pile of cash that you want to
deposit derived from? If you are a real estate company, an
accounting firm, a trust company, an art dealer, you do not
have to ask those basic questions. That is a loophole that has
been exploited by bad guys from all over the world.
Just as we passed the Corporate Transparency Act last year
that President Trump signed into law, I think our next big
thing, after the NDAA, will be to come together in a bipartisan
way to pass the ENABLERS Act. I am sure you are going to hear
more today from other witnesses about that. With that, it is an
incredibly important cause. We have immediate work to do. I am
grateful to all of you--Democrats, Republicans, on a bipartisan
basis--for coming together with us to get it done. Thank you.
Chairman Cardin: Thank you, Congressman Malinowski.
Representative Salazar
TESTIMONY OF MARIA ELVIRA SALAZAR, MEMBER, CONGRESSIONAL CAUCUS
AGAINST FOREIGN CORRUPTION AND KLEPTOCRACY
Ms. Salazar: Thank you Senator Cardin, and Congressman
Cohen, and the Helsinki Commissioners, and thanks for inviting
me to testify at this critical hearing. I agree with my
colleague wholeheartedly, corruption is a monumental threat to
freedom and human rights. Many of today's dictators rule
through corruption. I call them, and we have mentioned this
word, kleptocrats--a fancy word for those who steal from their
national treasury to enrich themselves. As you know, they
plunder, they exploit, they rob their people with no mercy. In
the process, they destroy the rule of law and use that stolen
blood money to finance marketing campaigns that portray them as
the saviors or redeemers of their country.
I know it very well--Putin Russia, Ortega in Nicaragua,
Maduro in Venezuela, and Castro in Cuba. For me, this is a
personal tragedy. I have seen this devastation brought by
kleptocrats to my most intimate surroundings. As you know, I am
the daughter of political refugees who fled the Castro regime
with the clothes on their back and $5 in their pocket. In 1960,
Fidel Castro turned Cuba, an island with the same per-capita
income as Italy, into a fourth-world Satanic nightmare that
lasts until today.
As a foreign correspondent for the United State Spanish
television, I reported and interviewed Chavez and Maduro. Those
two thugs, in only 20 years, have turned the richest country in
South America into a state where the average Venezuelan weighs
15 pounds less today because of lack of food. Venezuela
inherited oil, but it also had Hugo Chavez. Chavez implemented
his 21st century democratic socialism and promised the end
political corruption. Instead, he created another class of even
more corrupt useful fools, as I call them, called Los
Enchufados, the plugged ones. Another perfect example is Alex
Saab who stole millions and millions from an organization that
was supposed to distribute food to people's houses in the most
underprivileged barrios or neighborhoods in Venezuela.
Meanwhile, Daniel Ortega from Nicaragua. He jailed my ex-
husband, Arturo Cruz, who just running for president was his
only sin. He was one of the presidential candidates in this
last election. Arturo Cruz is currently in a military jail
called Chipote. Ortega just stole another presidential
election. Along with fixing elections, Ortega--his family and
his friends--took in $29 million in 2019 alone. There is
nothing these thugs fear more than a free election, because
they are in the business of power. They are not in the business
of taking care of their own people.
As you said, these are not far away problems for the United
States. Corrupt money flooding our country also destroys
American lives. The perfect example is the city of Miami, the
city that I represent in Congress. Miami was a hotbed for
laundering drug money in the 1980s. This brought violence that
spilled into the streets and harmed innocent bystanders. On top
of that we have got a very bad reputation, with movies like
Scarface and the television series Miami Vice. That is what
kleptocrats do to our city.
That is why I am committed to fighting corruption, a fight
that could not be more quintessential American--
quintessentially American. We have already made enormous
progress this Congress. I am proud be a founding member of the
bipartisan congressional Caucus Against Foreign Corruption and
Kleptocracy. We are striking at three pillars of the counter--
of counter-kleptocracy. We are keeping dirty money out of the
United States, we are creating tools to dismantle these corrupt
networks, and we are helping freedom fighters to build free
societies abroad.
I am honored to testify and to work alongside my colleague,
Tom Malinowski. Together we led several bills to fight
dictatorship, as he just explained to you. We introduced the
House version of Chairman Ben Cardin's bill, called the
Combating Global Corruption Act. This would create an open
reporting system for all countries, based on their compliance
with anticorruption norms and standards created by the United
States.
In the wake of the Pandora Papers investigation,
Congressman Malinowski and I also introduced the ENABLERS Act.
This bill would require the private sector to question those
professional enablers who help dictators to bring money into
the United States, to inform the federal government the source
of that suspicious money. Business with our country is a
privilege, is not a right. Their family members should not be
allowed to travel, dine, and lavishly spend stolen money on our
restaurants or our shopping malls. In other words, no more Saks
or Broadway.
By working together, Congress and this administration can
block these murderous thugs from coming into our country.
Thanks to you, to the efforts of the Helsinki Commission, we
have recognized the existential nature of this threat, and we
are responding with force. Thank you again for the opportunity
to testify today in front of you, and I look forward to
continue efforts to curb corruption and end brutal
dictatorship, and work across the aisle with members of
Congress.
Chairman Cardin: Well, let me thank both of our colleagues
for your passion on this issue, your leadership on this issue,
and effectiveness in getting action in the House, particularly
in the National Defense Authorization Act. As of last night,
the two bills, including Combatting Global Corruption Act and
the Global Magnitsky Act, both had cleared the relevant
committees. There were no objections raised by the Senate
Foreign Relations Committee or the Banking Committee, and are
included in an amendment for the NDAA.
Now, that does not mean we are going to get to the finish
line, because in the Senate we have individual member
objections that can cause us a delay in getting some issues
resolved. It does mean that we are going to get to the finish
line on those bills. That I hope it is in our version of the
NDAA bill. If it is not, we will make it clear that we will
accept that in conference. I am optimistic that we are going to
get those to the finish line.
