Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back

‘Corruption undermines democracy, weakens institutions and erodes trust, it destroys lives and impoverishes millions.

government, banks, law firms and professional services companies for their role in tolerating and sometimes facilitating a system that robs the poorest and today even threatens our own country’s security

They marvelled at the edifice of the main building, the fountains, the waterfalls, the statues, the exotic pheasants. It was a temple of tastelessness, a cathedral of kitsch, the epitome of excess.

When they emerged again, they looked ashen. By the final door was a book for comments. Someone had written: ‘How much can one man need? Horror. I feel nauseous.’

All over the world, insiders have stolen public money, stashed it abroad, and used it to fund lifestyles of amazing luxury while their home countries have collapsed behind them.

Once upon a time, if an official stole money in his home country, there wasn’t much he could do with it. He could buy himself a new car, or build himself a nice house, or give it to his friends and relatives, but that was more or less it. His appetites were limited by the fact that the local market could not absorb endless sums of money. If he kept stealing after that, the money would just build up in his house until he had no rooms left to put it in, or it was eaten by mice. Offshore finance changes that. Some people call shell companies getaway cars for dodgy money, but – when combined with the modern financial system – they’re more like magical teleporter boxes. If you steal money, you no longer have to hide it in a safe where the mice can get at it. Instead, you stash it in your magic box, which spirits it away at the touch of a button, out of the country, to any destination you choose. It’s the financial equivalent of never feeling full no matter how much you eat. It’s no wonder officials become such gluttons, since there is now no limit on how much money they can steal, and therefore no limit on how much they can spend. If they want a yacht, they can send the money to Monaco and choose one at its annual boat show. If they want a house, they can send the money to London or New York and find an estate agent who doesn’t ask too many questions. If they want fine art, they can send the money to an auction house. Offshore means never having to say ‘when’.

And the magic does not stop there. Once ownership of an asset (be that a house, or a jet, or a yacht, or a company) is obscured behind multiple corporate vehicles, hidden in multiple jurisdictions, it is almost impossible to discover. Even if the corrupt regime from which the insider profited collapses, as it did in Ukraine, it is difficult – if not impossible – to find his money, confiscate it and return it to the nation it was stolen from.

independence in 1991, pretty much everyone in the country had roughly the same amount of stuff, thanks to the way the Soviet Union mismanaged everything. In two decades, that changed utterly. By 2013, on the eve of the revolution, just forty-five individuals owned assets equal in value to half the country’s economy

The daughter of Angola’s longest-serving president has become Africa’s richest woman, sashaying around the West like an A-list celebrity while the rest of her nation struggles by in what is essentially a failed state.

Corruption had so hollowed out the state that it had all but ceased to exist, except as a means of illegal enrichment. Why, after all, would anyone defend something that spent its time making their lives miserable? Corruption robbed the whole country of legitimacy.

It is appropriate that the trail takes us to New York, however, because this hole didn’t open up in Ukraine, or sub-Saharan Africa, or in Malaysia, but in the heart of the West. Wealthy people have always tried to keep their money out of the hands of government, and have developed clever tools with which to do so over the centuries. In Britain and America, lawyers create trusts that allow their rich clients to technically give away their riches, while retaining the benefit of them, and thus pass them on to their children. In continental Europe, the same job is done by foundations.

Societies across the West (particularly the United States) have become less equal in terms of both wealth and income since the 1970s. Some economists, led by Thomas Piketty, have suggested that this is because the long-term return on capital is higher than the growth rate of the economy. That means, barring some world-war-sized catastrophe, Western societies will inevitably become more unequal, in the absence of concerted government efforts to the contrary. That may well be so, but it is not what this book is about.

am a journalist and, like all journalists, I am fascinated by crooks. My book, therefore, is about the people that cheat, the kind of people that doomed the country I moved to in 1999 and shattered the hopeful wave I was hoping to ride into a glorious Russian future

As one lawyer in Ukraine put it to me: ‘The choice isn’t between taking a bribe, or being honest; it’s between taking a bribe, or your children being killed. Of course you take the bribe.’ His Mexican peers have a pithier formulation: ‘Do you want paying in silver or lead?’ Corruption has become so widespread that whole countries are unable to tax their wealthiest residents, meaning only those least able to pay are forced to support the government. This undermines democratic legitimacy, and angers the people who live under such governments. For people who believe in a liberal world order, there is no upside to this.

The top 10 per cent of Russians own 87 per cent of everything: a higher proportion than in any other major country – pretty stark for a place that was communist just three decades ago. And this has all been made possible by Western enablers: the lawyers, accountants and others who move this money, and hide it in clever ways. If you try telling an informed Russian that the West is a principled alternative to Vladimir Putin’s Kremlin, he’ll likely ask why Putin’s propaganda chief was allowed to buy property in Beverly Hills on a bureaucrat’s salary, or why the deputy prime minister owns an apartment within walking distance of London’s House of Commons. This hypocrisy is a gift to Putin, who can not only undermine his opponents by highlighting it, but can use the West’s offshore tools against it: as a conduit for money to fund his security services; to create anti-Western propaganda; and to support political extremists favourable to his interests. Corruption is a force multiplier for the West’s enemies, and yet the West continues to accept dirty money into its economies by the billion. The money sucks at your feet, the ground falls away.

Ukraine is a deep red on TI’s map, the 131st least honest place in the world and – alongside Russia – the dirtiest place in Europe. Yet Yanukovich’s property could not have been obscured without the services of his British shell companies. So why is Britain listed as an honest 10th, alongside Germany and Luxembourg? Similarly, Manafort’s money was hidden by banks and companies in Cyprus and St Vincent, and they’re ranked a relatively clean 47th and 35th respectively. The United States, where his money ended up, is 18th.

