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18 March 2022

Kleptocracy isn’t just a Russian problem

The West’s enabling of international oligarchy needs to stop now – and it extends far beyond London.

By Thorsten Benner and Ricardo Soares de Oliveira

Amid the revulsion caused by Russia’s invasion of Ukraine, the West’s belated retaliation against Kremlin-linked oligarchs stands out. Their power and influence, especially in London, have been carefully documented over the years by journalists such as Catherine Belton and Oliver Bullough braving tough libel laws.

With the help of numerous professional facilitators in London and a string of UK-controlled tax havens, oligarchs laundered the capital they accrued after “looting with Putin” and built strong links to the British upper crust. They emerged as respectable supporters of sports clubs, museums, universities, think tanks and political parties, co-opting large segments of the London elite in the process. In this manner, they maximised the global influence of the Russian president, Vladimir Putin, and helped convince him of the West’s cupidity and decadent character. Those who pointed out the resulting dangers were often dismissed as radical or unhinged, and their warnings went unheeded until much too late.

For now, the UK is taking a noticeably more piecemeal approach to sanctions on oligarchs than the European Union. But even if it finally dismantles Russian interests in London, a purely Russia-focused approach risks leaving the modus operandi of so-called Londongrad intact, not just in London but across Western financial capitals.

This is because there is nothing particularly Russian about it. It is in fact a worldwide reality, linking all Western capitals and financial centres to developing world autocracies and resource-rich states. If we retaliate only against Russian oligarchs, there is a clear danger that their professional enablers will be canvassing for business elsewhere.

Africa’s many offshore links are instructive here. The African super rich also resort to metropolitan lawyers, co-opted politicians, bankers, accountants, company incorporation executives, management consultants, lobbyists, estate agents and public relations experts for help in managing their interests. UK lawyers have facilitated the acquisition of London property for elite Nigerians. One of the UK’s most high-profile PR agencies, Bell Pottinger, went into administration after it was found to have pushed disinformation on behalf of clients such as the Gupta family of South Africa, allies of the former president, Jacob Zuma.

McKinsey, Boston Consulting Group and PWC established close relationships with both the Angolan state and the private interests of the billionaire Isabel dos Santos, daughter of the country’s former president. Credit Suisse was fined £147m for serious failings in the bank’s due diligence for financial crime over loans to Mozambique which the UK’s financial services regulator found to be tainted with corruption – one of Africa’s most brazen scandals. Lisbon’s banks and law firms have long laundered Angolan money and conferred legitimacy upon Angola’s elite. Paris’s PR and media-for-hire are at the service of the Nguesso and Bongo ruling families in the Republic of Congo and Gabon respectively. Such efforts do not simply advance the global fortunes of oligarchs and their families. They establish strong networks of support for, and therefore fortify, authoritarian regimes back home.

These and many other revelations by the likes of the International Consortium of Investigative Journalists and the Organised Crime and Corruption Reporting Project draw a picture of African oligarchic connections with the West that are as troubling as those with Russia. Nor is the servicing of African kleptocrats simply a London problem. Some connections – Abidjan with Paris, Luanda with Lisbon – have strong roots, but the geography of service provision to kleptocrats is now massively globalised and diversified. It happens across every major Western financial centre, and has become an important business segment for non-Western financial centres such as Dubai, Hong Kong, Mauritius and Singapore.

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As with Russian oligarchs, facilitators first launder stolen monies. They then launder questionable reputations and render African kleptocrats respectable as they and their families stream to the West for education, health, leisure, asset protection and conspicuous consumption, all to the detriment of the vast majority of Africans.

Without these facilitators, who are not rogue operators but rather the most prestigious service providers in every domain, the massive theft of African resources would be impossible to get away with. This clearly shows corruption as a transnational and collaborative phenomenon rather than the internal problem of poor countries it is often presented as. 

What can be done? We need to use the current, perhaps short-lived, transatlantic consensus to achieve real systemic reform in the EU, North America and the UK, including in its overseas territories. This means targeting professional facilitators by circumscribing their practices and imposing costs for those who continue to play that role, as well as criminalising grey areas that have been amply exploited by corruption enablers. The recommendations in a recent report from the Chatham House think tank on the UK’s kleptocracy problem provide a roadmap for structural reform.

Some services provided to corrupt elites from authoritarian states will remain perfectly legal. But that does not mean that they have to be without costs for those choosing to provide them. In order to impose these costs, we need mandatory transparency standards that make sure we know about who provides services to corrupt clients. This will make it easier for civil society and the media to impose reputational costs.

Governments can also make sure their bottom lines are directly affected and decide to exclude any company from public procurement contracts that also chooses to provide services to corrupt authoritarian clients. A particular grey zone that needs attention is the work of lawyers that abuse attorney-client privilege in order to provide services to corrupt elites. Full transparency in party financing is a particular priority in countries such as France, the UK and Portugal. Educational, research and cultural institutions should sign a democracy pledge to the effect that they will not accept money directly or indirectly linked to authoritarian regimes. Crucially, we need to remove the impediments placed in the way of journalists, academics and civil society as they seek to investigate the links between professional facilitators and elites from authoritarian states.

If we do not do this while the political will exists, the current shift away from Russian business will simply lead top enablers to double down on their lucrative practices elsewhere in the developing world. We now know what this entails. Stopping the business models of the enablers would help people in the many poor states whose elites have a habit of siphoning off money and shifting it abroad – money that is needed to fund essential public goods. But more than anything, we in the West would help ourselves. Foreign kleptocrats are really holding up a mirror: if we paid attention, we would realise that our own elites are also susceptible.

Putin and his acolytes have always taken great pleasure in skewering the way the West holds the moral high ground. The former German chancellor Gerhard Schröder, who was recently nominated to the board of the state-owned Russian energy company Gazprom, served as the Russian president’s most effective example in this regard. Across the Western world, there are too many pocket-size versions of Schröder. Anti-democratic populists everywhere are cheering as these practices damage the credibility of democratic elites and corrode democracy from the inside. It is high time that we started cracking down on those who enable the corruption of authoritarian elites. And it is up to us. A clean-up is long overdue – so that we can look at ourselves in the mirror again.



[See also: “No one in government cared until the war”: how the UK left it too late to fight financial crime]

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