The other bills you mentioned, we are going to work on to
get them done. The other bills that we have followed we are
going to try to vehicles to move it. All of our legislation is
bipartisan, and your testimony here today underscores the fact
that we have strong bipartisan interest in recognizing the
national security threat of corruption, and we know it is the
fuel for corrupt leaders.
Thank you both for being with us today, and we are going to
move onto the second panel, but we thank you all for your
contributions to this hearing.
[Break.]
Chairman Cardin: We will now turn to our second panel of
witnesses. We have Leonid Volkov, who is the chief of staff and
political director for the Alexei Navalny team. Leonid was
campaign manager for Alexei Navalny's 2013 mayoral campaign for
Moscow, as well as the Navalny attempt to get registered for
the 2018 presidential elections. Since 2018, he has been in
charge of the smart voting, a tactical voting campaign that
successfully managed to defeat hundreds of members of Putin's
party, United Russia, in regional elections.
We have Scott Greytak, who is the director of advocacy for
the U.S. Office of Transparency International, where he manages
the office's legislative agenda and oversees its anticorruption
legislation lab. He is a well-known anticorruption attorney.
Then we have Elaine Dezenski, who is board of advisors of the
Center for Economics and Financial Power at the Foundation for
Defense of Democracy. She is an internationally recognized
expert and thought leader in security policy, with special
expertise in anticorruption, security, and risk management.
We have three real experts in the challenges that we have
on corruption. We look forward to your testimony. Your entire
testimony will be made part of our record, without objection.
You may proceed as you wish. We will start with Mr. Volkov.
TESTIMONY OF LEONID VOLKOV, CHIEF OF STAFF TO ALEXEI NAVALNY
Mr. Volkov: Dear Mr. Chairman, dear members of the
Commission, for me it is not only a big honor to take the floor
here today, to be invited, but also great pleasure to be among
like-minded people, in a room where everyone can agree that one
of the biggest threats to the world now is corruption--global
corruption, to be more specific. Which is a rather new
phenomenon made possible by globalization of financial markets,
modern technology provides better connectivity. The world has
become small, which provides great new opportunities for
expats, digital nomads, travelers, businessmen, but also for
kleptocrats.
President Biden will soon be hosting the first global
summit for democracy. According to its official website, there
are three main topics to be addressed during this summit--
defending against authoritarianism, addressing and fighting
corruption, and advancing respect for human rights. Our
experience in Russia teaches us that these are not three
different topics, but actually one. The opportunity to steal
money uncontrollably is the key motivation for very many
leaders to convert their rule, even after they have been
elected democratically, into an authoritarian one, and to
demolish human rights and basic democratic institutions is just
their way to protect their stolen assets.
A corrupt government has no choice but to silence the
independent press, because they cannot allow their crimes to be
investigated. A corrupt government has no choice but to rig
elections, because they cannot allow themselves to become
outvoted. A corrupt government has no choice but to destroy
independent courts, because they cannot allow themselves to be
challenged in court with an unpredictable outcome. In order to
be able to censor the press, rig the elections deprive the
judiciary from any independency, they have to become
authoritarian. That is the very sad path that Russia has taken
during the last 22 years under Vladimir Putin, a path very well
documented by the Anti-Corruption Foundation, an experience we
believe is worth sharing with other countries.
Let me make just a few observations based on this
experience that the Anti-Corruption Foundation, created by
Alexei Navalny, as obtained in Russia over the past 10 years.
During this decade, we have investigated hundreds of cases of
corruption among the country's top government officials,
including the Foreign Minister Lavrov, the then-Prime Minister
Medvedev, and President Putin himself, of course. Our
investigations feature palaces, private jets, yachts, jewelry,
and other luxury items with the total worth of billions of
dollars, stolen from Russian taxpayers. Even more importantly,
the allowed us to reveal several very significant patterns that
repeat themselves in the course of action of every corrupt
government official, be it a government minister or a mayor of
a small town with dilapidated roads and public schools.
Here is most important takeaway, based on our experience:
Every successful kleptocrats operates not in one but at least
in two countries. Their home country, where the absence of rule
of law makes it possible for them to enrich themselves
enormously, and the other country, where they would transfer
and preserve their assets. No kleptocrat engages in corruption
for the purpose of swimming in gold coins, like some cartoon
character. On the contrary, they aim to create sizable assets
which they would be able to pass to their children. They, the
kleptocrats, know better than anyone else that it is impossible
in their home countries for the exact reason that they are able
to steal so much there. There is no rule of law. There is no
protection for their wealth. They need to enjoy the rule of law
in democratic countries to protect their assets.
This makes corruption a global phenomenon, and this also
makes it possible to fight against corruption on both fronts.
We know too good what it takes to fight corruption in a country
where there is no rule of law. My friend, Alexei Navalny,
carried on this fight for many years. He got poisoned by
novichok, he got imprisoned, and he got tortured. He continues
to pay an enormous cost for his fight against corruption in
Russia. Luckily, on the demand side, in a country driven by the
rule of law, the fight against corruption does not require
enormous risk. It could be done through legislation. It could
be done through law enforcement, and through public opinion.
That is why I am here now, on behalf of Alexei Navalny and
the entire team of the Anti-Corruption Foundation. I am here to
endorse in all possible terms the activities of the Counter-
Kleptocracy Caucus and of the Helsinki Commission against
kleptocracy. We endorse the Foreign Corruption Accountability
Act, the Justice for Victims of Kleptocracy Act, the TRAP Act,
the Combating Global Corruption Act, and reauthorization of
Global Magnitsky. Of course, last but not least, the act that
would require the Biden administration to determine whether the
35 kleptocrats and government officials named by Alexei Navalny
meet the criteria for sanctioning under the Global Magnitsky
Human Rights Accountability Act. Believe me, all of them meet.
Let us fight this fight together. We are doing whatever we
can in Russia. A lot of things to fight global corruption could
be done here using legislative tools first of all. I want to
assure you that President Putin will hate these bills. This is
something that makes them so good. Thank you so much.