If Ukrainian politicians couldn’t be crooked without the services of other countries, why is their crookedness only pinned to Ukraine? And if British or Cypriot lawyers are touting for business from Ukrainian crooks, do their home countries have a right to their reputations?

As the Ukrainian prosecutor I quoted above made clear, it is hard for him to obtain evidence from a foreign jurisdiction, and it’s the same for investigators from any country. Money flows across frontiers, but laws do not. The rich live globally, the rest of us have borders.

I am part of a group that tries to highlight what this means. My friend Roman Borisovich came up with the idea for what we call the London Kleptocracy Tours: we fill up a bus with sightseers rather as if we were taking them to Hollywood to see where Clark Gable used to live, or where Scarlett Johansson gets her hair cut. Instead of showing them stars, however, we show them politicians. As our bus driver takes us through central and west London, our guides point out properties owned by ex-Soviet oligarchs, the scions of Middle Eastern political dynasties, Nigerian regional governors, and all the other people who have made fortunes in countries that score low on TI’s list, and hidden it in countries that rank high. We can only fit fifty-odd people in a bus at any one time, but the aim is a simple one: we want to pull away the veil that hides the abuse of the global financial system. We want to stop people saying – or being able to say – that they couldn’t have known.

‘These offshore companies which own so many empty buildings in London are using them to minimise their tax liability. That is diverting money away from crucial services.’ You don’t have to agree with squatting empty buildings to recognise that Miller had a point, and a surprisingly moderate one for an anarchist. All he wanted was for rich people’s property to be subject to the same amount of government scrutiny as everyone else’s, which currently it is not. Goncharenko

Goncharenko’s mansion is one of eighty-six different properties on this square alone that is held via the kind of anonymous structures that stop anyone, including the taxman, from finding out who the true owner is. Some thirty of them are held in the British Virgin Islands; thirteen are in Guernsey; sixteen in Jersey. Others are in Panama, Liechtenstein, the Isle of Man, Delaware, the Cayman Islands, Liberia, the Seychelles, Mauritius and – Manafort’s favourite – St Vincent and the Grenadines

Kleptocracy Tours

Before our grand tour has ended, it would be time to begin again at the beginning. Even those of us who like to think we know what’s going on have no idea what’s going on. The wealthy nomads who own these properties are taking advantage of the way money moves across borders, but laws stay put, to pick and choose which laws to obey. Under British law, you have to declare who owns a property. If you own that property in Mauritius, you do not. It will cost you money to structure your holdings that way, but if you can afford it, you have access to a privacy denied to everyone else in the country. The more I researched this, the more I realised it applies far more broadly than just property ownership. If you are a Syrian refugee, global visa restrictions severely limit your ability to travel. If you are a wealthy Syrian citizen, however, you can buy a passport from St Kitts and Nevis, Cyprus or half a dozen other countries, and suddenly you have access to a world of visa-free travel denied to your compatriots. If you are an ordinary Ukrainian, you are at the mercy of your country’s corrupt and inefficient court system. If you are a wealthy Ukrainian, however, you can arrange all of your business dealings so they are governed by English law, and enjoy the services of honest and effective judges. If you are an ordinary Nigerian, you must suffer what the country’s newspapers might say about you. If you are rich, however, you can hire London lawyers, and sue your country’s journalists based on the fact their online articles have been read in the UK and are subject to England’s famously tough libel laws. Most importantly, if you can structure your assets so they are held in the United States, your government will never find out about them (I’ll show you how later), whereas they will find out about everything owned at home.

morning coffee is owned in the Bahamas. The place I get my hair cut is owned in Gibraltar. A building site on my way to the train station is owned in the Isle of Man. If we spent all of our time trying to puzzle out what is really happening, we’d have no time to do anything else. It’s no wonder most sensible people ignore what the super-rich get up to. You follow a white rabbit down a hole, the tunnel dips suddenly and, before you know it, you find yourself falling down a very deep well into a new world. It’s a beautiful place, if you’re rich enough to enjoy it. If you’re not, you can only glimpse it through doors you lack the keys for. I call this new world Moneyland – Maltese passports, English libel, American privacy, Panamanian shell companies, Jersey trusts, Liechtenstein foundations, all add together to create a virtual space that is far greater than the sum of their parts. The laws of Moneyland are whichever laws anywhere are most suited to those wealthy enough to afford them at any moment in time. If a country somewhere changes the law to restrict Moneylanders in any way, they shift themselves or their assets to obey another law that is more generous. If a country passes a generous law that offers new possibilities for enrichment, then the assets shift likewise. It is as if the very wealthiest people in countries like China, Nigeria, Ukraine or Russia have tunnelled into this new land that lies beneath all our nation states, where borders have vanished. They move their money, their children, their assets and themselves wherever they wish, picking and choosing which countries’ laws they wish to live by. The result is that strict regulations and restrictions do not apply to them, but still constrain the rest of us

‘We see why the warlord’s subjects, even though he extracts tax theft from them year by year, prefer him to the roving bandits that rob sporadically. Roving banditry means anarchy, and replacing anarchy with government brings about a considerable increase in output,’ Olson wrote in his 2000 book Power and Prosperity.

