The author and Financial Times investigative journalist Tom Burgis talked a webinar audience of the think-tank RUSI this afternoon through his latest book Kleptopia: How dirty money is conquering the world.
Alexandra Wrage, chairing the webinar, asked; if financial centres rely on dirty money, is reform a dead end? Banks are spending on compliance; but if they are at the centre of laundering – by dictator ‘kleptocrats’ as set out in the book – is there any cause for optimism? In reply Tom Burgis began with the point that in banks and civil services, people of good faith are trying to grapple with the problems; not everyone is a monster. But he pointed to the SARs system (Suspicious Activity Reports), that he said probably did more to facilitate ‘dirty money’ transactions than stop them.
In the UK, about 400,000 such reports are filed each year. The UK’s National Crime Agency (NCA) has a department of about 25 people that handle SARs, ‘a truly impossible task’. It suggests, Tom Burgis went on, that the purpose of the system, ‘deliberately or not’, is to allow the impression of probity to be given to a system that is freely used by ‘dirty money’: “I can’t see any other interpretation of that state of facts.” As he added, it also tells you that banks proceeded with 400,000 transactions that it considered suspicious; ‘this is one of the strange paradoxes of the SARs regime;” if anything, he said, it make suspicious transactions easier, because banks have complied, by warning the regulator. “For me, and I am a reporter not a policy expert or a lawyer, it all comes down to front companies; anonymity in the financial system.”
Increasing the amount of information publicly available, such as SARs and ownership of companies, would be welcome; but here Tom Burgis pointed to the UK’s Companies House website, which shows the ‘farcical’ nature of a lot of filings. Even if the world were to get to the stage of more transparency, everywhere, still there would be an impossible amount of information to process, whether by machine or by man, in a meaningful way, he said.
As for the enforcement side, he said that corruption was busted by well-resourced prosecutors, having the time, money and inclination to use their talents, to crack open corrupt schemes. A front company, he said, is ‘the fiction at the heart of kleptocracies’; that companies are doing things, and not individuals. He argued for there to be a strict liability if you do business with a front company and that transaction is shown to be corrupt, or enriched an official; just as you do a crime if you speed in a car, no matter what justification you give. For those making corrupt transactions, the front company gives ‘plausible denability’.
As for his own digital and physical security and of dangers to investigative journalists like him – ‘journalists are now being murdered within the EU’ – he stressed that it has always been harder and required more courage to do such journalism in the likes of Kazakhstan, Angola and Ukraine – ‘those are the truly heroic journalists’. Even more heroic, he added, are those anonymous sources who without hope of recognition take enormous risks that facts become public. He made the case for investigative journalism as a ‘massively and incredibly difficult undertaking’; ‘if you think this is work that can be done by a kind of one-person Twitter band, you are sorely mistaken’.
A proposed answer (like SARs) to ‘dirty money’ laundering is beneficial ownership registers. Again, Tom Burgis pointed to the difficulties of policing the standard of information given to a register; and what would be the sanctions for filing ‘nonsense’. Rather than have any plan to fix the problem, he spoke of the need to invigorate the institutions of democracy, and of civic duty. While it might be frustrating that there was no ‘policy silver bullet’, he said: “The answers are completely obvious,” namely challenges to the concentration of power and wealth, through democratic institutions, or institutions that protect and promote the common good. Such as parliaments, a free press, independent judiciary ‘and so on’: “It’s right in front of us what we need to do.”
Are regulators to close to the financial institutions? Tom Burgis’ one word answer was; yes. “Of course they are too close, they are funded by banks.” That meant that a regulator treated banks as its customers, rather than upholding societal norms against the interests of those regulated. Regulators should represent civil society.
The City of London he described as ‘the hub of a network of offshore secrecy jurisdictions’; themselves ‘chunks of the former British Empire’. He spoke of the risks after Brexit of re-branding Britain as a low-risk, low-regulation centre for money. That would he said ‘turbo-charge the flow of dirty money into the UK’ and more subtly and even more worryingly would have effects beyond the illegitimate money; for it would in effect serve to pay legal salaries and school fees. Here he turned to how the struggles within kleptocracies are played out in British law courts, under the British rule of law. Tom Burgis was also alarmed by donations to political parties from Russia and other kleptocracies: “It’s astonishing. It baffles me, to be honest.”
He went on to the so-called British ‘chumocracy’ as seen in covid-related contracts given without scrutiny and tenders, to companies ‘created 20 minutes earlier’ and to politically-connected business people: “It’s given us a much broader understanding of the damage that corruption can do.” Chumocracy, he said, seemed to have led to excess deaths than if the coronavirus pandemic had been managed properly. Here he spoke of the wider sense of what corruption really means; and what it means when norms of public service start to break down; and once they do, how hard they are to restore: “It isn’t too hard for that to happen, but it might ring alarm bells for people, considering what rules we want to impose on those we want to entrust with power.”
For like mafia money, dirty money from kleptocrats does not favour any ideology; it probes, looking for human weaknesses, and greed. Increasingly, political and legal institutions are ‘under siege’. Kleptocracies are manipulating the institutions of criminal law, to take down their enemies. Who are unexplained wealth orders targeting? he asked. While an important and useful tool, he asked if they were really favouring one kleptocratic faction over another.
Kleptopia, hardback, published by Harper Collins, £20; visit https://tomburgis.com/kleptopia.
