| The Trump Administration Is Enabling Financial Crime |
| The Trump administration’s decision to nullify a landmark disclosure law is just the latest development |
| One of the Trump administration’s signature public policy initiatives has been rolling back federal efforts to identify and prosecute sophisticated financial fraud and white-collar crimes. We have seen it in Trump’s pardons of people who perpetrated major financial frauds, Attorney General Todd Blanche’s early decision to disband the DOJ’s criminal crypto enforcement task force, and the decision to close more than 1,000 white-collar criminal investigations, to name just a few items. |
| This week, the Trump administration added to the list with its decision to stop collecting data about the ownership of corporate shell companies under a law that was passed over Trump’s veto in 2021 — and to destroy data that it had already collected. It’s a significant setback for efforts to root out some of the most complex and consequential forms of international financial crime — from money laundering operations that run through New York City condos to insurance frauds involving oil tankers. |
| The use of corporate shell companies makes it harder for investigators to determine who is actually running a suspicious corporate entity. There are ways around this that investigators use all the time, but they are time-consuming, and the idea when the 2021 law passed was that it would expedite these sorts of investigations and perhaps even curtail illicit conduct by itself. |
| A law like this was bound to impose significant costs on people who did nothing wrong, and over time, that dissipated political support for the mandate, but even so, the law was on the books, and Trump has effectively nullified it for the time being. (A future administration could just as easily reverse course.) Members of both parties in Congress should be up in arms, but of course, Trump told them literally on the first day of his administration that he would ignore laws that they passed if he didn’t like them — in that case, the ban on TikTok, which had passed Congress with large, bipartisan majorities and been unanimously affirmed by the Supreme Court just weeks earlier. |
| Meanwhile, the Trump administration frequently claims that it is engaged in a war on fraud — mostly through the Justice Department’s newly created National Fraud Enforcement Division — but the claim is wildly misleading for several reasons. |
| To start, the administration has focused law enforcement efforts on government program fraud, but the effort has been highly politicized and disproportionately aimed at states led by Democrats. |
| The Justice Department is also now focusing on smaller financial frauds — and different types of them. Many of these cases seem to be emerging from immigration enforcement investigations and are the sorts of cases that are typically left for local prosecutors to handle. |
| But this was also the eminently predictable result of the DOJ’s ill-conceived decision to impose a quota on prosecutors that now requires them to keep at least 25 open cases. It’s much easier to charge a few small, local frauds than it is to charge a single large and complex financial fraud scheme. Not surprisingly, the quota was announced internally by a senior Trump DOJ official who appears to have no experience with white-collar criminal work, unless you count the time that he pled guilty to drunk driving while working as a line prosecutor in North Carolina. |
| Meanwhile, the DOJ’s National Fraud Enforcement Division already appears to be under considerable stress. According to the Wall Street Journal today, the division “has struggled to recruit prosecutors and has been slowed by an internal turf war that has caused some promising investigations to languish.” They have also been forced to take credit for work done by prior administrations. |
| All of this is happening at a time when financial fraud has been rising all over the world, even according to the DOJ’s own statistics. You can safely assume that those numbers will continue to get worse in the years to come. |
