Two books assess the fight against global corruption


American Kleptocracy. By Casey Michel. the Saint-Martin press; 368 pages; $ 29.99. Scribe; £ 18.99

The facilitators. By Frank Vogl. Rowman & Littlefield; 216 pages; $ 32 and £ 25

NOTEXT MONTH Joe Biden will organize a virtual “Democracy Summit”. The goal of the powwow is to galvanize like-minded leaders to counter the global growth of authoritarianism. One of its themes will be the fight against kleptocracy: the plunder and laundering of national wealth, typically using international banks as conduits for ill-gotten gains and Western real estate markets as a destination. Campaigners hope the meeting will give momentum to the fight against such looting, a fight Donald Trump has not really fought from the front lines. Leaked documents that highlight the use of offshore financial networks to transfer money in secret, from the Panama Papers in 2016 to the Pandora Papers in October, underscore the urgency of the task.

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Measuring the private wealth parked in “secret jurisdictions” is, by definition, impossible. Estimates range from a few trillions to $ 32 billion. The proportion that is suspicious is also difficult to estimate. At one extreme is perfectly legitimate money – personal funds seeking to protect confidentiality or cross-border joint ventures using offshore structures for neutrality purposes. On the other, black money, hidden in shell companies or trusts to hide corruption or launder drug money. In between is a large gray area that includes legal but ethically questionable tax evasion.

And where exactly is “offshore”? The stereotypical haven is a palm-fringed island with attractive politicians. Yet the larger states that plague such places also have questions to answer. The most comprehensive study on shell companies found that suppliers of members of the OECD, a club of mostly affluent countries, were more likely to offer true anonymity than those in traditional offshore financial centers. British shell companies and partnerships figure prominently in the giant “laundromat” programs from Russia and Azerbaijan. Many EU countries are vectors of tax evasion. And a lot of the world’s dirty money ends up being invested in luxury towels in places like London, Paris and Miami.

Casey Michel’s title leaves no doubt where the journalist and fellow at the Hudson Institute, an American think tank, thinks much of the blame lies. Despite all its claims of moral leadership in finance, he argues, America has become “the world’s greatest offshore paradise” and the largest provider of “financial secrecy services” that facilitate money laundering. This has enabled it to withdraw unparalleled amounts of tainted money from “the world’s worst”, from corrupt regimes to extremist networks.

America was one of the first countries to criminalize money laundering and, since the 1980s, has been the most aggressive in trying to stem it. He spurred efforts to create the Financial Action Task Force (FATF), a global anti-money laundering standardization body founded in 1989. Since the attacks of September 11, 2001, it has taken the initiative to disrupt terrorist financing networks. It is a US law that initiated the global exchange of tax data to fight cross-border tax evasion.

Yet, at home, America has tolerated many of the bad practices for which it has hammered other countries. As U.S. states competed for business registration, shell companies proliferated in Delaware, Wyoming and Nevada, the latter being a crucial beachhead for Mossack Fonseca, the law firm at the center of Panama Papers (and forced to close by these revelations). South Dakota has developed a line of super-secret trusts.

Mr. Michel builds his book around two characters, both prolific users of the infrastructure of American financial secrecy, skillfully weaving their stories and his analysis. The first is Teodoro “Teodorin” Nguema Obiang Mangue, the spendthrift son of the president of Equatorial Guinea, a small state in central Africa plagued by klepto. The other is Ihor Kolomoisky, a Ukrainian oligarch accused by America of stealing billions of dollars from a bank he owned and flushing them out of US property (charges he denies).

Gloves are on

Mr. Obiang’s story is the most frightening, and its outline is more widely known. He made headlines in 2011 when prosecutors decided to seize various assets he had acquired in America with allegedly corrupt money, including a mega-mansion, a fleet of supercars so vast he would try to match her ride with her shoes and a treasure trove of Michael Jackson Memories (including the star’s famous white glove). He spent a large chunk of his money in and around Malibu, a posh California beach town.

Mr. Kolomoisky carried out his alleged laundering in less sanitary places. Its representatives invaded Cleveland, Ohio, wowing local officials by talking about regeneration. But much of the downtown property, once purchased, fell into disrepair. Why let your assets rot? “Think of US real estate as a rainy day kleptocratic fund,” says Michel. If the money is stolen or illegally earned, the return on investment is secondary. The land under a ruined building retains its value. As Cleveland discovered, this type of calculation can devastate communities.

The co-founder of Transparency International, an anti-corruption organization NGOFrank Vogl distributes the blame more widely in his book. The “facilitators” of his title are the banks that move money from launderers; lawyers who set up their brass companies or, alongside public relations firms, push back against prosecutors and the media on behalf of kleptocrats; and estate agents and yacht dealers who help them procure trophies. Much of it is legal, but, according to Vogl, it “does not serve the public interests of citizens in democratic nations, and far beyond.”

Few would dispute this. But Mr. Vogl’s book is a mess. Turgid lists of examples appear to be compiled by an over-excited intern, not one of the wisest coves of the anti-kleptocracy movement. He strays from the topic several times, as in the account of a banking scandal in Italy caused by an explosion of derivatives, not dirty money. Some things go wrong: it’s a mystery why Mr. Vogl chooses the United Arab Emirates as one of the countries favoring the fight against illicit financing, when in reality it remains a laggard. He drops the names of a lot of people in finance, but doesn’t reveal anything very interesting about them. Did you know that John Bond’s daughter, HSBCthe former boss of, set mountaineering records?

Mr. Michel’s book is more fluid, coherent and entertaining. He also has more to say about what is supposed to be Mr. Vogl’s big theme. U.S. regulators have long been concerned about enablers, but through effective lobbying they have managed to crawl loophole after loophole. Real estate agents, luxury goods sellers and the like, for example, were granted “temporary” exemptions from the Patriot Act (a post 9/11 law with strong anti-money laundering provisions), which then became permanent. . American lawyers are pretty much free to work with whoever they want – in many ways “the perfect friend to have if you’re a kleptocrat,” Michel says.

His book also has flaws. Sometimes he gets carried away: the racy details of Obiang’s story border on excitement. He only devotes half a dozen pages to Delaware, for so long the main US jurisdiction for shell companies. It barely scratches the surface of the many ways that U.S. double standards shape dirty money geopolitics, at FATF and beyond.

Neither book gets to the heart of what is needed to clean up global finance. The crux of the matter is that although money laundering networks are increasingly sophisticated and transnational, regulation and law enforcement remain balkanized. Biden’s priority at this summit should be pushing for more cooperation. â– 

This article appeared in the Books and Arts section of the print edition under the title “Hear no lies”


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