AML Talk Show Hosted by Stephen Platt
Good afternoon folks, and welcome to this KYC360 Anti Money Laundering Talk Show with me Stephen Platt. Thank you very much for joining once again. Today, I'm really excited to be joined by an acclaimed journalist and author, Tom Burgis.Tom is an investigations correspondent at the Financial Times. He's reported from more than 40 countries, won major journalism awards in the United States and Asia, and been shortlisted for eight others, including twice at the British Press Awards....
Good afternoon folks, and welcome to this KYC360 Anti Money Laundering Talk Show with me Stephen Platt. Thank you very much for joining once again. Today, I’m really excited to be joined by an acclaimed journalist and author, Tom Burgis.
Tom is an investigations correspondent at the Financial Times. He’s reported from more than 40 countries, won major journalism awards in the United States and Asia, and been shortlisted for eight others, including twice at the British Press Awards.
His critically-acclaimed book, The Looting Machine, about the modern plundering of Africa, won an Overseas Press Club of America award. And his second, recently-published book, Kleptopia: How Dirty Money is Ruling the World, was recently, as I say, published to great acclaim. I’ve read it. It really is a hugely-compelling work. And I’m delighted that Tom has chosen to spend the time talking to me this afternoon. Tom, welcome. How are you over there in London?
Yeah, great. Well, I’m delighted that you and your guests have taken time to listen and to ask questions. It’s thrilling. Thanks for having me.
Well, thank you, Tom. Tom, let’s kick off, as I generally always do with these interviews, by asking you to tell us a little bit about your background. I really would like to try and understand where your passion for investigating and reporting on corruption stems from.
Yes. Well, I am essentially a failed poet. When I was in my early-20s I worked for a while on an industrial estate in Manchester, where I’m from, behind bars and cobble together some money and went off to South America to wander and write poems and see where the roads lead. And they lead to The Santiago Times in Santiago de Chile, wonderful city.
And then I ended up with a job for which I was paid $100 a month and the use of a shed to live in behind the newspaper office. And The Santiago Time the only, or sadly was, the only English language newspaper in Chile. And I was to be the arts editor, which involved going to the arty things around Santiago and writing them up in them in, generally, pretty pretentious ways.
And then, suddenly, Chile went through this absolute convulsion. This is in 2003 and 2004 when… You’ll remember that Augusto Pinochet was detained in London when a Spanish investigating judge asked the Blair government to extradite him to Spain to face human rights charges related to his dictatorship in Chile and the Blair government declined to do that. And because Pinochet argued that he had a sort of mental impairment.
So he was sent back to Chile. And there he encountered the difficulty with his ploy, which is that the Chilean establishment, that now Democratic Union establishment, which was still wrestling with the legacy and the vestiges of Pinochet’s power, said, “Well, if you’ve got mental impairment, you can’t be head of the army anymore. So you lose your immunity for prosecution, we’re going to come after you.” And there was this extraordinary reckoning. It was like watching the nerves of history exposed, a whole country, many of whom had I had colluded with [inaudible], many of whom had lost loved ones to hideous torture and murder.
And so poetry wasn’t going very well, anyway, frankly, a couple of little bits published in impossibly obscure papers. But suddenly, I was in the middle of some actual news. And I started trying to write some news about Pinochet and about the massive anti-globalization protests, who were constantly getting gassed and trying to report on those and we discovered a paper mill that was poisoning some water and killing some endangered swans. And I sort of stumbled into the news. My editor, I should mention, read my first attempt at a new story and said it was the worst news story he’s ever read. But I’ve worked on it since then, and-
Things have got better since then, Tom, yeah.
That was nice of you to say here. So anyway, then I ended up after a year so back in the UK and then I went and I was fascinated by globalization and how portions, wealth and power, and the place I came to realize where that portioning was most contested, unjust and violent was large parts of Africa. So I wound up getting to the FT [inaudible] to be posted first in Johannesburg covering Southern Africa, and I covered the fall of Thabo Mbeki and the rise of Jacob Zuma and the elections in Angola and Zimbabwe, and a coup in Madagascar, and so on.
And then I went to the big Africa job, by my view anyway, West Africa, living in Lagos for a couple of years. And that was my first real experience of living day-to-day in a full blown kleptocracy, and how every facet of life has changed, and I have a deep love for Nigeria and Nigerians. But it is a totally dysfunctional place. Wonderful in many ways, but utterly ruined by corruption. So you could say that also about a lot of the rest of West Africa.
And then when I eventually moved back to the UK, I sort of felt like corruption, understanding corruption, and especially globalizing corruption, a globalized corruption was starting to feel to me like one of the most powerful and least understood forces in the world today. So that drew me to the former Soviet Union, the other big engine of corruption and the Middle East too, and really, so yes, I’ve read the [inaudible]. I’ve been working on that kind of globalized corruption essentially in one form or another and I’ve covered terrorism in the far right and other things. But that’s been the big thread for me.
And then Nigel Wilkins, I met a chap in a bar, we could talk about this more if you want, but that’s the germ of the book, I met a Swiss banker in a bar and one thing led to another and he gave me some documents he’d got hold of, and I pulled together other threads that I’d been looking at and that became Kleptopia, this book that’s meant to be a kind of riveting page turner, but also underscored by lots of notes at the back to demonstrate, I hope, the way in which that globalized corruption is really reshaping the world in which we live in, in all its aspects.
Yeah, and indeed, we are going to come on and talk in a lot more detail about the book. And for those, I mean, I would expect that anybody listening to this podcast will be very familiar with the term kleptocrat. But for anybody that isn’t, the Cambridge dictionary definition, at least, is a leader who makes himself or herself rich and powerful by stealing from the rest of the people. Now, your central contention in Kleptopia, Tom, is that dirty money is conquering the world by undermining the rule of law and democratic institutions.