Stable government aligns the interests of the strong and the weak, since they both want to see everyone get wealthy. The weak want to be wealthy for their own sake, while the strong want the weak to be wealthy, so they can take more from them as taxes. Olson used the parallel of a mafia protection racket. If the mafia’s grip on a community is complete there will be essentially no crime, since it is in the boss’ interests for local businesses to make as much money as possible, so he can extort proportionately as much money as possible from them. Crime, for a society, is an unproductive activity that forces people to waste money on guards and fences and locks. It is in all our interests to be governed. But Olson had a caveat: the argument only works if everyone is thinking in the long term. Moneyland turns his calculation on its head. Because its citizens are able to keep their assets outside the communities they steal them from, they don’t care what happens in the long term. The more they steal now, the more they and their children get to keep. In fact, they make money from instability: the more disputes there are, the more money there is for them to cream off.

Moneyland is where globalisation acts differently. It is not a function of capital being allocated efficiently to garner the greatest return for its owners, but of capital being allocated secretly to gain the greatest degree of protection.

we wish to preserve democracy, however, we must confront Moneyland’s nomad citizens, and find a way to dismantle the offshore structures that make it so easy for them to hide their money from democratic oversight. They are at least as significant a threat to the rules-based order that seeks to make the world safe as the terrorists and dictators we read about every day.

I lay out how the citizens of Moneyland like to spend the cash they hide in it – the clothes, the property, the art, and the rest – and what their increasingly outrageous spending habits are doing to the world. The effects of this spending are so extreme that there is now a whole field of study, called plutonomy, devoted to it

Moneyland induces vertigo to such an extent that, once the idea had occurred to me, I felt dizzy because it explained so much. Why do so many ships fly the flags of foreign countries? Moneyland allows their owners to undercut their home nations’ labour regulations. Why do Russian officials prefer to build billion-dollar bridges rather than schools and hospitals? Moneyland lets them steal 10 per cent of the construction costs, and stash it abroad. Why do billionaires live in London? Moneyland lets them dodge taxes there. Why do so many corrupt foreigners want to invest their money in New York? Moneyland protects their assets against confiscation. In putting together this account of Moneyland’s birth, growth, structure and defences, I have relied on my own investigations, and those of others: US congressional committees; NGOs like Global Witness and Transparency International; economists, academics and others. One point that needs to be made firmly and repeatedly, however, is that I am not describing a conspiracy. Moneyland is not controlled by an arch-villain, stroking a white cat on the arm of a leather chair. If there was a controlling brain behind Moneyland it would be easy to deal with. The reality is far more complex, and far more insidious: it is the natural result of a world in which money moves freely, laws do not, and where a good living can be made from exploiting the mismatches that result. If a tax rate is low in Jersey and high in Britain, there’s money to be made for anyone who can move her clients’ assets out of Britain and into Jersey. The same goes for jurisdictions all over the world: they all have subtly different rules and regulations

Moneyland is more like an ant hill than a traditional organisation. In an ant hill, the individual ants are not obeying instructions; there aren’t middle manager ants directing them to go out and pick up grass seed. There aren’t police ants arresting wrongdoers who keep grass seeds for themselves, or judge ants sentencing them to terms in ant prison. The ants are responding in a predictable manner to external stimuli. In Moneyland, the individual lawyers, accountants and politicians are also responding in a predictable manner. If a law is helpful to any aspect of a rich person’s existence, Moneyland’s enablers make sure the rich person can enjoy the benefits of that law wherever and whatever it is, to the greater good of the rich person and to the detriment of the rest of us. If you squash one ant, or arrest one crooked lawyer, the activities of the rest will continue unaffected. It is the whole system that must be changed, and this is hard.

The other countries made commitments, too. If they wished to change the value of their currency by a significant amount, they promised that they would only do so with the approval of a new body called the International Monetary Fund. This would stop dictators manipulating currencies to ruin their neighbours and stoke conflict. To prevent speculators trying to attack this system of fixed currencies, cross-border money flows were severely constrained. Money could move overseas, but only in the form of long-term investments, not to speculate short term against currencies or bonds.

Still, one of the few advantages of being a freelance writer is that my time is my own to waste.

Apart from that, perhaps the most striking section of his testimony is when he rubbishes some of the more optimistic myths about the post-Soviet transition. He describes one such myth as being the belief that Russia was on the right course, that life there was broadly akin to that in Chicago under the rule of Al Capone, and that all everyone had to do was wait for Russia to sort itself out and things would be OK. ‘For the US to be like Russia today,’ he wrote, ‘it would be necessary to have massive corruption by the majority of members of Congress as well as by the Departments of Justice and Treasury, and agents of the FBI, CIA, DIA, IRS, Marshall Service, Border Patrol, state and local police officers, the Federal Reserve Bank, Supreme Court justices, US district court judges, support of the varied organised crime families, the leadership of the Fortune 500 companies, at least half of the banks in the US, and the New York Stock Exchange. This cabal would then have to seize the gold in Fort Knox and the federal assets deposited in the entire banking system. It would have to take control of the key industries such as oil, natural gas, mining, precious and semi-precious metals, forestry, cotton, construction, insurance, and banking industries – and then claim these items to be their private property. The legal system would have to nullify most of the key provisions against corruption, conflict of interest, criminal conspiracy, money laundering, economic fraud, and weaken tax evasion laws. This unholy alliance would then have to spend about 50 per cent of its billions in profits to bribe officials that remain in government and be the primary supporter of all the political parties … the US president would not only be aware of these activities but would also support them – including the involvement of his

own daughters and all of his close political and financial supporters. Further, he would direct a campaign to smear and remove the Attorney General for investigating the office of the president.’ And that was not all, because, of course, this dystopia was not confined within national borders. ‘Most of the stolen funds, excess profits, and bribes would have to be sent to offshore banks for safekeeping. Finally, while claiming that the country was literally bankrupt and needed vast infusions of foreign aid to survive, this conspiratorial group would invest billions in spreading illegal activities to developed foreign countries.’