Chairman Cardin: Well, thank you very much for your
testimony. We really appreciate your courage on these issues.
Mr. Greytak
TESTIMONY OF SCOTT GREYTAK, ADVOCACY DIRECTOR, TRANSPARENCY
INTERNATIONAL U.S. OFFICE
Mr. Greytak: Chairman Cardin, Co-Chairman Cohen, Ranking
Member Wicker, Ranking Member Wilson, and members of the
Commission: Thank you for holding this important and very
timely hearing today, and for inviting Transparency
International and me to talk to you about four actions that
Congress can take right now to destabilize foreign corruption
and kleptocracy.
As illustrated be Leonid and as Elaine will talk about,
corruption is the lifeblood of authoritarian governments. At
the same time, it is the inadequacy of our own laws here at
home that compounds these problems. Just last month the Pandora
Papers revealed to a global audience yet again how the United
States continues to serve as a leading secrecy jurisdiction for
stashing offshore funds and plays host to professional enablers
who help the world's elite move, hide, and grow their money.
Congress can act by passing a series of bills to disrupt
foreign corruption and kleptocracy, both as their practiced
abroad but especially as they are enabled here at home.
First and foremost, Congress can make sure that the six
anticorruption bills that were already included in the House's
version of the NDAA are also included in the final NDAA. These
bills are the Global Magnitsky Human Rights Accountability
Reauthorization Act, the Combatting Global Corruption Act, the
Navalny 35 measure, the Foreign Corruption Accountability Act,
the TRAP Act, and the Justice for Victims of Kleptocracy Act.
Collectively these bills would enhance the U.S. ability to deny
kleptocrats access to our country and to our financial system,
they would increase transparency, they would encourage
cooperative efforts among the United States and its allies, and
they would provide actionable information to the victims of
kleptocracy.
Second, congress can ensure that the Treasury Department
issues a strong rule when it is implementing the Corporate
Transparency Act. In January, Congress made a historic
milestone by passing this act, and effectively abolishing
anonymous shell companies. In doing so, it explicitly
recognized how malign actors seek to conceal their ownership in
order to carry out acts of foreign corruption. Right now, the
Treasury Department the FinCEN are drafting that rule. Congress
can ensure that they meet the intent of that law and deliver
robust, comprehensive, and highly effective rules that ensure
that corporations, LLCs, and all other similar entities are no
longer able to serve as the getaway cars for corruption.
Third, Congress can pass the Foreign Extortion Prevention
Act, or FEPA. Nowadays more and more American workers and
American companies are having to do business overseas, often in
highly corrupt environments. They are being targeted
specifically by corrupt officials there for bribes. Dozens of
other countries across the world have responded to this dynamic
by criminalizing bribe demands by foreign officials. The United
States should follow suit, protect its workers and its
companies, by passing FEPA, a bipartisan act that is already
supported by an enormous political tent, including the U.S.
Chamber of Commerce and Greenpeace USA.
Finally, Congress can crack down on American enablers by
requiring key professional service providers here in the United
States to perform full due diligence on their prospective
clients. The Pandora Papers revealed how an advisor to the
former prime minister of Malaysia was able to use an American
law firm in order to set up a network of companies, despite
that advisor fitting the textbook definition of a high-risk
client. The advisor went on to use those companies to steal
over four and one half billion from the public investment fund
of Malaysia. There are too many stories like this. Congress
must end American complicity in foreign corruption. One
compelling approach to do so is the bipartisan ENABLERS Act.
Writ large, strong action from Congress on these issues
would be met by a growing and engaged civil society community
that is more committed than ever to eradicating kleptocracy and
corruption across the world. We have already seen productive,
fruitful partnerships between government and civil society.
Just this past June, this Commission helped bring together
members from across the aisle, informing the Caucus Against
Foreign Corruption and Kleptocracy, which has served as the
launching pad for nearly every significant global
anticorruption and counter-kleptocracy measure before this
Congress, and with which we have been fortunately able to work
very closely.
In the words of the administration's National Security
Study Memorandum designating the fight against corruption as a
core national security interest, fighting corruption allows the
United States to secure a critical advantage and is essential
to the preservation of our democracy. I look forward to
discussing these and other opportunities for Congress to turn
those words into action. Thank you.
Chairman Cardin: Well, thank you for your testimony, and
specifically your recommendations are very helpful.
Ms. Dezenski, glad to hear from you.
TESTIMONY OF ELAINE DEZENSKI, SENIOR ADVISOR, CENTER ON
ECONOMIC AND FINANCIAL POWER, FOUNDATION FOR DEFENSE OF
DEMOCRACIES
Ms. Dezenski: I am not sure if the microphone is on. Can
you hear me?
Chairman Cardin: You are on.
Ms. Dezenski: Okay. Great. Thank you so much. Chairman
Cardin, Co-Chairman Cohen, members of the Helsinki Commission,
thank you so much for the opportunity to be part of today's
discussion.
Over the next few minutes, I would like to share some
observations on the growing challenges of foreign corruption
and China. To be sure, there are many ways that we can observe
the problem of corruption in the context of China. Perhaps the
best lens that we can use is to examine China's Belt and Road
Initiative. In less than a decade, the BRI has changed the
contours of global development, but in ways that are
threatening to democracy and democratic norms. Endemic
corruption, high levels of debt, and long-term dependences in
Beijing are eroding good governance and contributing to China's
growing political and economic influence. It is time for the
U.S. to address these challenges and offer a better model.
Today, the U.S. faces growing aggression from
authoritarians who seek to erode our open, rules-based system
in favor of closed, opaque, highly centralized regimes. Chief
among these threats is China. To build deeper support for its
governance model, the Chinese Communist Party is seeking to
rewrite the rules of engagement with many, if not most,
developing nations--those that are most in need of vital
infrastructure investment. The primary vehicle to achieving
this reframing is the Belt and Road Initiative.