And you say that there is a global web of corruption. And what I want to explore with you is, whether that’s right, is there, do you think, really a sort of committee that never meets, that’s sort of ruling the world of kleptocrats? Or is the toxicity that the book details actually much more random than that? Well, what are your views?
I think that there are two parts to that. One is, and as I try and show in the book, there are real secret networks in which the business interests, the corrupt business interests of kleptocrats and the oligarchies that flourish under kleptocrats, connect. So that’s part one. And a good example is you look at Robert Mugabe in Zimbabwe twice in 2008 to 2013, he is saved from the damning verdict of his people, which would have been otherwise delivered in democratic votes, he saved by twice receiving $100 million that allow him to brutalize the opposition and steal the election.
The first time in 2008, it’s delivered by a combination of a Wall Street hedge fund, a London listed mining company, a white Zimbabwean kind of wheeler-dealer, with connections in Congo and on all those guys who do that deal. On the business side, they all cash out to three Central Asian oligarchs connected to Russian organized crime and the Kazakh kleptocrats. They have a glorious kind of global kaleidoscope of kleptocratic interests. Not even just aligning their interests but actually doing business with each other, actually forming active business networks from which profit is extracted from political power and maintained that corrupt political power.
And then five years later, Mugabe repeats the trick, this time with the help of, among others, a Chinese middleman with connections to the military intelligence and seven aliases, best known as Sam Parr who does a diamond deal in Zimbabwe. So there’s example of part one which is the… there are more examples in the book and there are more examples for instance in the 1MDB scandal’s a very good one, and so on, of transnational kleptocratic business networks, the actual genuine connections between kleptocrats and their regimes.
And at Part two is you use a great expression, which I also borrowed for the book, I think I read it in a Nick Cohen column in the Observer once, “A committee that never meets.” He used it about the British establishment, a committee that never needs to meet. So a group of people so clear in what their own interests are, and so clear in understanding who those are who share those interests that they didn’t really need to discuss them, they’ll know which decision to make in any given situation to support that collective interest of maintaining the authority of the British establishment.
In Cohen’s example, I would argue in advancing the kleptocratic cause because the deepening of kleptocracy in one place, helps the deepening of kleptocracy in another, it spreads secrecy, it undermines the global system of laws and rules that are meant to make corruption difficult. And I think you see this in the relationships between… You see this in Trump’s presidency, his best relationships, Mohammed bin Salman, Kim in Pyongyang, Putin, and so on, and figures like Oban [inaudible]. These are people who sometimes might seem to have differing geopolitical positions, but ultimately, their principal interest is in advancing the privatization of power from which they all benefit.
You could also say, I think that, again, despite what would appear to be geopolitical enmity, I think I would include, say, Maduro and Trump and the Iranian Revolutionary Guards in the same category. And I would argue that the nationalist, neo-fascist, communistic, rhetoric, whatever it may be, is ultimately a cover for corruption.
Yeah, so you’re citing as evidence, really, that supports this, this sort of alignment on geopolitical issues, despite it being sort of non partisan. They’ve all got shared interests, and those interests are essentially the advancement of their own interests.
Right. Well, I mean, we take that for granted that’s a reasonable idea when I’m talking about democracies, we talk about community of democracies. I mean, we say even though democracies compete economically on specific things, or they compete politically, they compete in everything from investment to hosting World Cups to individual leaders seeking kind of leadership positions in this community of democracies, we take it as a given that that is a thing, that the Democratic leaders would take a shared set of similar positions on similar questions. And I think it’s pretty clear that kleptocratic leaders do the same thing.
Yeah. Now essentially, you’re saying that corruption is the dominant force of power globally, from Africa, through, as you’ve said, to the Trump White House. Let’s talk about London. We’ve seen huge flows of questionable money into the city of London, and obviously to its real estate markets, widely publicized. Bill Browder, who was on the show some months back, has done a, I think, an excellent job of continuing to highlight this.
Everybody seems to accept that that is what has been happening and is continuing to happen. But nothing, it seems to me, of any substance is being done about it. Yes, there are well-meaning people in law enforcement, but they’re only scratching the surface, they’re under resourced, etc. Isn’t the biggest problem, Tom, that there just isn’t a political will to combat this?
Yes, well, there’s two related problems. One is that, especially since the financial crisis, obviously, the institutions that we entrust with the responsibility and the powers to protect us from the worst financial crimes have been starved of investment, the NCA has not done too bad but the Serious Fraud Office has obviously had a pretty torrid time.
And you look at, for instance, the ENRC case, I should say that obviously, I’ve had a lot of bother with the ENRC trio and they’re trying to take some legal action against me in New York. So I should sort of declare that, it’s all public, but it’s also the case that it’s a complete mismatch, isn’t it? The SFO’s total annual budget is about $50 million, I think. And the three oligarch owners of the ENRC are worth about $7 billion. And you can see this playing out in the multitude of lawsuits that the trio of oligarchs have brought related to that case, the sort of legal arsenal they have trained on those who tried to scrutinize their activities.
And partly, that’s just a result of austerity, which is obviously a set of political decisions in itself. But also, yes, a lack of political will. And I think that comes from sort of London’s position as this kind of entrepot for footloose, global wealth. But one of the things that sort of struck me when I was writing the book was the difference between the ferocious campaign by the American authorities against Swiss banks that helped Americans evade tax and HMRC’s approach here, which has been basically to say, “Well, I mean, do we care really about that? It looks pretty tricky.” Because obviously, the difference being that most of what’s going on in London is not actually defrauding the UK exchequer is defrauding all the other exchequers of people who park the money in other…
And more broadly… Sorry, the other side of that, is laundered money into the UK. Now, we may come to this and I think it’s an interesting question for us and maybe for our audience here. But the way that laundered money doesn’t behave like clean money in a market, it behaves irrationally and it distorts markets. But I also think before you get to that point, at times of the exchequer in a declining imperial power that’s had 12 odd years of austerity, ultimately, the decision is, do we just want money of any flavor? And do we want to turn the UK into more of a sort of Singapore on Thames that is essentially open to money, regardless of its provenance, to try to sustain our national income in that way?