The crucial attribute of corporate vehicles is that they are legally separate from their owners and their owners’ liability for their debts is limited. What that means in practice is that, if you operate through a company, society as a whole is taking responsibility for your debts. It’s a kind of insurance. If your business fails, only the assets of the limited liability company will be at risk, not those of its owner.

‘Corporations have neither bodies to be punished, nor souls to be condemned, they therefore do as they like,’ said Edward Thurlow, Lord Chancellor of Great Britain in the late eighteenth century. Elsewhere he is quoted, more colloquially, as saying: ‘Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked at?’ With this kind of distrust prevalent at the highest levels in Europe, it had to be in America that the real innovation happened. In 1811, New York legislated for the creation of limited liability companies, and thence the idea spread, at first slowly, and then – from the 1850s – more rapidly. In 1855, Britain followed suit, with spectacular results. In 1860, half of all securities traded in London were government bonds; by 1914, company shares made up more than 95 per cent of the market. Limited liability is, in the words of the Economist, ‘the key to industrial capitalism’. Companies are good; without them, our modern prosperity would have been impossible.

One of the ten ranking areas is ‘starting a business’: the easier it is to create a company, the better your score. ‘In many countries the bureaucratic obstacles and high costs imposed by inefficient company registries deter people with good business ideas from embarking on the path of formal entrepreneurship,’ the 2015 report explained.

Was he concerned that, if people use the companies he sells to commit fraud, that might violate his Christian mission? ‘I don’t worry about that, I don’t have anything to do with that,’ he said. ‘I just give them their incorporation papers, that’s it. If I knew somebody is a criminal organisation that would be different. But people don’t say, “Hey, I belong to a criminal organisation or the mafia or whatever.” They don’t admit that.’ It was thanks to people like Harris that, in an elegantly designed academic study published in 2014 under the title Global Shell Games, US incorporation agents were shown to be the laxest in the world when it came to providing companies to anyone who asked for them

And there is no incentive for the more permissive states to clean up their act. Just like Jersey or Nevis, they have become hooked on the revenue that Moneyland brings. ‘A Delaware official said that 22 percent of the state’s revenue comes from the company formation business.

It is not impossible for law enforcement to see through shell companies or to confiscate assets held via corporate vehicles, but it is expensive, laborious and time-consuming, even if you try to cut corners.

The FBI’s Karen Greenaway said corrupt foreign officials were often little better than bank robbers. But while a bank robber could have his loot frozen while being investigated, kleptocrats can tap their stolen wealth to pay lawyers to keep it safe. ‘They walk through the door with droves of attorneys to defend this property right, and it puts us and it puts the country it’s stolen from at an unfair disadvantage,’ she said. ‘Due process shouldn’t mean that you get the best attorney money can buy with the money you’ve stolen. There’s something wrong with that. If he really wants somebody to defend his property rights, what we say in court is that we’ll give you an attorney. The fact that you don’t like the attorney that we’re going to give you, that should be immaterial.’

In another bank, a member of the anti-money-laundering team approved a relationship with a politically prominent family, despite them being under international sanctions and credibly accused of the embezzlement of millions of dollars of government funds. ‘In my view, provided there is sufficient business to justify the risk then I am happy to recommend we proceed,’ the banker wrote. That is not how things are supposed to work. What this all means is that, once again, if you’re rich enough, the rules are negotiable. If you could afford the $8,000 fee to open an account at a bank in the Cayman Islands, then you didn’t need to worry about paying US taxes. If you are the family of a wealthy foreign official, then private banks in London and New York alike have a history of bending the rules to make sure it is they who get your money, rather than one of their competitors. If everyone is applying the law, then there is money to be made in being the banker who doesn’t, which is a strong incentive for no one to be too scrupulous. The Moneyland ratchet always leads to looser and laxer regulations for the rich. And the highly intelligent bankers, accountants and lawyers will keep hunting for tunnels for their clients to slip their money through.

Wealth-X, a consulting company that maps the movements of the super-rich as if they are wildebeest, calculates that in 2016 there were 226,450 people in the world with assets worth more than $30 million (it calls them ultra-high-net worth people, or UHNWs), a 3.5 per cent increase on the year before. Collectively, their wealth had increased over the previous twelve months by 1.5 per cent to $27 trillion, which is roughly equivalent to the entire output of China and the United States added together. And the outlook for further increases is good: ‘SOLID GROWTH EXPECTED ACROSS THE ULTRA WEALTHY SECTOR,’ proclaims the company’s World Ultra Wealth Report 2017. ‘The global ultra-wealthy population is forecast to rise to 299,000 people by 2021, an increase of 72,550 compared with 2016 levels. UHNW wealth is projected to rise to $35.7 trillion, which implies an additional $8.7 trillion of newly created wealth over the next five years.’ If this prediction comes true, the planet’s UHNWs will have added the equivalent of the GDPs of Japan and Germany to their stock of wealth, in half a decade.

This is a lucrative business, the basis of much of the economies of Switzerland, London, Manhattan, Cayman, the British Virgin Islands, and many more places all over the world. The logical consequence of their effectiveness in preserving their clients’ wealth is the creation of dynasties, which will ensure a family’s temporary advantage is never removed, but instead becomes entrenched, and that the inequality of this precise moment is maintained in perpetuity.

‘Their work radically undermines the economic basis and legal authority of the modern tax state,’ she concludes. ‘Using trusts, offshore firms, and foundations, professionals can ensure that inequality endures and grows in a way that becomes difficult to reverse short of revolution.’