Launched in 2013, the BRI is much more than an
infrastructure program. It has been more accurately described
as a geopolitical enterprise, and how China seeks to redefine
its engagement with more than 140 countries. That is, most
countries in the world. It gives us a unique view into how
China is building global influence, and how corruption has
become a key mechanism to support this, because where the BRI
goes, corruption follows.
It is true that corruption may proliferate more easily in
countries that already suffer from weak governance and high
levels of corruption. In fact, the vast majority of countries
within the BRI fall below the median levels of control of
corruption, according to recent World Bank indicators. But this
does not adequately explain why corruption is so prevalent in
the BRI. Rather, it is the CCP's formal policy of non-
interference with BRI recipient governments that sets the stage
for corruption on a much larger scale.
The BRI is designed to undercut quality development because
it eschews the normal safeguards that typically accompany
infrastructure investments. These safeguards, also referred to
as conditionality or Western conditionality, include
anticorruption standards, transparent bidding and procurement
processes, environmental standards, labor standards, and other
good governance practices. The BRI could, in theory, help close
the global infrastructure gap, but it is heading in a different
direction--principally as a tool of China's aggressive global
expansion, long-term dependencies on Beijing, fueled by
corruption, spiraling debt, and made worse by the impact of
COVID.
Detailed case studies of BRI projects in Malaysia and
Kenya, as noted in my testimony, demonstrate the consequences
of China's failures to engage in open and transparent conduct.
Corruption has been reported in countries from Ecuador to the
Maldives, Indonesia, Sri Lanka, Pakistan, Belarus, Mozambique,
Vietnam--the list goes on. New data tracking BRI investments
and other Chinese investments is telling. Thirty-five percent
of BRI projects have struggled with challenges related to
corruption, labor violations, environmental pollution, and
other governance issues, while only 21 percent of China's non-
BRI infrastructure projects have encountered these same issues.
Since 2013, China has steadily shifted the majority of its
financial support away from loans to sovereigns, instead
favoring loans to foreign state-owned companies, state-owned
banks, special purpose vehicles, joint ventures, and private
sector entities within recipient countries. Shifting away from
loans tied directly to governments allows those liabilities to
be treated as off the books, raising concerns that recipient
countries are underreporting their total debt to China. More
than 40 countries now have levels of public debt exposure to
China in excess of 10 percent of their GDP.
China has acknowledged that the BRI is facing governance
and corruption risks. Xi Jinping called for launch a Clean BRI,
or Silk Road of Integrity. This vision of a Clean BRI is, at
most, lip service to transparency and anticorruption norms.
There is very little to suggest China is committed to any of
it. It is doubtful that Beijing, or many of its partners, truly
want a BRI free of corruption. Why? Because this would change
the operating model, to the detriment of China's political
ambitions.
It also offers an opening for the United States and its
partners to put forward a different model. What is the path
forward for the U.S.? Recipient governments are increasingly
waking up to the risks of China's model, and a window exists to
work with governments seeking alternatives. I would like to
highlight just a couple of the recommendations from my written
testimony.
First and foremost, of course, we need to fully support the
counter-kleptocracy legislation moving forward within the NDAA.
This is a comprehensive set of measures put forward to combat
foreign corruption by closing our loopholes--money laundering,
immigration loopholes, enforcement loopholes, all of which can
limit the ability of kleptocrats to use our systems to their
advantage.
Second, we need to double down on investment strategies
that offer clean alternatives to the BRI. The U.S. is now
engaging with allies through initiatives such as the Build Back
Better initiative, launched under the G-7, the Blue Dot Network
together with Japan and Australia. These efforts should be
fully supported and expanded to include more partner nations
and to include increased funding not only from the public
sector, but from the private investors, the institutional
investors who really hold the key to closing the global
infrastructure gap.
Third, we need to increase our efforts to educate citizens
and support the great work of civil society and journalists who
report on corruption risks. We need to declare war on
combatting the misinformation and disinformation campaigns that
shroud the corrupt practices of China and other regimes across
developing economies. Authoritarian gaslighting obfuscates the
actions, objectives, and outcomes of opaque deals. It is time
to call out this behavior.
Fourth, let us pivot our critical supply chains out of
China and towards allied countries. COVID-19 has laid bare that
any dependencies on regimes like China put us at risk when
global shocks affect our critical supply chains. Ally-shoring,
relying on our democratic partners, could reduce dependencies
on China for critical materials and supplies and helping bring
production, jobs, and long-term economic security closer to
home. Ally-shoring can help revitalize and extend our networks
of partners and allies, further reinforcing democratic norms
and anticorruption standards, providing an economic backstop to
the corrosive effects of the authoritarians.
Finally, we should support BRI countries in impartial
adjudication of corruption disputes, including disputes over
stolen asset recovery, and provide technical support to help
understand and mitigate risks of doing business with China. In
that context, we should also explore the establishment of an
international anticorruption tribunal that would hold
kleptocrats accountable.
Finally, we need to take special care as we move forward
with our own massive infrastructure investments in this
country, ensuring that hidden CCP interests sometimes disguised
as private-sector companies are in no way siphoning our hard-
earned tax dollars into their corrupt coffers. The CRRC--
China's manufacturer of rolling stock--is now producing in the
U.S. for two mass-transit systems. It offers us a view into how
states and localities may be at risk of CCP influence, so we
need to be very mindful of it.
Renewed public trust will be the dividend of these efforts.
The United States should seize this opportunity now to offer a
better way forward. Thank you very much.
Chairman Cardin: Well, thank you very much for your
testimony. Also, we believe in the National Defense
Authorization Act on the Senate side will be our
competitiveness bill that deals with many of the issues that
you were referring to on supply chain with China. It is a--we
hope that we will have an opportunity to get that also to the
finish line, many of the points that you--that you raise.
We will start questioning with Congressman Cohen, who is by
WebEx.