Until there’s a moment akin to what happened with climate change, when it went from being an esoteric, scientific idea that seems to have no bearing on our individual lives, to something that we could feel pressing in on us whether it be through refugees arriving from Lake Chad, or wildfires in California, or changing temperatures, or the spread of malaria, whatever it may be, until that happens with transnational kleptocracy, as I think it will, as we start to understand that more and more people are dying as a result of transnational kleptocracy in the West, whether it be witnesses to corruption or people who fall out of favor with kleptocrats such as Putin and end up with a little dose of nerve agent. Once you start to realize that kleptocracy is a threat to us in our day-to-day lives, I think the political will will start to change but that hasn’t really happened yet, although I hope it’s starting to happen.
Let’s go back to exploring in a little bit more detail this economic imperative. I really like your term. I think you said London was an entrepot for footloose, global wealth. I mean, the concern must be, Tom, that economic imperative to turn a blind eye will only get bigger because of COVID and its economic impact and also Brexit. And so are you genuinely fearful that the UK is going to become a Singapore on Thames once we are released as it were from the shackles of Europe, is the UK going to set itself up as one of the world’s leading offshore centers? I mean, you can make a powerful argument to say that it already is, but that it’s going to further strengthen its position as a center of that nature?
Well, yes, I think you make a very strong argument that it already is because it already is. The City of London, by most measures, the sort of intricate statistical calculations about the size of secrecy jurisdictions is not, I confess, my strongest point and people like Nick Shackson and understand that much more clearly, than I do. But I think I’ve got a pretty good sense of it. And it seems relatively clear that the UK, plus the Crown dependencies and overseas territories add up to the biggest secrecy jurisdiction in the world, bigger even than Switzerland.
But I think you might start to see is that… So as I say, at the moment, there’s that sense of the City of London is this kind of almost sort of global place where, before, as I say, footloose capital, but the idea of financial opacity is spreading into the domestic British system, and I think COVID is a very clear example. The pages of private eye and open democracy and others have done a fantastic job of trying to keep some sort of scrutiny on the immense public spending that’s happening, using emergency powers under the pandemic with no scrutiny. Just it’s absolutely rife, crony capitalism is there, I think it’s very hard to argue otherwise.
I think, in my experience, once systems like that set in, it’s very hard to pull it back because political classes get very used to that kind of unscrutinized spending. I think when we look back on this year, we will realize that not only is all the money gone, but a lot of the rubrics and norms that we had for controlling the spending of our money have broken down.
Fascinating. One of the things I want to explore with you is the way in which kleptocrats utilize the City of London to launder their money. And similarly to do so through the London real estate market, but also, in addition to legitimizing their money in Canary Wharf, it seems to me, attempt to legitimize their political interests through the courts in Chancery Lane, they certainly don’t seem to be afraid to take on their political opponents in UK courts.
And they also legitimize, or at least seek to advance their image interests in Westminster by hiring the likes of former prime ministers and other politicians who are keen to get rich off their connections. So there are a lot of people in London, getting rich off the back of kleptocrats. And nobody, it seems to me, seems to be questioning this, which points therefore to, it seems to me, the unavoidable conclusion, which is that the economic imperative of continuing to attract their business, or indeed to retain their capital, trumps the desire to crack down on financial crime.
Yeah, I mean, I think I’ve struggled to put that better than you just have. Yeah, I entirely agree. And that’s what I’ve tried to sort of bring to life in the book is there’s sort of some human narratives that really demonstrate this in action. And I think just maybe give a couple of examples, I think, the legal pursuit of Mukhtar Ablyazov is an extraordinary case, one of the richest men in the former Soviet Union at one stage, a Kazakh fell out with a Kazakh dictator, and depending on who you believe, either stole an enormous fortune or was a brave dissident, he stood up to a dictator, or a bit of both. And the pursuit of him through the UK, civil courts has essentially taken a kleptocratic power struggle, a power struggle that happens in a place with no law, lawless land, and transported it into the cradle of the rule of law, the British High Courts.
And those two worlds, it’s matter and anti matter, they don’t mix, they can’t really compute one another. So you get a British judge trying to rule on the facts of a case completely out of context. And you see this happening again and again and again in the British legal system.
You also see, you’re right to mention Westminster as well. I mean, look at the, not only, the Blair, Mandelson, the others who rent themselves out to dictators and kleptocrats around the world, but also those currently in power. I mean, look at the big donors to the Conservative Party, I mean, Labor has problems like this, too. But I’ve said this before, it just strikes me as extraordinary. If you were to imagine a situation where Vladimir Putin’s main donors for his personal political career, and his political party, were British billionaires whose wealth was of dubious origin, and who had big connections to British intelligence with the children of MI6 offices.
You would look at that, and you would say, “Well, that is obviously…” There would be absolute outrage in Russia for a start. I don’t think any Russian president could possibly continue if that emerged, but in the UK, that is the system that we have, and it’s not just Russian money, there’s money from Central Asia, there’s money from Africa, money from corrupt regimes in Eastern Europe and so on. And we seem to feel that we’re okay with that. That we’re all right with… It’s not so much the foreign influence, I don’t mean this in anyway to sound xenophobic, but it is significant influence that is public, it’s not concealed, in our political system by people connected to the highest levels of full on kleptocracy. And that is just a… I think when we stand back from it, we’ll see that it’s just an astounding state of affairs.
