James Snell is a writer and researcher. He has written for Spectator World, Foreign Policy and other media.
For years, the fight against kleptocracy – dirty money plundered from the poorer parts of the world and integrated into more comfortable jurisdictions – has been the dogged pursuit of very few. Even in January of this year, I was told, anti-kleptocracy activists felt like they were on the defensive.
But Russian President Vladimir Putin’s invasion of Ukraine and the Ukrainian resistance have foreshadowed a change.
During the last three months of the war, in many conversations, counter-kleptocracy activists said they were busier and more influential than they ever imagined. On the phone, some of them sound hoarse, almost hysterical, with excitement. They say the wind is finally behind them. But the extent of this change remains to be seen.
After the Cold War, it began to be understood that flows of stolen money not only robbed the world’s poorest, but also corrupted and poisoned the countries where that money was hidden.
“It is remarkable that it is only in one generation that gains in the anti-corruption and transparency space have occurred,” Casey Michel, the author of American kleptocracysaid.
But all that was changed by the attacks of September 11, 2001. With legislative and political attention absorbed by the war on terrorism and then the financial and health crises, anti-corruption campaigns have languished. Instead, the Western world focused on getting rich and told itself that everything was fine.
During the second half of the decade, however, with political storms over “Russian bots” and the funding of populist politicians, and growing awareness of how the Chinese Communist Party sought to undermine democracy, the movement of dirty money to rich democracies have again become a rallying cry.
In 2014, the Hudson Institute launched its Kleptocracy Initiative, part of a loose network of journalists and scholars who kept the fire burning. And in 2016, activists in London began chartering buses for the first “kleptocracy tours”, modeled on those given to the homes of Hollywood stars, but rather houses bought by corrupt money.
“Midway through last year, the Biden administration elevated corruption to a fundamental national security threat — for the very first time,” Michel said. An anti-kleptocracy caucus has been founded in the United States Congress. And across Europe, groups of parliamentarians have pushed for Magnitsky laws – named after Sergei Magnitsky, an anti-corruption campaigner who died suspiciously in a Russian prison.
But then Russia invaded Ukraine, annexed Crimea, and sanctions followed. Everything has been galvanized.
“Putin’s invasion could have spelled the death knell for the West,” a Washington, DC operator told me over the phone, “but the Ukrainians saved our lives” — a widely shared view.
Given the time of Ukrainian self-defense, the West began to sanction the oligarchs and countries rushed to seize Russian-owned yachts as soon as possible. Think tanks across Europe and America immediately established programs to monitor Russian black money, as well as the nefarious influence of global kleptocracy. The European Commission has launched a Freeze and Seize Task Force to enforce the sanctions, while the United States has announced the KleptoCapture Task Force along the same lines.
However, seizing and sanctioning the wealth of Russian oligarchs is only one aspect of a larger movement. Could it be that this conflict, and the bureaucratic and legislative whirlwind that followed it, were one-off?
I was assured that although these entities appeared quickly, they would not disappear tomorrow. “Once you form a government institution, it doesn’t go away. The most difficult thing is to put the government in motion. But once it starts, it’s hard to stop it,” a DC source said.
Nevertheless, there is still reason to be wary. The momentum is difficult to maintain.
Anti-corruption activists note that, just as in the days before Russia’s invasion, powerful legal and property business groups are pushing for waivers of new legislation, and that in the world, even less attention is paid to the public servants – lawyers, real estate agents, hedge funders – who are the ones who hold and manage the dirty money, create the front companies and provide additional services to lubricate the kleptocratic machine.
For example, the United States Patriot Act, with its strong anti-money laundering provisions, is still in effect 21 years after it was passed. “But soon after, the Treasury issued all these exemptions for all these industries,” Michel said. “They were meant to be temporary, but 20 years later they’re still in place.”
Moreover, American and European policymakers are now busy throwing mud on each other.
According to one observer, the Americans have seamlessly shifted from characterizing the UK as the world’s financial laundromat to holding France and Germany solely responsible for dragging their feet on Russian money.
Meanwhile, British politicians are chafing at what they see as outdated references to “Londongrad” in the American press, and very real concerns about the predatory use by kleptocrats of Britain’s libel laws. to silence the critics are buried in the middle of these small reproaches.
More practical issues also emerge.
Canada’s Shadow Foreign Secretary Michael Chong and the Chairman of Britain’s Foreign Affairs Select Committee Tom Tugendhat wrote in April that significant international cooperation is still needed to prevent kleptocrats from simply falling through the cracks of the new system as it is created. They say there are shortcomings in the “legal coordination, regulatory asymmetries, poor sharing of financial intelligence and insufficient enforcement” of the new regime.
Without a solid architecture in place, they argue, not only will Russian oligarchs circumvent sanctions, but any new system will utterly fail to catch dirty money from other jurisdictions.
Atlantic Council member Ben Judah said institutional issues, such as data management and staffing, still hamper effective enforcement. “It’s always worrying when there’s a growing gap between what we say we can do and what we can do.”
“In Britain we have most of the laws we need, most of the registers we need, and we [still] don’t do a lot of enforcement because we don’t have the capacity,” he added.
Despite these concerns, everyone I spoke to showed enthusiasm to use the momentum of recent months to clean up European and global politics, to repatriate stolen money from the poor, and even to expose the buying illegality of politicians by corporations.
These are ambitious hopes. They’re built on good intentions and the fun of quickly putting things theorized for decades into action. But for now at least, even with all the recent developments, there doesn’t seem to be a way to remake the financial world.