Representative Cohen: I think I am with you. Thank you, Mr.
Chair.
Mr. Volkov, I want to start with you, and first I want to
know, how is Mr. Navalny's health?
Mr. Volkov: Thank you, Congressman Cohen, for your
question. Well, we are now in the situation when, like, the
absence of bad news is the only good news we have. Mr. Navalny
is imprisoned unlawfully. His health is currently stable, but
of course it could happen any moment that the situation will
start to deteriorate again. It is very important that
international attention is paid to his situation because we do
not have to forget he is in custody of that very people who
tried to kill him one year ago. Like, if he gets forgotten,
then they will definitely try again. The situation is
dangerous.
We have learned recently from a media report published by
the only remaining Russian independent TV station, TV Rain,
that they actually created a solitary confinement situation for
him without putting him in solitary confinement. He is in a
barrack with, like, 20 other inmates who are not allowed to
talk to him, to communicate to him, even to wave to him. There
is actually a lot of, like, psychological torture applied.
However, his spirit remains high, and that is the most
important thing.
Representative Cohen: Well, thank you. Public attention and
notice on his circumstance is important to his success and his
survival, is that correct?
Mr. Volkov: Yes, very much so.
Representative Cohen: You have moved out of Russia, is that
correct?
Mr. Volkov: We operate from abroad after our organization
has been outlawed. We have been designated as an extremist
organization, something like al-Qaida. Yes, we had to move our
operations abroad just to protect our employees. Otherwise, it
would be too dangerous for them to stay inside the country.
Representative Cohen: How has this affected your health and
your employees health and your work?
Mr. Volkov: We are very determined to make President Putin
regret that he has pushed us out of the country. Of course,
while many opportunities are now lost--we had to close our,
like, physical offices inside Russia, so it is not so easy for
us to communicate to our supporters in the country as we used
to. Also, operating from abroad yields us many new
opportunities that we try to use.
Just to give an idea, we have tripled the amount of the
content that we are producing--so video investigations and
other type of content--operating from abroad, because in Moscow
we were always, like, bootstrapping because, like, every second
month someone from law enforcement would come with a search
warrant and just seize all our equipment, pretending this to
be, like, material evidence for yet another criminal case. Now,
when such a risk does not exist anymore, our hands are untied,
and we can operate on a broader scale.
Representative Cohen: You have seen, I presume, the list of
35 folks who have been recommended for sanctioning. The Anti-
Corruption Foundation--your group--has recommended 35
kleptocrats to be sanctioned. Then Senator Cardin and Wicker
and Representatives Malinowski and Curtis introduced a measure
that would require the administration to undertake sanctions
review of those 35 names. Are there other people that you
believe should be included beyond those 35?
Mr. Volkov: Yes. Yes, there are quite a few. Well, let us
take the first step and then we will come up with more
suggestions.
Representative Cohen: Okay. Russian oligarchs largely hold
their money and live their lives in the West, as I understand
it. A lot of them apparently bought property in New York in a
certain individual's properties, we understand. Where, in your
opinion, does the dirty money of Russian oligarchs--first,
where does it originate? How do they get it? Then once they get
it, who do they use in the United States--lawyers, accountants,
et cetera--to help them keep it? Where are the destinations for
those stolen, purloined funds?
Mr. Volkov: Yes. Indeed, kleptocrats are very smart in
abusing, like, legal system of the Western countries where
there is rule of law and where they can protect their assets.
In this regard, I do very much endorse the ENABLERS Act, which
would make it much more challenging for the kleptocrats to
engage with Western enablers of corruption.
In Europe, the main destination of the assets stolen from
Russian taxpayers is definitely London. We believe very much in
the possible--hopefully possible--U.S.-U.K. cooperation on
sanctioning the Russian oligarchs. This would be more
efficient.
Well, as you know, like, European Union is very complex.
Twenty-seven countries needs to agree upon everything with
every country able to execute a veto right. Like, luckily,
London remains the main destination for Russian taxpayers'
money, and U.S.-U.K. cooperating on the sanction list, on
Global Magnitsky, on other measures such as ENABLERS Act would,
I believe, be the most efficient way to proceed.
Representative Cohen: In the United States I guess New York
and Palm Beach or that area in the Florida Gold Coast, as they
call it?
Mr. Volkov: In the U.S., yes, there are a few locations--
New York, Florida, Miami--that--a few more. They are
discovering new destinations for them. They are looking for
interesting spots. Well, just recently, here in Washington,
D.C., we discovered about Oleg Deripaska's enormous mansion,
one of the most expensive properties in town. It is not limited
to New York and Florida only. Well, if we would have to set
priorities, these two destinations are, indeed, the most
beloved by Russian kleptocrats.
Representative Cohen: Let me ask you just a few more
questions, then I am going to yield. In 2021, the Duma
elections, Google and Apple censored the Navalny Smart Voting
list at the behest of the Putin regime. You were, as I
understand it, connected to and in discussions with both Apple
and Google. Could you elaborate on their role in censoring
those elections and how that affected the election?
Mr. Volkov: It had an effect, and thank you for bringing
this up. Indeed, this censorship act was, well, very painful,
actually. Also, like, it was--it came all out of a sudden.
Like, Google and Apple did not give us, like, ahead warning, so
we did not know this is going to happen. We did not expect this
to happen.
As we know from media reports, Putin threatened to start
arresting their employees, the Russian employees of Google and
Apple, if they would not remove our list of voting endorsements
for the Duna elections. Putin actually threatened to take
hostage employees of American companies. We believe the way
Google and Apple dealt with this crisis, well, was definitely
not the best way to deal with a terrorist who is taking
hostage. We, as the developers of this voting application and
of this endorsement--like, the Navalny team, the Navalny
foundation--we yet to get an official explanation from Google
and Apple, not to say an apology, for what happened.