In Soviet times, he said, the government under-valued doctors, who were paid little. Ordinary citizens, however, were grateful to the medics that helped them get better, and brought them presents: candy, or alcohol. These weren’t bribes so much as genuine gifts. They were given not in expectation of a reward, but as an expression of gratitude, but they became the norm. If you went to the doctor, even though healthcare was free, you took something along to give her. After 1991, when the Soviet Union collapsed, the situation changed, however. Doctors began to realise how much their Western colleagues were earning, and also began to appreciate the heft of their position. They literally had power of life and death over their patients; if a senior doctor decided the team would not treat you, you’d die. ‘When we became a market economy, sweets or brandy didn’t cut it anymore,’ the agent said. ‘The doctors wanted money, actual banknotes, and people started paying them. The system we have now suits doctors very well. They don’t want to change anything. If you’re a senior doctor, you have a hospital. It might be bad, it might leak, but it’s free, the state provides everything. The profits you earn, however, you don’t have to share them with anyone; you don’t even pay any taxes. You operate, earn two or three thousand dollars, stick them in your pocket, and off you go.’ Ukrainian healthcare costs are socialised, in that the government pays for the facilities, the buildings and the infrastructure. The profits, however, are privatised, in that the doctors get to keep what they earn. It’s great for the senior doctors, but it’s terrible for the country.

‘I don’t think there’s corruption in Ukraine, and I’ll explain why,’ said the agent. ‘Corruption exists where you have a healthy state; and it takes up just 10, or maximum of 15, per cent of the country. When it takes up 99 per cent of the country, that’s not corruption, that is the state. Do you understand the logic? It’s total. It’s total at all levels. Even an old granny selling sunflower seeds is part of this, because the policeman going past takes five or ten hryvnias from her. She gives, he takes, and this suits them both fine, because she knows she’s got someone looking out for her.’

When corruption is widespread, it becomes impossible to know who to believe, since the money infects every aspect of state and society. Every newspaper article can be criticised as paid for, every politician can be called corrupt, every court decision can be called into question. Charities are set up by oligarchs to lobby for their interests, and those then provoke doubts about every other non-governmental organisation. If even doctors are on the take, can you trust their diagnosis? Are they claiming a patient needs treatment only because that would be to their profit? If policemen are crooked, and courts are paid for, are criminals really criminals? Or are they honest people who interfered in criminals’ business? Not knowing who to believe, you retreat into trusting only those closest to you – your oldest friends, and your relatives – and that reinforces the divisions in society that corruption thrives on. It is impossible to build a thriving economy, or a healthy democracy, without a society whose members fundamentally trust each other. If you take that away, you are left with something far darker and more mercenary.

On the eve of independence from Spain, Equatorial Guinea had been one of the most prosperous countries in Africa, with almost universal literacy, more hospital beds per capita than Spain itself, and healthy crops of both cocoa and coffee. Equatorial Guinea is in short an extreme but sadly not entirely atypical example of how – for so many ex-colonies – the sweetness of freedom can turn sour

Every ex-colony is different, and those that have turned into impoverished dictatorships all have their own reasons for having done so. Inherent in this process, however, is the very nature of colonies. They were created and run to enrich the colonial power. No matter how honest the officials sent out to administer them, their job remained to extract value from the colony and to send it home. State export agencies, for example, set prices for agricultural products in colonies all across Africa. They were originally created – or were said to have been originally created anyway – to help farmers, but the agencies quickly became a way of squeezing money out of peasants by paying below-market rates for their crops, then re-selling the crops abroad for the enrichment of foreigners. The flags flying over the capital cities changed during the 1950s and 1960s, but the decisions taken by those in government often remained remarkably consistent. After independence, the new governments maintained the export agencies, nominally to raise capital for industrialisation, but in reality just to continue the scams, with the surplus being diverted to cronies now, instead of the old Western masters. This is just one of multiple examples of how the new governments quickly learned the old tricks. ‘The new nations of Africa were born in a moment of hope. It is difficult to recapture the emotional tone of that moment. But the depth of it, the fullness of it, and the promise it offered left its mark on all who were in any way touched by the events of that era. It was called a new dawn, a new birth, a new reawakening,’ wrote Robert Bates in his 1981 book Markets and States in Tropical Africa. ‘The dreams of that period have given away to disillusion … Public institutions no longer embody a collective vision, but instead reinforce a pattern of private advantage that may often be socially harmful

Mathematics dictates, declared Rajatnaram, that if a crooked politician is to keep getting richer, he must steal ever more, which will anger his subjects. That means he must buy the support of more and more officials, which will require more money, which will necessitate more theft, and provoke yet more public anger. ‘He must win over all the instruments of state power – the army, the police, the entrepreneurs, and the bureaucracy. If he must loot then he must allow all his subordinates from the permanent secretary to the office boy to join in the game,’ he wrote. ‘In most developing countries, a few years of this kind of free-booting affluence led to economic anarchy, political instability, and the eventual replacement of democracy by civilian or military autocracies.’ Rajatnaram rejected then-prevalent academic theories that corruption could aid economic development by oiling the wheels of commerce, and ensuring businesses were able to operate with minimal interference. On the contrary, he said, there was nothing beneficial about corruption at all. ‘A society that is indulgent towards corruption and the successfully corrupt is not, as is often argued, a liberal sophisticated society inspired with a shrewd understanding of human nature,’ he said, according to the published transcript of his speech. ‘On the contrary, it is what one sociologist has aptly termed a “kleptocracy” – a society of the corrupt, for the corrupt, by the corrupt

‘What is regarded as dishonesty in countries well indoctrinated with political ideals, may appear as morally in order in a society where the bonds of kinship are strong and the concept of nationhood remains something very recent and artificial,’ Andreski wrote. He was one of the first thinkers to realise that corruption is organised as a pyramid, with rulers extracting large sums at the top, while state employees have to take bribes to feed themselves at the bottom. The bribes collected from citizens essentially replace the money the rulers stole, meaning the government has outsourced the collection of its illicit wealth to everyone employed by the government. Andreski did not condemn the low-level officials who participated in the pyramid, recognising that they had no choice about how they operated in a system designed to force them to act corruptly, but he was clear that corruption is disastrous when it afflicts a whole country, and does nothing but harm to any prospect of equitable or healthy development.

