What $2tn in possible corrupt activity reveals about Kleptopia
Five years ago, in the bar of a war correspondents’ club in London, I met a man who had stolen the secrets of a Swiss bank. Nigel Wilkins was bald, wore large spectacles and had a mischievous antipathy to authority. An economist by training, he had taken a job at the UK office of one of the biggest Swiss banks, round the corner from the Bank of England. He was the compliance officer: the person whose task it was to stop dirty money passing through the bank’s accounts. When he started to suspect that was precisely what was going on, he took to waiting until the bankers headed out for the evening, then photocopying whatever was on their desks and taking the copies home. He informed the British financial regulator that he had collected 1,000 pages of evidence revealing what he believed was a scheme to launder dirty money from the former Soviet Union, the Middle East and elsewhere. Nothing happened. But he set me on a trail that led to a terrifying place I’ve called Kleptopia.
This week we’ve caught a fresh glimpse of Kleptopia. The International Consortium of Investigative Journalists published the FinCEN files, details of more than 2,000 leaked suspicious activity reports that banks had filed to the US Treasury. They show that, even when bankers have doubts about the provenance of their clients’ money, the financial secrecy system goes on serving its primary purpose. That purpose is not simply to accentuate the concentration of wealth, to abet corruption, or to shift the proceeds of crime, important though all those functions are. No, it is to accelerate a project that had been gathering momentum since the end of the cold war: the privatisation of power itself.
Back when it became clear that the Soviet Union was unravelling, its rulers hastily squirreled as much of the empire’s wealth abroad as they could. Their counterparts in other places where power is easily converted into money – chiefly those cursed with large quantities of oil or minerals – did likewise. Globalisation was moving forward apace and, like Starbucks, migration and viruses, dirty money went global. An international kleptocracy began to take shape, financial secrecy its catalyst.
Many of the names that have emerged in the leaked documents are figures who got rich under the regimes of powerful kleptocrats and have gone on to build private empires that extend worldwide. The interests amassed by Isabel dos Santos, the daughter of the dictator who presided over decades of plunder of Angola’s oil, stretch from Brazil to Portugal. The Kazakh exminister and banker Mukhtar Ablyazov and his relatives accumulated assets ranging from a Moscow oceanarium to a Cincinnati mall. The central-Asiato-eastern-Europe gas venture Dmytro Firtash assembled while he was flying high in Ukraine was so profitable he could snap up the disused London Underground station that had served as Churchill’s top-secret command centre during the second world war.
While this wealth floated off into the ether of the financial system, the means for scrutinising money remained local. One of the reasons suspicious activity reports that banks send to the Treasury’s FinCEN unit are so ineffectual is that the watchdogs who might seek to act on them are confined to borders that money, dirty or otherwise, does not observe.
And so, while the rest of us surrender ever more of our privacy to online retailers, terrorism databases
and track-and-tracers, the global kleptocracy hoards secrecy. Like a democratic government that never accounts to parliament, a kleptocratic regime that keeps its business dealings obscure enjoys unconstrained power. They have taken hold, with few exceptions, everywhere from Budapest to Beijing, Ankara to Pretoria. When their power is threatened, they can tap global markets. The mining deal that supplied Robert Mugabe with $100m just as he embarked on a wave of election brutality that won him his final decade in power was engineered by a Londonlisted company backed by a Wall Street hedge fund.
In these regimes, corruption is not only a tool for maintaining fealty but also for punishing disloyalty. Dos Santos, Ablyazov and Firtash all deny any wrongdoing. Each can rightly say that the reason they, rather than other members of the ruling cliques in Angola, Kazakhstan and Ukraine, find themselves under investigation is because they were the ones who fell from political favour.
For those who retain that favour – and those who bestow it – the financial secrecy system remains a tool for turning illegitimate power into money, then scraping away that money’s past so that it can buy what is on sale in the remaining democracies: legitimacy. That was the business of another figure named in the FinCEN files: the disgraced lobbyist Paul Manafort.
Along with all the money that the likes of Manafort have helped to funnel into democracies has come the spirit of kleptocracy. It lives most vividly in the man Manafort served as campaign manager, whose business career was for years sustained by money that flowed in via front companies from Russia and other kleptocracies and built the buildings that bore his name, and who in office has conflated his personal interests with those of the state while cultivating a union of kleptocrats in Moscow, Riyadh, Pyongyang and beyond. Donald Trump has, like any good launderer, constructed an alternative reality. Little wonder he, like kleptocrats the world over, is so desperate to cling to that most potent shield from the past, the immunity from prosecution that comes with high office.
As for my mischievous source Nigel Wilkins, he ended up going to work for the UK financial regulator at Canary Wharf. When his old Swiss bank was caught helping Americans evade tax, Wilkins told his superiors he had a load of documents that showed similar suspicious behaviour in the UK. He was escorted from the building and fired for gross misconduct. His offence? Violating the bank’s clients’ confidentiality.
Tom Burgis is a Financial Times investigations correspondent and the author of Kleptopia: How Dirty Money is Conquering the World, out now from HarperCollins
Along with the money the likes of Manafort have helped to funnel into democracies has come the spirit of kleptocracy