I anticipate that it could happen--like, realistically, the
pressure was so strong that they were not able to withstand. It
happens sometimes. They had to acknowledge it publicly. They
had to be vocal. They had to reach out to us to give us
warning, to help us develop some other tools to deliver the
content to our supporters. Most importantly, I believe we have
to work together with them to prevent this from happening
again, and of course, such actions of the government which
considers it is a proper thing to, like, really blackmail
companies with the fate of their employees, this has to be
punished, and this did not happen yet.
Representative Cohen: Thank you very much. There are so
many more questions I would like to ask you and the other
witnesses, but I have taken enough of my time for now. I yield
back the balance.
Chairman Cardin: Thank you, Representative Cohen.
We will go to Representative Wilson.
Representative Wilson: Thank you, Chairman Ben Cardin.
This positive bipartisan hearing featuring three superstars
as witnesses who are so impressive and informative, thank you
so much. It is encouraging, the professionalism that each of
you have indicated to expose corruption, your courage to do
that, and--which destabilizes democracy. What you are doing is
good for the people of Russia and the people of China, but
particularly democracies around the world that are at risk.
Chief of Staff to Navalny, I am so impressed and honored to
be in your presence, and how extraordinary your service on
behalf of the people of the Russian Federation and your
hometown of Yekaterinburg is beautiful. I have had wonderful
visits there. My family's had numerous visits across the
Russian Federation, from St. Petersburg to Novosibirsk, Tomsk,
Chelyabinsk, and I have been so impressed by the people of
Russia. It was just so inspiring to see the architecture, the
art, the literature, and that is why it is so disappointing,
truly, to see the level of corruption in Russia and how that
holds back what could be such a dynamic and impressive
community and country.
With that in mind, Alexei Navalny--and to show the
extraordinary bipartisanship, Congressman Steve Cohen is
absolutely correct. That is that Alexei Navalny is a hero of
the world. He has written an op-ed, which is in The Guardian
newspaper of the United Kingdom, which has plans for--calls for
action against corruption, and it is--and revealing that it is
the lifeblood of the Putin regime, and underlining the problem
behind so many global problems. With that op-ed, how can we act
on the--Alexei Navalny's recommendation to fight global
corruption?
Mr. Volkov: Thank you so much for your kind words and for
your question.
First of all, I would say that many of things that Alexei
Navalny mentioned in his op-ed to The Guardian and Le Monde and
Frankfurter Allgemeine have already been reflected by the six
bills that were House NDAA amendments and that are now up to be
considered on the Senate floor, because he actually also
addressed this issue of a demand side and of fighting
corruption with legislation in these countries where
legislation could be enforced, unlike in Russia. I think that
the Congress is on the very right track here, and we are very
thankful, and as I told already, we are here to endorse it.
Russian people will applaud to these measures. It is funny,
Putin's propaganda spent 20 years explaining that, like, these
oligarchs and Putin's friends are actually, like, evil. Like,
why the life quality standards are so bad in Russia? Because,
well--because of the oligarchs and because of the legacy of the
1990s. I believe, like--and of course, there is also,
unfortunately, like, a lot of anti-American propaganda in
Russian state media. There is, like, "evil America" in their
perception, but also evil oligarchs.
I believe this could actually cause quite a short circuit
if evil America sanctions the evil oligarchs. I cannot wait to
see how the Russian propaganda will try to explain what is
actually happening.
I mean, on a serious note, you are right; Russian people
deserve much better. It is a nice country, well-educated
people, enormous resources. Even in the best country, when the
average kickback rate for any government procurement contract
is 70 percent in cash--so if you want to build something like a
school, hospital for, like, $10 million, you have to bring back
7 million dollars in cash to the--to the government official
responsible for the procurement. No economy could be
successful, and there is such burden, and that makes
corruption, like, the primary target and the--and the primary
problem in the country.
Representative Wilson: With the--that is shocking to hear
of the 70 percent. What do you see as the future of Russia in
the next five, to 10 years?
Mr. Volkov: I do very much hope that Putin will not be able
to carry on for 10 years because the global trend is quite bad
for him. Young people do not like him. There has been, like, 22
years of Putin with no alternative, and people are just tired.
We see that, like, among younger voters, Putin is doing very
badly.
His most powerful tool to stay in power is his TV
propaganda machine, which is enormously sophisticated and
successful. Young people, digital normals, are much less
subject to this propaganda. They are not falling victims to
this propaganda.
The clock is ticking in our favor. Putin's approval ratings
are at historic lows, and younger people want change and know
that they deserve change. It could take time, unfortunately,
though, because while he is still very strong--he has all the
law enforcement in place and all the repression machine, and
actually the amount of repression is unprecedented. Russia now
has more political prisoners than Soviet Union ever had after
Stalin. Khrushchev and Brezhnev and Gorbachev had less than
Putin has. He has shown that he is ready to increase the
pressure and even increase the amount of repression. At some
point it is going to crack, just that is--and Russia will have
a democratic transition to rule of law and to democratic
institutions. This will take a lot of time, I am afraid, or at
least some time. Targeting corruption--making corruption less
fun for Putin's friends, for his elite, for his oligarchs--
could contribute to internal tensions within the regime, could
create splits that probably will make this process faster.
Representative Wilson: Well, we all hope for the best for
the people of Russia.
Mr. Greytak, Transparency International is the world's
premier anticorruption organization and chapters in most
countries. What corruption today do you see differs from
corruption of 30 years ago?
Mr. Greytak: Thank you for the question. I think to echo
what Leonid is saying. It is just become much more
sophisticated. Basically, a group of extremely well-educated
Westerners have developed these incredibly complex financial
vehicles--arrangements like trusts, the role of private equity
and investment advisors, really futuristic opportunities that
kleptocrats and their enablers have been able to take advantage
of. We are well past the days of rats chewing holes in cash in
Pablo Escobar's home. These funds are now shipped offshore.