Important decisions are determined by ulterior motives regardless of consequences to the wider community,’ he wrote. ‘The essence of kleptocracy is that the functioning of the organs of authority is determined by the mechanisms of supply and demand rather than the laws and regulations; and a kleptocratic state constitutes a curiously generalised model of laissez-faire economics even if its economy is nominally socialist.’

He said that the most accurate reflections of African political reality were often found in novels, rather than textbooks, partly because it was unfashionable to doubt the honesty of the newly independent governments, but mainly because it was hard to write critically about a kleptocratic country without being expelled. He did not single out any particular novelists (‘lest this might get them into trouble’) but it seems likely he was referring to Chinua Achebe, the Nigerian author whose 1958 masterpiece Things Fall Apart established him as one of the most vital writers in the world, let alone Africa. It was Achebe’s second novel, No Longer At Ease, which appeared in 1960 – the same year Nigeria gained its independence – that held the best insights into how hard it was proving for former colonies to build honest political cultures

have looked, they see a correlation between corruption and misery. The greater the level of corruption, the more money is earned by the elite, which drives inequality, and frays the bonds connecting societies together. In the dry language of economists, money invested in schools and healthcare and roads and safety has a higher multiplier effect – you get a better return for the economy from every dollar you spend – than taking it offshore and spending it on ostrich-leather shoes. Better governed countries have a higher standard of living, better health, longer life expectancy, improved educational outcomes, and better performing economies. Both Rajatnaram and Andreski used the word corruption as well as kleptocracy, and it is clear they did not consider them to be interchangeable. Corruption was something Andreski knew from Poland, where it was called ‘the socialist handshake’, to reflect the passing of banknotes from palm to palm during an unofficial business deal. Kleptocracy, however, was a new phenomenon distinguished by far greater volumes of theft. ‘Many of them have simply transferred big sums from the Treasury to their private accounts, but the practice of getting cuts on government contracts constitutes the chief fount of illegal gains. In Nigeria, the customary cut is 10 per cent, and for this reason the expression “ten-percenter” is often used to designate anybody active in politics,’ Andreski wrote. That volume of money couldn’t be hidden under a mattress, or concealed within the hand and passed over during a handshake. Processing these large sums would require banks willing to accept the money, and able to move it around, in a way unavailable to officials in Poland. Andreski was aware that he was witnessing something qualitatively different from previous forms of corruption. What he was seeing, although he did not realise it, was the first flicker of the impact of globalised finance on African society, and the opening of the Moneyland tunnel: steal–hide–spend

Jack Blum, the American lawyer who went on to investigate corporate bribery for the Senate’s Foreign Relations Committee and who told me there was no point going to Nevis, was hired as a consultant to draw up an anti-corruption convention for the United Nations. Blum is a clear-sighted observer whose analysis of corruption, kleptocracy and offshore-enabled greed (which we shall come back to shortly) has been of vital importance. He was out of his depth, however, in the political swamp that was the United Nations. Sitting in a café in Annapolis in 2017, he described how he drew up a twenty-page draft back in 1975, and handed it in to the diplomats. ‘They took a look at it, and they started laughing, and they said we have to put this in UN language,’ Blum remembered with a tone of amusement that he presumably did not feel at the time. ‘There was the Arab bloc, which wanted to have Zionism as corruption; the African bloc, which wanted to have racism as corruption; the Soviet bloc, which wanted to have capitalism as corruption. As you can imagine, this draft convention got nowhere. By the time they finished fiddling with the language, instead of twenty pages, it was ninety-something pages and utterly worthless. It was referred to for years around the UN as the disaster of 1976.’

. It is lawyers and accountants who guard the tunnel into Moneyland, and they can unlock its doors, and usher anyone able to pay the entrance fee past its gilded threshold. In many cases, they have been acting in the full knowledge that the money they are handling has been stolen. In the 1990s, Citibank held accounts for kleptocrats from Nigeria, Gabon and elsewhere at its private banking unit (again, we have the Senate’s tireless investigations subcommittee to thank for these revelations

Western legal systems are predicated on the core assumption that individuals are innocent until proven guilty, which causes a problem. If someone can take control of a country’s legal system, can use that control to make a fortune, can smuggle that fortune to somewhere where highly paid lawyers are skilled at enforcing the rights of defendants to a fair trial, and can control what evidence might emerge at that trial through his domination of the original country, then how can that person ever be prosecuted? We begin to see what a well-defended place Moneyland is.

Vanish (its rather inappropriate name) is sixty-six metres long, can accommodate twelve guests and seventeen crew, and can motor from London to Cape Town without filling up with gas. It has two helipads, and was launched by a Dutch shipyard in 2016. ‘That’s a real boat, bro,’ the sales executive exclaimed. ‘I do know who owns it, but I won’t tell you. You would know some of their connections. But just like most of the rich people in the world, you wouldn’t have actually heard of them. The richest people in the world are not actually celebrities, they are financial people who are involved in huge corporations or family businesses. They’re super-unassuming and that’s what we have specialised in.’