Well, I mean, you used the term there, I think, wisely, if we stand back from it, and I think, look, we can both agree, all existential threats are long term, right? But part of the problem with this is that corruption is chronic. It erodes civil society over time. And what you have to do is, you have to take a step back, you have to take the long view of it, to understand just how destructive it is.
But the difficulty, of course, is that there is always a short-term economic imperative that makes institutions, both private and public, turn a blind eye and say, “Well, we’ll just let that deal go,” or, “We’ll just make an exception here. Because it helps to save 5,000 jobs,” or it relates to a big tax payer, or whatever the case may be. And this sort of insidious, long-term chronic nature of corruption, makes it incredibly difficult to take on, doesn’t it? I mean, am I right about that, what’s your view?
Well, yes, I think that there are basically two types of system, corruption is everywhere, and it’s in human nature, when left unchecked to seek benefits for yourself and your loved ones. I mean, the reason we have these institutions is not just to stop the bad guys, it’s to save us from our own worst instincts. That’s why we have built states of laws, right? Because, like Goethe said, “I can’t think of a crime I couldn’t commit.” Anyone, in any circumstances, can do anything. And we have these institutions, because we know we have a sense of human nature, we have a sense of wanting to protect ourselves from our worst instincts.
So there are two kinds of systems, there’s one in which the rules and laws and cultural norms that continue to prevail, but that make corruption an aberration, and it’s an example of the system malfunctioning. And then the resistance where corruption is the system. I once attended a Nigerian presidential primary in 2010 or ’11. And I stupidly left my laptop bag with a couple of passports and 10 grand and cash in it, which is the kind of thing you need to get around in West Africa, I left it unattended for a few minutes and it got nicked.
Obviously, that made life rather tricky for a few days and I had to get hold of an emergency passport, and for that I needed a police report and I threw a friend at an MC, I was introduced to a clean copper, who would write me, without demanding a bribe, would write me a police report of what had happened. And in order to do this, I had to meet him in the back of a car parked away from the police station where he worked in total secrecy, and trying to avoid being followed, and so on. That was to allow me just to benefit from someone acting in a lawful way. That’s what happens when corruption takes over. And once corruption becomes the system rather than the aberration, that is a kleptocracy.
And I think you’re right to say it’s chronic and gradual, and there would never be one clear moment when you could say you tipped from one foot to the other. But that’s why we always have to be pushing to maintain the norms and pushing to have well-funded investigative journalism, independent minded MPs and impartial courts and so on. And that’s why when a government minister stands up and says, “We’re going to knowingly break international law,” or a prime minister refuses to release an intelligence committee report into Russian influence, for which we can read kleptocratic influence in the UK, that’s why we must resist with all our mind these, essentially, normalizations of corruption because it because, you’re right, there isn’t going to be a moment where we have a referendum, and say, “Do you think we should become a kleptocracy now?” It’s also true that nowhere is immune from it.
Yeah, let’s explore that. Because there is no question in my mind that we are slowly, as a society in the UK, becoming almost anesthetized to this. And the cancer is there, it’s metastasizing. And in the same way, to cite what you said earlier, that we thought climate change only affected people in the developing world, we now know that the chickens are coming home to roost for us, too. And we’re beginning to wake up to it, and we’re beginning to make some changes, perhaps way too late, but we are.
Now at what point do you think are we going to reach that inflection position on corruption? What’s it going to take for us to begin to really recognize this for what it is, see that it’s happening and really begin to address it?
I mean, that’s the question, isn’t it? There’s a number of ways of coming at that, so one of the one of the parts of my book that was the hardest to report both in terms of difficulty and also because it just involves some horrendous human suffering, was to do with the deaths of witnesses in a big corruption case. And what really struck me there… So this is three people who died, one in South Africa and two in Missouri in the US who were all potential witnesses in the ENRC case that I talked about earlier, should stress [inaudible ], no charges have been brought, ENRC denies its done anything wrong, ENRC certainly… And it’s back, it certainly strongly deny anything to do with these deaths and that’s not the suggestion, but it is true that three potential witnesses from one corruption case have died in suspicious circumstances and it’s also true that other witnesses as well as investigators on that case are filled with fear by this and that appears to be impairing the course of justice.
And I think examples like that, and examples like, I mentioned the intelligence committee report into Russian influence in the UK and there’s a very long list in there of, I can’t quote the whole thing off the top of my head, but you mentioned some of the areas earlier of people who get caught up in this world, estate agents, art dealers, we know where money gets laundered, school bursars, obviously anyone with anything to do with anything to do with the stock exchange, the biggest laundry of them all, and so on, company secretaries, fiduciary agents, paralegals, lawyers, solicitors, practically any line of white collar work you can think of, is potentially exposed, that would that report pointed out, to dirty money.
Now if we live in a world where people who are in these possessions of the secrets seem to turn up in suspicious circumstances dead. And if we’re in a world where these secrets are increasingly being passed through, essentially more or less in every walk of professional life, then I think we’re going to start to see that the danger of this world is filtering in very close to our lives or the life of someone dear to us. Because the crucial thing to understand about kleptocracy is it is not underpinned by… The ultimate kind of guarantee your kleptocratic power is not how many yachts you’ve got, or how many Van Gough’s you’ve got locked up in a free port somewhere, it’s violence.
Because the reason kleptocracy is the opposite of democracy is because there’s no consent involved. It’s illegitimate power, power held through force of theft and patronage, but ultimately, because you’ve got no contract between rulers and rule, because you don’t turn around every four or five years of the election and say, “This is what I’ve done. You entrusted me with this job. This is what I’ve done on health, education, defense, and so on, choose if you want me to keep on doing it.” That obviously, is not the conversation in a kleptocracy, the conversation is, “Do you feel that I’ve shared enough of what I’ve stolen with you?”