They are now hidden in Western economies that have relatively
stable and solid growth trajectories for that money. We are in
an age where the anticorruption movement has to be extremely
fluent in how our corporate laws and finance work in order to
be able to track and recover and repatriate that money.
Representative Wilson: Well, thank you again for your
expertise on doing that.
A final question from me for Ms. Dezenski, and that is--and
we certainly appreciate the Foundation for the Defense of
Democracies. What a difference they make, and as we address the
subversion by the Chinese Communist Party, my perspective is
from birth I was inspired by my father First Lieutenant Hugh
Wilson, who served with the Flying Tigers in China in 1944
where he adopted a great affection for the people of China in
Xi'an, Chengdu, and Kunming. I am also grateful that my
family's had numerous visits across China and the people of
China have just been so impressive to me as being talented, and
we just hope for change in that country.
At the same time, we have a situation where China has--CCP
has a long-range view as opposed to Russia for what they would
like to see, dominance by the CCP in the world. What would you
comment on their long-range view? How would that be at odds of
values to the people of the United States?
Ms. Dezenski: Thank you so much for the question. I think
you hit on something incredibly important. The long-range view,
the long-term commitment that the CCP has to effectuating its
plan, its global ambitions, is exactly that. BRI is a great
example. It is not enshrined in the constitution of China. They
take these plans and these programs very seriously. The idea
that COVID, for example, is canceling out the BRI could not be
further from the truth. We will see ebbs and flows in terms of
how China uses its influence and its corrupt tactics, but they
will continue to keep their eyes on that long-term plan.
I think this is a challenge for us because we tend to think
in shorter time periods, and I think China has probably
exploited that to some extent. When we think about our
responses, we need to be, I think, more strategic about the
short-term implications of what we can do and the longer-term
commitment to democracy and democratic norms. This is something
that has to transcend all other political conversations because
it is about the future of this country. Perhaps it is exactly
the kind of wakeup that we need to get refocused on the kinds
of long-term objectives that keep our democracy safe.
Representative Wilson: Thank you very much.
I yield back, Mr. Chairman.
Chairman Cardin: Thank you.
We now have Representative Gallego on WebEx from the
great--representing the great State of Arizona.
STATEMENT OF RUBEN GALLEGO, U.S. HOUSE, FROM ARIZONA
Representative Gallego: Thank you. Thank you.
My first question is for Dr. Volkov. Thank you for your
testimony. Particularly interested in one of your lessons you
shared in your written remarks about Russia, listing former
high-ranking European politicians with what you described as
alternate retirement plan to serve on the board of directors
for Russian state-owned companies. One example that stands out
to me is former German Chancellor Gerhard Schroder taking a
leading role overseeing Nord Stream, a project that started
during his term in office. What do you see as potential
solutions to this problem? How can we more effectively tackle
the strategic corruption that has such a concerning impact on
the Western democracies?
Mr. Volkov: Yes, indeed. Thank you for your question.
Unfortunately, not only former Chancellor Schroder. The former
French Prime Minister Francois Fillon is another member of a
board of huge Russian state-owned company. The former prime
minister of Finland and the former foreign minister of Austria,
Karin Kneissl, and a few others. The problem is not even that
some of them becomes employed by the Russian state; the problem
is that they know such an option exists. Well, it affects their
judgment.
I know that Germany develops now a law that effectively
prohibits German former government officials to become--to
accept such kind of job offers. I believe there should be some
legal framework developed on a global Western scale to prevent
this from happening because otherwise, yes, it is a--it will
remain a huge problem that people will just have a second
thought: Should I--should I say something bad about Putin or
not, because this would kind of strip me of some nice options
in the future?
Representative Gallego: [Inaudible.]
Mr. Volkov: It is a very sophisticated way for them to
distribute corruption efficiently.
Representative Gallego: Yes. We certainly have seen some of
that even in our sector here.
Mr. Greytak, in your written remarks you referred to
corruption as the lifeblood of authoritarian governments like
those in Russia and China. You also highlighted some of the
steps that both countries are taking like suppressing free
speech and strengthening organized crime. I wonder if you can
talk more about whether Russia and China have similar
approaches to corruption. Are there certain parts of Russia's
playbook that you think China's adopted? If so, what do you
think would be the best way for us to counter Chinese
corruption if it, in fact, is using the Russian playbook?
Mr. Greytak: Thank you for the question. You know, I think
it is two sides of a similar coin. Russia has perfected sort of
the large-scale embezzlement of public funds that allows it to
remain in power and has really utilized a lot of these Western
vehicles for moving and hiding that money overseas. China has
adopted corruption strategically as a way of growing its
geopolitical influence in particular in developing parts of the
world. They have many common features to the extent that they
reward those in close positions of power, that they employ
bribery in order to gain access to important parts of the
world. For Russia, it is many Soviet states. For China, it is a
good share of Africa and South America. These are all really
one and the same. It is a patronage network--I think the term
was used earlier--that these states are able to use and grow in
order to leverage, you know, the money and the assets they take
from their people in key parts of the world.
One of the most important things that we can do about that,
I think, is to take a very 21st-century view in response to how
these networks work. It was asked how corruption has changed
over the last 30 years. It is far more global and
transnational, maybe just simply by the fact my organization,
Transparency International, was formed and will celebrate its
30th anniversary soon. This is really reflecting the global
nature of these networks. Whether it is through sanctions or
law enforcement authorities over corrupt officials like the
Foreign Extortion Prevention Act, whether it is through
coordinated actions with our allies to sanction these officials
and break up those networks, or whether it is working with our
financial institutions and other financial institutions in
other countries, we really need to be looking at this
holistically because that is how governments of China and
Russia are thinking about this.
One of the most important developments that I think can
come from this renewed focus on fighting corruption is to make
sure the U.S. government speaks in one voice in a whole-of-
government, coordinated effort, understanding how corruption
iterates and is used by America's adversaries, and responds to
that with the full strength of the federal government.
Representative Gallego: Thank you, Mr. Greytak.
