by John Heathershaw and Tom Mayne for The Conversation
During an interview one of us (Ricardo Soares de Oliveira) carried out in 2017, an African high net-worth individual said he was told by an executive whose business had long served him out of London: “Come meet us in Dubai”. This is part of a large but still misunderstood shift.
In response to the hardening of rules for foreign money of dubious origins in traditional financial centres, sensitive business has been moving toward new, more permissive jurisdictions. This offshoring of services is giving corrupt strategies a new lease of life, while also making the fightback more difficult.
For every corrupt dealing that materialises as legitimate wealth, a trail of service provision is indispensable. Bankers, lawyers, real estate executives, accountants, management consultants and PR agencies have acted as facilitators in western financial centres.
Western governments have long indulged kleptocracy, a system where business success and political power are inextricably entwined. They have done so by condoning lax law enforcement and promoting deregulation, often through risible mechanisms of professional self-regulation.
by Robert Barrington for The Global Anti-Corruption Blog
In recent years, anticorruption campaigners and policymakers have directed increased effort towards improving the global Anti-Money Laundering (AML) system.
Imagine this system were operating perfectly. Would it stop kleptocracy?
Of course not, no more than AML systems stop heroin production. AML laws and regulation are not designed to stop the acts that generate dirty funds; they are designed to stop the proceeds of crime from being disguised (laundered) and thus freely circulating around the world.
The more difficult question involves monies kleptocrats steal: if the global AML system were operating perfectly, would it stop these funds – the proceeds of corruption – from circulating around the world?
Two recent reports in the UK — from the Taskforce on Business Ethics and the Legal Profession and Spotlight on Corruption — answer the question with a resounding NO: when the proceeds of corruption derive from kleptocracy, when crooks have captured the state, the UK’s AML system is not capable of addressing these funds. To be clear, even if the current global AML system were operating perfectly, the UK would be unable to deal with the proceeds of corruption arising from state capture.
by Marie Le Conte for Foreign Policy
London, you may be aware, is the place to be if you’re a shadowy individual with piles of ill-gotten money who wishes to, ideally, shield said ill-gotten money from view.
This has been a popular topic in investigative nonfiction for some time now. In 2009, Mark Hollingsworth and Stewart Lansley published Londongrad: From Russia with Cash. In it, they describe how a “group of buccaneering Russian oligarchs made colossal fortunes after the collapse of communism—and many of them came to London to enjoy their new-found wealth.”
by John Heatheshaw, Tena Prelec and Tom Mayne (on Democracy for Sale by Peter Geoghegan)
The global effort to counter kleptocracy is at a turning point. In a matter of weeks, Donald Trump has rolled back decades of US anti-corruption initiatives.
Trump has suspended enforcement of the Foreign Corrupt Practices Act, undermined the Department of Justice’s ‘KleptoCapture’ task force, and moved to cut funding for journalists and civil society groups investigating corruption.
Most strikingly, the US president has proposed replacing the existing investor visa program with a ‘gold card’ scheme that would grant residency and a path to citizenship for anyone willing to invest $5 million—potentially including the Russian oligarchs he recently called “very nice people.”
All of this signals a major shift: while David Lammy has promised to bring “the golden age of money laundering” in Britain to an end, the US appears set to make a relaxed attitude to corruption explicit policy. At the same time Dubai and other ‘new financial centres’ have emerged as hubs for the global super-rich.
by ICAEW Insights
Accountants invite significant risk by taking part in activities that support kleptocratic states or individuals, a new book warns.
Factors that lead professional services firms to assist kleptocratic behaviour have fallen under the microscope of a new book from Oxford University Press.
Indulging Kleptocracy is co-authored by University of Exeter Professor of International Relations John Heathershaw, who is co-leading a landmark worldwide study of how professional services, including accountancy, enable corruption.
Fellow co-author is University of Exeter Research Fellow Tom Mayne, who researched a chapter that focuses on accountancy. Insights caught up with them to find out what accountants can learn from their book.
by John Heathershaw, Tena Prelec and Tom Mayne for Irish Examiner
Kleptocracy — literally “rule by thieves”, where a leader corruptly steals their country’s wealth — is not a new concept. Rulers, both ancient and modern, have exploited their position to siphon off public assets, entrenching their power through corruption and repression. Yet what is a relatively new phenomenon is how modern-day kleptocrats are able to utilise a transnational network of professional enablers located in the West — wealth managers, real estate agents, lawyers — to extract money and maintain power.
As a result, a lot of this corrupted wealth makes its way from kleptocracies to democracies like Ireland and Britain. In 2019, the US Department of Justice brought bribery charges against Gulnara Karimova, the daughter of the former president of Uzbekistan, alleging she had received around $1bn in corrupt payments from telecoms companies, with up to $300m frozen in a bank account in Dublin.
Kleptocracy is intimately tied up with organised crime and again here Irish entities can be used to facilitate the transfer of criminal cash with Irish shell companies, special purpose vehicles (SPVs) and investment limited partnerships (ILPs) used, according to Transparency International, “as a conduit for laundering illicit financial flows from overseas”.
Kleptocracy therefore depends on an ecosystem of interlocking companies, trusts and bank accounts, created by enablers both here and abroad, that provide the financial, legal and reputational tools to legitimise stolen wealth. But professional enablers do not simply move money, and they don’t just supply their services. They create the structures that sustain kleptocracy, embedding it into our political and economic fabric.
by John Heathershaw, Tena Prelec and Tom Mayne for The Conversation
Kleptocracy, a term derived from the Greek for “rule by thieves”, describes a system where business success and political power are inextricably entwined. Political elites exploit their position to siphon off public wealth, entrenching their power through corruption, patronage and repression.
However, kleptocracy is not just a system of domestic corruption. It typically involves a transnational network of political elites and so-called professional enablers who work together to extract wealth and project power.
The ability of kleptocrats to loot state resources and evade accountability depends on an ecosystem of banks, lawyers, lobbyists, intelligence agencies and PR firms that provide the financial, legal and reputational tools to legitimise stolen wealth.
Our new book, Indulging Kleptocracy, analyses many cases of such professional enabling in the UK for elites whose wealth originates in post-Soviet countries such as Azerbaijan, Kazakhstan and Russia. We uncovered examples of this activity using in-depth case studies that drew on court documents and correspondence with the enablers themselves.
We found that, on countless occasions, British professionals have found loopholes in the rules, defeated new measures against money laundering, exploited the lack of transparency in universities and political parties and challenged the efficiency and effectiveness of the rule of law.
By Matei Rosca
icij.org
A new global study mapping illicit financial flows reveals Dubai and Hong Kong are now dirty money hotspots, while the U.S. is becoming a go-to destination for banking bribes.
The United States has fallen behind other developed countries in curbing financial secrecy, surpassing Switzerland as the “international banking center of choice for corrupt transactions,” according to a new report from the University of Sussex.
The findings, based on data that spans four decades and more than 70 jurisdictions, provide “an unprecedented view of how the structure of different types of illicit global financial networks have evolved” in response to changing regulations, the report said.
The researchers identified several long-term trends, including the U.S.’s transformation into a financial transparency scold — and scourge.
by Anita Hawser for The Banker
The US has replaced Switzerland as the “international banking centre of choice” for corrupt transactions, according to new academic research that attributed this shift to relatively weak anti-money laundering and counter terrorism measures and “significant fiancial secrecy”.