And ultimately, that deal is only… If that’s not enough to hold on to power, you occasionally need to use violence. Same way organized crime was and you see that in the book in the terrible massacre in Janos and I went there and I reported that in as much detail as I possibly could, because that is where kleptocrats really show their face, is when force of money isn’t quite enough, and force of corruption isn’t quite enough, they turn to violence. And they turn, in that case, to the likes of Tony Blair, to then spin that violence into a narrative in the west to make them look legitimate.
I’m not sure it’s possible for us to get it more controversial, but I’m going to ask a pretty controversial question. And you’ll know that this question doesn’t represent my own views, but it’s a question I think that we need to explore. In Scandinavian countries, Tom, you’ll know that until very recently, bribe payments were tax deductible, and attitudes have shifted pretty significantly in developed economies, certainly. And I want to explore with you why, in your opinion, does the fight against corruption and financial crime trump the need to stimulate economies and save jobs?
Because it is, as we’ve been exploring over the last 30 minutes or so, it’s actually pretty binary, right? There’s a choice to be made by societies over which course they want to follow. And we’d all do well, I guess, to just remind ourselves that 40 years ago, before the US introduced anti-money laundering legislation, the financial services businesses, you didn’t have any role to play in fighting corruption or other forms of crime at all, they didn’t address their minds to it, they could do what the hell they wanted with whoever they wanted. So what is the basis for your hugely forceful argument, that the imperative of fighting financial crime outweighs the economic imperative that we’ve been exploring so far today?
Well, you make the devil’s advocate argument very well, but I still would say it’s a false choice. I don’t think that on the one hand, you have resisting corruption and on the other you have economic advancement. I mean, you tell me, where are you more likely to succeed and be able to create vibrant, fulfilling jobs, in a democracy or in a kleptocracy? You go to Nigeria, practically everybody’s unemployed, despite the greatest energy resources in Africa.
I suppose, the point for me is that corrupt money doesn’t behave like honest money, it doesn’t support job creation. Okay, there are examples where the revenues of prostitution and human trafficking in one part of Eastern Europe have flowed into another part of Eastern Europe and built a load of good housing and schools. Money can do things like that, and it’s uncomfortable, but it’s true.
But as a general point, laundered money doesn’t behave in a way that’s conducive to the kind of stable investment you want to create jobs, for instance, it wants to overpay. Laundered money is always looking to pay a much higher price, it’s not a useful for kind of honest price discovery in the market, it creates bubbles. Blood and Oil, I mean, I would obviously recommend everyone reads my book first, but once you finish that, Blood and Oil, about Mohammed bin Salman, and I’d recommend you get two copies of [inaudible] book, because it’s quite useful to read the narrative and be able to turn effortlessly-
Yeah, to the notes.
… to the notes at the same time, and then obviously, one as a Christmas present for your mother.
But Blood and Oil, the description of Mohammed bin Salman is that, it’s a great book, Bradley Hope’s book and his colleagues book, and the description of Mohammed bin Salman, a man who has simply been selected by geological accidents of the country that his family owns, sitting on top of a load of oil, which we all want, he has been selected to be one of the decisive investors in the world, like the main force in the SoftBank Vision Fund that’s shaping the tech future of humanity, if you want to believe the hype, and I think there is something to it. For instance, there is no merit to that decision. He is not a man who’s displayed any talents, for investment that should elevate into that kind of influence. He’s displayed talent for overseeing parts of a regime that will dismember their opponents in foreign embassies, but not as an investment genius, certainly.
And this kind of money from kleptocracy, yes, it’s an amount of money on the first basic sense flowing from one place to another, but it isn’t conducive to economic health. It’s quite the opposite of it. So the argument against corruption is an argument for a healthy, stable economy, I think you only have to go to Nigeria or Congo or Greece and Italy or to Malaysia or Moscow to realize that.
Yeah, and I think the points extremely well made, and we see it as well, don’t we, play out not just at a state level, but also at an organizational level. Those, for example, financial services, businesses that get rich or have got rich off the back of toxic money, find that they collapse pretty quickly either when they’re investigated and prosecuted and brought to book or when the money leaves and seeks out an even weaker spot in the global financial system. So their toxic money is never a good foundation upon which to build either a sustainable business or a sustainable economy. I mean, that’s the argument.
Yeah, that’s absolutely. But I’ll add a point as well, that the judicial system in democracies is currently deals with this is also rigged. So if you and I, Steve, we set up a massive, let’s say, arms company tomorrow, and we pay out a load of bribes to make some big arms sales in Middle East or wherever, and it’s later discovered that we were commissioning the middleman to do these bribes that they can’t quite pin it on us, probably more or less, even if there’s overwhelming evidence against you and me personally, generally, what happens is that the company, as an entity, will take the blame. The company, which is obviously a thing, you can’t jail, you can’t humiliate, you can’t punish in any way because it doesn’t really exist, it’s just an idea.
And what will happen is that you and I will be constantly retired, possibly, we’ll have to give back a little bit of one year’s bonus or something like that, but we won’t even notice that. And what will happen is that the current shareholders, these cases typically take about seven years, so the shareholders seven years on, by which we mean, of course, all the normal guys’ pensions and pay prospects, that will be penalized. And in some $900 million deferred prosecution agreement with the Department of Justice and a little bit for the SFO tagged on.
So the punishments for corruption are paid, essentially, by future pensioners at the moment, not by the individuals who conduct it. And I mean, I don’t want to just go on and on, but if you want to come to, I just think the whole mechanisms of this work is through our extraordinary tolerance for anonymity in the financial system, which is what allows this disavowal of human agency and this application of human responsibility for corruption.
Yeah, let’s talk about transparency a little bit more. I mean, is there ever a justification in your view for financial secrecy? Are people or corporations entitled at all to privacy or do you think their affairs must be completely transparent in order for us to bear down on kleptocracy?