Last, Ms. Dezenski, I wanted to ask you about Chinese
corruption specifically. In your written remarks, you
highlighted the Belt and Road Initiative as the primary vehicle
to redefine how China engages economically and politically with
the rest of the world. I immediately think of Huawei and how
China is using 5G companies to gain influence abroad. Are there
particular BRI projects that concern you the most? Which types
of projects do you think are most important for us to
prioritize as we not only monitor Chinese infrastructure
investment, but also seek to provide alternatives to it?
Ms. Dezenski: Thank you. It is an excellent question. I
would probably highlight a couple of different types of
projects that should be high on the radar.
I think you have hit the mark with anything related to
digital infrastructure. These kinds of projects have popped up
all over Africa and other parts of the world that are currently
underserved by digital networks. Why is this so important? It
is so important because 5G networks in particular offer
mechanisms for digital authoritarianism, the ability to manage
communication lines for the benefit of closed regimes. This has
been, of course, a topic of much conversation, and I think
there are a lot of good efforts underway in that regard. We
need to keep a close eye on what is happening there.
The other area that I would pinpoint are those projects
that would potentially give Beijing military influence. These
would include strategic ports, for example, in the Indian
Ocean, along the South China Sea. Any type of project that
improves the connectivity and allows greater access for Chinese
military should certainly be high on our radar.
I would also look at projects in South America a little bit
more closely. A lot of the focus of the BRI projects has been
Asia and Africa, but for us anything in the Western Hemisphere
is really at our doorstep. China has already made inroads in
Ecuador, in Argentina, definitely in Venezuela, and other
countries. This sets us up for a very serious negative dynamic
in our own backyard, and we need to be able to avoid that. When
we think about where we can double down on our investment
strategy, I think the first place we need to look is south of
our border.
Thank you.
Representative Gallego: Thank you.
I yield back.
Chairman Cardin: Well, let me thank my colleagues. I want
to thank all of our witnesses.
A few observations. First, Mr. Volkov, one of our principal
objectives in the Helsinki Commission in the Helsinki Final Act
was the health of civil societies in countries. Today, in
Russia, civil societies cannot function. As you have indicated
in your testimony, that you actually can function--you could
not function in Russia. You would like to be able to function
in Russia, but you have to function in another country in order
to be able to do any work at all. That is totally contrary to
the commitments made under the Helsinki Final Act. I mean, it
just underscores again how far Russia has gone from its
commitments that they made in 1975.
Ms. Dezenski, you really connected some dots for us on the
supply chain issue. You know, we have looked at the supply
chain here as a matter of security to have product, but as you
are pointing out it is a source for corrupt resources for
China. That is where they are making their--getting their money
in order to finance their corrupt system that they are now
trying to turn around to expand to control international trade
rules so they can even do more corrupt business. It is a very
important issue. As I pointed out, we are really trying to deal
with this in the National Defense Authorization Act, which is
probably the right place for it to be.
The Senate's already acted on this. The House has not. That
is one of the reasons why we have to have a conference. We are
going to try to resolve the substance of this bill in
conference. I am going to take back from this hearing your
testimonies as to how we have to deal with recognizing this as
a source of corrupt revenues for China being able to advance
its objective of controlling world commerce.
Then, Mr. Greytak, I just really want to underscore the
issue of enablers. Legislation is moving in the House, but I
was listening to the testimony of Mr. Malinowski pointing out
art dealers. I do not know how you get at art dealers, for
example. I think we are going to need to get a little bit more
technical. We are looking at expanding the Magnitsky sanctions
to enablers, and we have talked with our global partners as to
the expansion of the statutes to include the enablers. I worry
that, can we stay one step ahead of what is--of the people who
are enabling this by any legislative efforts that we do in this
area? I am going to welcome your technical assistance as we go
forward to try to figure out how we can, in fact, tie down
those areas because we have to deal with that. There is no
question about it.
I am encouraged by this testimony. As I said in my opening
statement, yes, corrupt leaders want the protection of rule of
law in our country in order to protect their assets, but they
also put themselves at risk because we can use our system to
stop their illegal activities, their corrupt activities. It
gives us a nexus to be able to really make effective change.
I will conclude the hearing. A hearing that we had
yesterday in the Senate Foreign Relations Committee was on
lessons learned from Afghanistan. There is a lot of lessons to
be learned from Afghanistan: Failures in four administrations.
To me, one of the center mistakes we made is that America
poured in billions of dollars to fuel corruption in
Afghanistan. We never had an honest leader in that country. It
was always taking the money for themselves rather than for the
people. We lost the support of the people because they did not
benefit from the type of programs that we put forward. Sure, we
advanced human rights. Sure, we advanced women's rights. That
is all important, but we did not get to the welfare of the
people generally. When problems developed with the Taliban,
they were able to offer little resistance to the Taliban coming
in and taking over their government.
Now, I use that example because there is another example in
history known as South Korea. South Korea suffered from
corruption from back before they were liberated, and look at
this country today.
My point is U.S. involvement can make a difference. We do
not have to accept corruption as a way in which a country's
traditions are based upon patronage and corruption. Yes, we do
not change that with our system. We do not change that with our
governance. We do plant the seeds so that we can advance the
welfare of all the people, which is where the climate for
democracy will flourish.
I just really want to thank all of you for your testimony
today. I think you have added greatly to our hearing. I can
assure you this is our top priority of the Helsinki Commission.
We are going to follow up on all these issues. Right now, we
are laser-focused on the National Defense Authorization Act
because that is our best avenue right now to get to the finish
line on some additional legislation.
Our thoughts/prayers are always with Mr. Navalny. We
recognize he is at risk. Please, if you have a chance, let him
know that we are watching everything that is being done. We are
going to do everything we can to advance the rights of the
people of Russia and to do everything we can to keep Mr.
Navalny safe.
With that, the hearing will be adjourned with our thanks.
[Whereupon, at 12:11 p.m., the hearing ended.]
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