‘If you look at it more broadly, all of the strengths of our system, the adversarial legal system, the democracy system, the freedom of speech system, they try to abuse in every way possible. Wherever there are openings in liberal democracies, they’ll try to abuse those openings,’ he said. Money crosses borders, laws do not, and Moneyland protects its own. Few campaigners, and few media outlets, could be like Browder and cover a loss of £660,000, on top of the ongoing costs of multiple legal procedures in other jurisdictions. So they choose to be cautious about what they publish, even if they are sure of the truth of their statements. This means that a letter from a London libel specialist remains a useful tool for anyone looking to shut down discussion of the origin of their funds, whether or not there is any British connection.

Because the money in Moneyland isn’t just drug money, or stolen money, or bribes; if it was, the problem would be much easier to solve. All of that ‘bad evil’ money is washing around with ‘bad naughty’ money, which has dodged taxes, or regulations, and been stashed offshore to avoid detection. There’s also money that has flowed out of economies like Russia, China or Venezuela which isn’t the fruit of a misdeed of any kind, but is instead owned by people who fear that the government might take it away from them if they kept it at home. And this ‘flight capital’ adds a whole new dimension to the amount of cash we’re talking about. According to one estimate, some $2.5 trillion fled China in the decade to 2017, despite the increasingly onerous capital controls erected by the government. Often this flight capital is hidden, visible only in what are called the ‘errors & omissions’ (E&O) in government figures, the entry that statisticians add to the columns of numbers to make them add up.

Internal Revenue Service (IRS

‘I was actually mocked at the bank for that, because it was all about undeclared money,’ he told me by telephone from his home in Pennsylvania in 2017. ‘At the time, at the bank, the number that was floating around was 70 per cent undeclared money, and if you didn’t deal with undeclared money, then what the hell were you doing at UBS?’ Then the Bradley Birkenfeld scandal broke, and everything changed. Suddenly, UBS needed to find clever ways for its clients to manage their money that didn’t offend the American authorities, and the straight-laced Cotorceanu was the man to find them. He assessed the relative merits of forty different jurisdictions, and created the templates for an entirely new way of doing business. As such, he became an expert in the relative merits of FATCA and CRS, and that’s when he made the same discovery made by a handful of other clever lawyers. The United States had bullied the rest of the world into scrapping financial secrecy, but hadn’t applied the same standards to itself. ‘When people ask, “What did the US do to become the new secrecy jurisdiction?” I say they didn’t do anything, that’s the point. They always were a secrecy jurisdiction, but everyone else was as well,’ Cotorceanu told me. ‘I liken it to Warren Buffett’s expression: “You only know who’s not wearing a bathing suit when the tide goes out.” There were lots of people not wearing bathing suits at the time, the US amongst them. The tide went out, and everyone else scurried to put on bathing suits. The US is the only one without a bathing suit on. It’s always been without a bathing suit, but now it’s alone by itself

The reasons for why this happened are complicated, and partly stem from differences in the ways different countries administer taxes. US authorities only collect information on interest and dividends, meaning that this is the only information they can share with foreign counterparts, whereas CRS regulations require other countries to share information on the actual assets that are earning the income. But there is more to it than that –

As you will recall, back in the 1960s, Swiss banks held money for Nazi war criminals, but they also held money for tax dodgers and for refugees. These groups of people all sought secrecy/privacy/confidentiality (delete as applicable), meaning the evil money washed around with the naughty money, which washed around with the scared money. All three groups of people benefited from those first eurobonds, because they provided an income on money that had previously been static, but not all three were advertised equally prominently. Swiss banks loved to claim that their bank secrecy had been designed to protect Jewish wealth from Nazi confiscation, and kept quiet about all the dictators whose money they also hoarded, or the tax dodging they facilitated. In effect, the refugees were being used to run interference for the others, and to make the Swiss banks look high-minded, rather than like the criminogenic institutions that they were. Swiss banks insisted that the reason they didn’t want to reveal the details on their clients was because that would endanger the legitimate interests of people seeking protection from rapacious governments. That excuse died for Switzerland with the revelations about diamonds in toothpaste tubes that resulted from the Birkenfeld scandal, meaning the tax dodgers and the kleptocrats finally got exposed. But it hasn’t died for the United States, where bankers still like to claim they’re acting as a refuge for the money of the world’s huddled masses, rather than for the wealth of greedy businessmen and crooked officials

So, how does this loophole work? ‘It’s extremely straightforward,’ Cotorceanu assured me, before launching into an explanation that was extremely complex. Essentially, it comes down to where a trust is based, for tax purposes. Since a trust – unlike a company – is not registered with the authorities, and instead exists as an agreement between a settlor and her lawyers, its jurisdiction is not a straightforward matter, and interpretations differ from country to country. The lawyer’s goal is to exploit those mismatches, to create a trust that exists in the gap between the regulations. ‘The simplest way to do it, and there are lots of others, is just to give one foreign person, a non-US person, one of a laundry list of powers: for example, give a foreign protector the right to remove and replace the trustee. Bang, that’s a foreign trust,’ Cotorceanu said. ‘It doesn’t matter that the trustee is in the US, that it’s governed by Nevada law, that all the assets are in the US, that all the investments are in the US, that the bank account is in the US. If one power on the laundry list is held by a non-US person, that makes it a foreign trust for tax purposes.’ If it’s a foreign trust for US tax purposes, then the United States cannot give information about it to foreign governments even if it decides it wants to, so that’s good. But here’s the better bit. If it has a US trustee – such as Alliance