I think it’s a delicate one, and the distinctions between secrecy and privacy in commercial confidentiality are never entirely clear. But what I’ve landed on… The book isn’t meant to be a nonfiction novel, right? It’s meant to be, although, obviously, I’m not pretending for a second I’m Truman Capote, but I’m trying to write in that genre of In Cold Blood or Liar’s Poker, The Big Short or maybe, Nothing to Envy, these non fiction novels. I think, again, that’s the stylistic and literary reasons for that, but also to try and write a story about human beings in a world where we so often talk about companies, front companies doing things and that is the trap we fall into.
The book’s written like that to try and get into… As it say, it’s kind of like the idea of the human minds in this situation, I just feel as though that is what we’ve drifted away from. What was the second part of your question again? Can you remind me?
So basically the question was whether or not you think there’s ever a justification for financial secrecy, or whether in fact-
Yes, sorry. Yes. So I just started going for on my own tangent there. So I would say, I didn’t put this in the book, but I’ve written it in on open democracy. For me, it boils down to an idea of speeding and tax evasion. So we have strict liability in law for those ideas. If you’re driving a car at 120 miles an hour, it doesn’t matter if your wife’s in the back giving birth or you’re rushing to the vet with a dangerously ill pet chicken, or you’re racing to tell the Metropolitan Police about a bomb plot, it’s a crime, it doesn’t matter, there is no mitigating circumstances.
And the reason for that is very good. We have strict liability in cases where if we ever made exceptions, everybody would do it. So if mitigating circumstances were allowed in speeding, then the road would be a bloodbath, the economy wouldn’t work, and there would be sort of like paralysis the country long, because everyone would consider themselves to have a good reason. So we say, “Okay, we’re all going to sacrifice the freedom to take decisions about how fast we can drive in order to have serviceable roads, so at least we can all get somewhere at a reasonable speed.” That’s quite a good example of the kind of John Stuart Mill social contract, I think, or the Rousseauvian ideas about the social contract.
Then on tax, again, if you fail to declare some of your income, doesn’t matter if your mom was very ill upstairs, and you were very distracted, or your house burned down, if you didn’t declare it, the motive doesn’t matter, the fact is enough. You face the penalties for that. I think the same thing should apply to corruption in this way that you should be allowed to… If you want to go ahead and do your oil deal in Somalia, where the government says you must take as your partner this offshore company from the Cayman Islands, and you are not aware of its owner or you haven’t declared knowledge of its owner, you can do that if you want to, you can still do that now. That’s how lots of African oil deals happen and oil deals elsewhere. You’re allowed to do that.
If it is later shown that that transaction was corrupt, by which I mean if that local partner that you were forced to take is later shown to have been owned by an official or a relative of an official who had influence to advance your business interests, so maybe the oil minister’s cousin or someone from the ruling party or whatever it may be. If you’re later today shown to have corruptly enriched an official, it doesn’t matter whether you can be shown to have known or not, that’s what’s crucial.
Because at the moment, so much human responsibility is avoided because of this charade from companies. Every major corruption scandal involves a front company because it’s how we create [inaudible], scarcely plausible, but just about plausible deniability. So we would say, “Okay, you can go on doing those deals with those anonymously held companies, that’s fine, knock yourself out.” But the minute law enforcement can establish that that deal was corrupt, you will have no defense in ignorance. It’s the same, it’s like the Donald Trump business model, the money launderers’ business models, say, “I just didn’t check where the money was coming from. I didn’t know. You’re saying it’s from some guy close to a former Soviet dictatorship. Well, maybe it is, maybe it isn’t. But it came to me through some LLC.” I think you have to remove that sort of false unconsciousness, that faux ignorance from the system, because that is the crucial kind of psychological mechanism for global corruption to happen.
And people could continue to… I would also think you should probably have, I think they’re called universal identifiers or something like that. There’s a term that’s used, but essentially, bank accounts should all have a human beneficial owner known to the bank, and so on, because money ultimately, is a social tool. Secret ownership of money is a weird idea to me.
I mean, tell me, you’re making a really powerful argument for the imposition of strict liability, due diligence obligations between contracting parties and the institutions and professionals that service them. And I get that, but it’s a different thing, isn’t it, to throwing open, but beneficial ownership registers, company registers and giving everybody access to information that people might legitimately think should be private. I mean, I accept that there are good reasons why the authorities should be able to access information about the financial affairs of everybody. Because clearly, the alternative would be a nonsense.
But complete transparency is another question. I mean, I know this is a hackneyed argument, but what about people who are themselves trying to flee from or protect their interests against kleptocrats? Would they not have a legitimate claim to privacy?
Well, there’s two arguments there. One is you say it would be a nonsense if, correct me if I’m not paraphrasing you correctly, but you said be a nonsense if law enforcement didn’t have access to beneficial ownership information. But that is the situation, the mutual legal assistance system doesn’t work. The vast majority of beneficial ownership information that would be of any interest to law enforcement is hidden in the Cayman Islands, British Virgin Islands, Switzerland, Delaware, and so on, to which local law enforcement might, in some cases, theoretically have access if they wanted it, but generally don’t, and foreign law enforcement certainly didn’t have any access.
It just doesn’t work, the idea that you can say, “Okay, law enforcement can have information about beneficial ownership of a particular company anywhere in the world, if they ask for it.” Even if that were possible, which it isn’t, it still doesn’t work, because law enforcement obviously is never going to be able to conduct daily checks of the beneficial ownership of every company. The transparency itself is that is the deterrent. It just doesn’t allow you to enter into the corrupt deal in the first place.
And the second part of your question about, yes, so let’s say the wealthy Ukrainian media magnate who decided to run for public office, and he knows that he’ll be targeted by his kleptocratic owners, who will try to seize his assets. And this is fascinatingly Mukhtar Ablyazov’s argument I get to in the book, he gave an incredibly fascinating… It’s a great read, actually, his sort of novel-length witness statement, I think it’s his 10th witness statement in the London case, in which he’s accused of stealing billions from the bank he used to own. He says, “”Well, the reason I hide all my stuff offshore is not because I’m stealing money. It’s to stop the dictator stealing it.”
The problem with that is, those two things look the same. And this is why kleptocrats end up in these bizarre power struggles where you can’t establish who owns what, because hiding your assets in a front company because you have stolen them, and hiding your assets in the front company because you think dictator’s going to take them, to the outside, it looks the same. It’s just assets hidden in a front company. And then whatever view you wish to take of the person’s motives, but they’re not, there’s motives on hidden in the front company or even overt, you can ascribe anything to that. And that’s why these power struggles become so extraordinary when they hit the London courts.
And I would just say that the argument for me, the argument that financial secrecy that permits kleptocracy within nations and transnational kleptocracy, under which most people in the world now live [inaudible], I mean, look, I’m sitting next to a map, look at a map, cast your eyes across it, and tell me that anything other than three quarters of it is not people condemned to live their entire lives probably under kleptocracy. To say that the occasional case where someone very wealthy and politically reformist will be targeted by a kleptocrat, that that outweighs the generations of misery caused by the financial secrecy that allows kleptocrats do persist. I just don’t buy it. Okay, then it may mean that it causes problems for rich people who wish to try to stand up the kleptocrats, it may mean that and they may have to find different ways to try to resist them that doesn’t involve force of money, they may have to sacrifice the matter. Yes, that is true. But it’s nothing compared to… protecting them, it has nothing compared to the damage that’s done by financial secrecy to all the others. The argument you’re putting, I appreciate you’re-
Playing devil’s advocate.
Yes, and you’re testing these positions, quite rightly, but I’d say that the argument you’re putting is the one that says there shouldn’t be speed limits on roads, because one day someone will need to drive at 150 miles an hour, because they’re late for a blood transfusion. We can’t allow that because then everybody would drive at 150 miles an hour and the roads would be carnage. That’s my point.
Yeah. Okay. Now, part of the inspiration for the book, most recent book, Kleptopia, was that chance meeting that you had with a Swiss banker at Nigel at a meeting at The Frontline Club in London. And he started to pass you documents that he had taken from his employer. Now, a lot of people have a problem with journalists using information that has been stolen. I’m referring here, of course, to the recent history of leaks, we had Panama Papers, we had most recently the FinCEN leaks. And in particular on the FinCEN leaks, they were suspicious activity reports that were actually made to the authorities by financial institutions, in pursuance of their sort of legal obligations.
And there is a school of thought that says there’s a danger that the publicity that resulted from that leak undermined this suspicious activity reporting system itself, which was the part of the infrastructure which is designed to prevent crimes like corruption from occurring in the first place. So given that you’re a leading journalist working with, what I regard, as the best newspaper in English speaking world, how do you justify the use of this information for your purposes?
Yes, good question. So, I mean, fundamentally, I think it’s important to defend the rights of journalists’ use information that comes to them in any way, short of them actively commissioning illegal means to acquire that information. If information has been hacked or otherwise improperly acquired before the journalist knows about that information, it’s in the public interest for the… Depending on the contents of it, of course, assuming that it is information of public interest, genuine public interest, it is in the public interest for the journalist to conscientiously reveal that information.
But there are also big questions, I think… I’ll come to Nigel and my story in a moment, and I can obviously talk about Nigel, because he’s no longer with us, but the FinCEN leaks and the Panama Papers and these ones, I mean, they have been really important in some way. I mean, the Panama Papers was a huge step forward in revealing to us the extent to which political office all over the world is being monetized for private gain, that was really important.
But I also think there’s a danger that huge leaks of that sort, which are often processed, sort of using AI and so on, because it’s just way too much information for individual journalists to read. The danger is that they can be interpreted out of context, I mean, both the context within the financial institution or in Panama, the case of Panama Papers, the law firm, or in a case of FinCEN Files, the public agency from which they’ve come, and they can be misinterpreted without the context of the other places to which they refer.
So yeah, I mean, some of the FinCEN reporting did seem to me to treat the banks in a slightly cartoonish way, as though there’s sort of lots of kind of palm rubbing villains keen to guzzle up the dirtiest of money and hide it. And obviously, there are people who do that, but overwhelmingly, in my experience, people in banks, like people anywhere, are trying to live a relatively decent life and do a decent job, probably with not enough sleep and not enough money, and trying to make very difficult decisions.
And I think that that is the danger with these massive leaks, and it depends how the journalistic organization handles them. Some of it’s been brilliant, some of it less so. With Nigel, with my source, yeah, he gave me about 1,000 pages of documents that he had, yes, stolen from the Swiss bank. But he did so with a very clear public interest in mind, which was to expose financial crime. And before he came to a journalist, he contacted what was then the Financial Services Authority, and HMRC, offered them this information, he tried repeatedly to get them to look at the information, and then he’d been so frustrated and thwarted, and sort of humiliated and eventually banished from the city as a result of the efforts that he did end up speaking with a journalists, he never asked for any money from me or for anyone else.
And I read every one of those documents, and actually, my first attempt at a story was pretty rubbish. Because if anything, I went too far the other way, I tried to write about it in the context of how banks work, and how the city works. And it took me years really to follow the threads and link together with other stories that I was working on, be it Donald Trump or Ablyazov or stories that I’ve been on out in Africa and really understand information he’d given me.