Trust Company of Reno, Nevada, for example – then it is American for the purposes of the CRS, and thus immune to its provisions. That means it doesn’t have to exchange information with foreign governments under CRS, which means a rich Chinese businessman, or a Russian, or whoever, can park their money here with no fear that information about it will drift back to his home country’s authorities. The trust is American under foreign law, and foreign under American law: it doesn’t exist anywhere. Nevada’s magical trusts have played jurisdictional Twister in a way that would have warmed Siegmund Warburg’s heart: it’s American when it wants to be; and foreign when it doesn’t. ‘It’s incredibly useful,’ said Cotorceanu

So who’s taking advantage of it? ‘Latin Americans, Russians, Saudis, these people aren’t worried about taxes. Saudi doesn’t have an income tax, but information about wealth can be used against people, and if you’ve got a regime that’s not to be trusted then you want to keep that data confidential. You’ve got a lot of people from the Middle East and these sort of oppressive regimes that want privacy as well,’ Cotorceanu continued. ‘I require that the clients be declared, because I don’t want to assist in hiding undeclared money. For me, it’s all about privacy for declared money. However, a lot of people are using these structures now for undeclared money. The old offshore world has been brought onshore to the US.’ Nevada does not appear to publish data on the amount of assets held by its trust companies, but its rival South Dakota does. In 2006, before the UBS storm hit, the state’s trustees held an already impressive $32.8 billion – that’s around $42 million per head for every South Dakotan. By 2015, that total had reached $175.1 billion; and then rose by almost a third in just the next twelve months. In 2016, the state’s recorded total was $226 billion, which was $261 million for every resident of this prairie tax haven. ‘Many of the offshore jurisdictions are becoming less appealing for international families looking for secrecy. The stability of the

trust laws catering to international families may be more appealing to many international families than an offshore trust based in a less powerful country,’ one South Dakota trust company states on its website. Translated into normal English, that means that tax havens can be bullied into coughing up information about their clients, but the United States cannot

Because of the CRS, there’s a lot of money coming out of the traditional money centres: Switzerland, Singapore, Hong Kong, to a certain extent Dubai, a little bit of the Caribbean … they’ll call up and say, “My grand-dad set this up in many of those places, and now all of a sudden this information is going to be sent back to Bangladesh or Uzbekistan, so let’s move it to the States.”’

have tried to show that the degradation that offshore-enabled venality causes in places like Ukraine, Afghanistan and Nigeria is worth caring about on its own terms, particularly when you consider that diseases unleashed by looted health systems, and terrorists radicalised by corrupt officials, are no respecters of the national borders that impede their opponents. The misery in distant countries will become our misery, too, if we don’t help stop it. I recognise, however, that these arguments are rarely vote winners. For understandable reasons, it is difficult to persuade someone of the merits of a course of action that will cost them their job. Just look at the response by US banks to the Obama White House’s modest attempt to make them report foreigners’ interest payments to those foreigners’ home countries. ‘Kidnapping is not just a theoretical concern for these depositors. Having their deposit information leaked is a real threat to them,’ said Gerry Schwebel, executive vice president of IBC Bank of Laredo, Texas, who predicted ‘massive capital flight’ if the regulations took effect, as well as the collapse of many banks. The regulations took effect anyway, in 2011, and in the years since, not only has IBC Bank of Laredo not gone under, its stock price has tripled. His bank’s resilience may be a result of the fact his and others’ objections persuaded the US authorities to limit the number of countries they were willing to exchange information with. Mexico and Brazil are on the list; Venezuela, Colombia, Panama, Equatorial Guinea, Afghanistan, Nigeria, Malaysia, China, Russia, and most other places plagued by kleptocrats are not, which makes the whole thing rather pointless.

Even if Manafort is acquitted, the indictment makes clear that people steal if they know they can get away with it. They are more likely to steal in countries with poorly developed or corrupted institutions, like Ukraine, but that is a function of the opportunity, not the individual.

And there are disquieting signs that the dirty money sloshing around the world, seeking safe Moneyland investments, is beginning to besmirch the places that have been so happy to provide it with a haven. The anguish in the United States over Russia’s involvement in the 2016 presidential election is a remarkable testament to the destabilising impact of a relatively small amount of dirty money, even in a developed democracy. There is similar concern in Britain over murky donations into the Leave campaign during the Brexit referendum; and equivalent worries in other leading Western countries, particularly France and Germany. All money corrupts, and big money corrupts bigly.

As with the eurobonds, when naughty money ran interference for evil money and helped make offshore tricks look acceptable, this is another example of Westerners bending rules that are later broken by kleptocrats. If Vladimir Putin did pervert the US democratic process by hiding dirty money behind elaborate corporate structures, he was only following a path long taken by wealthy Americans (and revealed in the journalist Jane Mayer’s excellent 2016 book Dark Money), reluctant to act in their own names. Disapproval of these surreptitious payments should not depend on whether they are benefiting your own side or not. They are inherently harmful. Without trust, liberal democracy cannot function. When representatives of the Allied powers met in Bretton Woods, New Hampshire, in July 1944, they had a keen awareness of the danger of the flow of uncontrolled money, and the power it has to spread instability and damage democracy. ‘A breach must be made and widened in the outmoded and disastrous economic policy of each-country-for-itself,’ wrote the US delegate, Harry Dexter White, in a memo to Treasury Secretary Henry Morgenthau, two years earlier. When Morgenthau himself addressed the opening conference at Bretton Woods, he reflected on the same theme: ‘the thread of economic life in every nation is inseparably woven into a fabric of world economy. Let any thread become frayed and the entire fabric is weakened. No nation, however great and strong, can remain immune.’

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