And I guess just a final point on this, it is important to have leaks from everywhere. Because as Jeremy Bentham said, “Conspiracy thrives in secrecy.” We need, and it’s legitimate, to have insight into the workings of institutions, be they banks, or governments or big corporations or whatever it may be, we have a legitimate need for insight into these parts of societies, what they are, powerful parts of that, between them, make our societies work.
And, okay, you can have formal oversight regulators and so on. But we all know that those institutions are flawed too. So sometimes you need a bit of a kind of random check, which is essentially what whistleblowers and leakers do, they give you just a random view from where someone happens to be sitting with a certain character and conscience and courage often, to expose a bit of these institutions that no one wants seen on the outside and that sometimes there is collateral damage for that, and sometimes the information isn’t interpreted in the full context. But it is also important because it’s a check against really corruption in these institutions to have these sudden lights turned on in hidden corners.
Yeah. I mean, one of the things that really worries me, Tom, is that there are plenty of role models for excessive risk taking, right, or lots of role models for turning a blind eye. Massively wealthy heads of investment banks and goodness knows what else would have been bowed out despite reckless conduct and worse, mind blowing lifestyles. Where are the role models on the right side of the fence? I mean, I was reminded of this question recently. I mean, Paul Moore, I was so sad to see that Paul Moore, the-
Yeah, very brave man.
He died last month. And Paul, he couldn’t find another job in the city. And the only whistleblowers who seem to do okay are those that get paid significant sums of money by US law enforcement agencies. Now, I’m not encouraging whistleblowing, I’m not advocating whistleblowing. But it seems to me that it is almost sort of anathema to success. And the only thing of worth in our society, it seems, is that which can be celebrated by the tribe.
And in the context of my earlier question about when is this going to change, when are we going to reach the inflection point and begin as a society to say, “Look, actually, we’ve really got to stop this rot,” in order to do so, we need some role models, don’t we? And I guess my question is, are there any reasons, in your opinion, for optimism?
Yeah, well, can I kind of split that into two, and I’ll come to optimism second, and they linked. This crucial question of kind of role models and what we as a society deem worth, that term, high net worth, what do we really mean by worth? But I think it’s really helpful to think incredibly widely about this kind of stuff and come at it from all sorts of angles. And one of the things I’d go to in answer to that question is Steve Biko, the kind of the leading thinker of Black Consciousness in apartheid, South Africa, and the kind of alternative strand to Mandela, more radical in some ways, and obviously, eventually, beaten to death by the apartheid security forces.
Steve Biko’s position essentially says, to subjugated black South Africa, and non white Africa, says, “The reason we are still trapped is because we go on wanting what the oppressors tell us we must want, which is the things they value and the things that they have, and what they consider to be worth. The way to break the system is to reassess what worth means, and what value is, and not take it on the terms of the corrupt regime.” You can see the thinking like this in feminist thought, in gay thought, and in lots of places, you encounter it, in fiction, too.
And I’d say that part of the reason that kleptocracy is thriving so much, is because it finds such fertile soil in societies that venerate great wealth as the only indicator of worth, increasingly, and obviously, social media has really has really [inaudible] this because you can essentially erase facts and present yourself as this kind of bling celebrity. And then there are of course, there are people who do have that massive wealth, obscene amounts of wealth, let’s be clear here. Anyone who’s ever been to Eastern Congo or frankly a food bank, and pauses for more than a minute will start to see that there’s a distribution of wealth and say, “Well, it is obscene.”
And so I think the idea is not to… I think what Steve Biko would tell us to do is not to try to make integrity pay, as you like, not… I agree with you, that the kind of the IRS system of paying bounties to whistleblowers that Brad Birkenfeld, for instance, benefited so much from… I mean, you can see it in a purely utilitarian way, I guess, the state coffers do get a lot more money back in, sometimes through the systems, but they’re also very dubious and create all sorts of dubious incentives.
I think we just have to be celebrating the Nigels of this world. I think it’s a subtler process and trying to have more conversations like this. I think it’s kind of, and this brings me to optimism, I think the sort of the beauty of spending a lot of time with Nigel when he was alive and also a lot of time with him, if you like, in his death and reading his notebooks and his documents and really trying to understand him and coming across as well, as I do, I’m very fortunate in my work which can be hellishly stressful and dangerous sometimes, but I get to meet people of extraordinary courage, the vast majority of whom I can never name or discuss, but who will take huge risk, very much for no reward. In fact, the last thing they want is a reward. The last thing they want us to be singled out, even though maybe they would like to be, but they need to do that in secret, and they’re taking a huge risk for the collective good and for the good of the world in which their children will grow up.
And that is what is true worth, for me, without trying to sound overly self righteous. But also, I would say that these people I meet who are my sources in dangerous places, they seem, to me, to be living much more fulfilled life than the child of an oligarch I meet here and there, who’s living a very comfortable lie. And I feel like it’s these kinds of reimaginings of what worth is in these times that will spread the political will you’ve be talking about and will lead us to resist the spread of kleptocracy.
Well, Tom, let’s hope you’re right. I’ve really enjoyed our conversation, absolutely fascinating, as I’m sure that all of our listeners have enjoyed it, too. I want to thank you on behalf of all of them for taking the time to share your experiences and thoughts with us. And I think probably there would be no better way of celebrating Nigel’s life than in reading his story and reading your book Kleptopia which I would wholeheartedly encourage all KYC360 members and talk show listeners to do, you will not be disappointed, it really is a riveting read.
If you like what you’ve heard today, do please spread the message, both about Tom’s book and work and also about KYC360 and this talk show. This recording will be available as a podcast on KYC360 and many other platforms from tomorrow. My next AML Talk Show guest will be the acclaimed US journalist, Rolling Stone journalist, and acclaimed best-selling author, Matt Taibbi. So I look forward to speaking to Matt, and having you all listen again next month. For now, stay safe. Thank you and goodbye.