moneyland

ALADDIN’S CAVE

When the French rebelled in July 1789 they seized the Bastille, a prison that was a symbol of their rulers’ brutality. When the Ukrainians rebelled in 2014, they seized Mezhyhirya, the president’s palace, which was a symbol of their rulers’ greed. The palace’s expansive grounds included water gardens, a golf course, a nouveau-Greek temple, a marble horse painted with a Tuscan landscape, an ostrich collection, an enclosure for shooting wild boar, as well as the five-storey log cabin where the country’s former president, Viktor Yanukovich, had indulged his tastes for the over-blown and the vulgar.
Everyone had known that Viktor Yanukovich was corrupt, but they had never seen the extent of his wealth before. At a time when ordinary Ukrainians’ wealth had been stagnant for years, he had accumulated a fortune worth hundreds of millions of dollars, as had his closest friends. He had more money than he could ever have needed, more treasures than he had rooms for.
All heads of state have palaces, but normally those palaces belong to the government, not to the individual. In the rare cases – Donald Trump, say – where the palaces are private property, they tend to have been acquired before the politician entered office. Yanukovich, however, had built his palace while living off a state salary, and that is why the protesters flocked to see his vast log cabin. 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. Enterprising locals rented bikes to visitors. The site was so large that there was no other way to see the whole place without suffering from exhaustion, and it took the revolutionaries days to explore all of its corners. The garages were an Aladdin’s cave of golden goods, some of them maybe priceless. The revolutionaries called the curators of Kiev’s National Art Museum to take everything away before it got damaged, to preserve it for the nation, to put it on display.
There were piles of gold-painted candlesticks, walls full of portraits of the president. There were statues of Greek gods, and an intricate oriental pagoda carved from an elephant’s tusk. There were icons, dozens of icons, antique rifles and swords, and axes. There was a certificate declaring Yanukovich to be ‘hunter of the year’, and documents announcing that a star had been named in his honour, and another for his wife. Some of the objects were displayed alongside the business cards of the officials who had presented them to the president. They had been tribute to a ruler: down payments to ensure the givers remained in Yanukovich’s favour, and thus that they could continue to run the scams that made them rich.
Ukraine is perhaps the only country on Earth that, after being looted for years by a greed-drunk thug, would put the fruits of his and his cronies’ execrable taste on display as immersive conceptual art: objets trouvés that just happened to have been found in the president’s garage. None of the people queuing alongside me to enter the museum seemed sure whether to be proud or ashamed of that fact.
Inside the museum there was an ancient tome, displayed in a vitrine, with a sign declaring it to have been a present from the tax ministry. It was a copy of the Apostol, the first book ever printed in Ukraine, of which perhaps only 100 copies still exist. Why had the tax ministry decided that this was an appropriate gift for the president? How could the ministry afford it? Why was the tax ministry giving a present like this to the president anyway? Who paid for it? No one knew.
In among a pile of trashy ceramics was an exquisite Picasso vase, provenance unknown. Among the modern icons there was at least one from the fourteenth century, with the flat perspective that has inspired Orthodox devotion for a millennium. On display tables, by a portrait of Yanukovich executed in amber, and another one picked out in the seeds of Ukrainian cereal crops, were nineteenth-century Russian landscapes worth millions of dollars. A cabinet housed a steel hammer and sickle, which had once been a present to Joseph Stalin from the Ukrainian Communist Party. How did it get into Yanukovich’s garage? Perhaps the president had had nowhere else to put it?
The crowd carried me through room after room after room; one was full of paintings of women, mostly with no clothes on, standing around in the open air surrounded by fully clothed men. By the end, I lacked the energy to remark on the flayed crocodile stuck to a wall, or to wonder at display cabinets containing 11 rifles, 4 swords, 12 pistols and a spear. Normally, it is my feet that fail first in a museum. This time, it was my brain.
The public kept coming, though, and the queue at the gate stretched all the way down the road for days. The people waiting looked jolly, edging slowly forward to vanish behind the museum’s pebble-dashed pediment. 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.’
And this was only the start. Those post-revolutionary days were lawless in the best way, in that no one in uniform stopped you indulging your curiosity, and I exploited the situation by invading as many of the old elite’s hidden haunts as I could. One trip took me to Sukholuchya, in the heart of a forest outside Kiev. The sun beat down, casting mirages on to the tarmac, as the road dived deeper into the trees. Anton, my driving companion, who ran his own IT company before joining the revolution, stopped the car at a gate, stepped off the road into the undergrowth, rustled around and held up what he’d found. ‘The key to paradise,’ he said, with a lop-sided smile. He unlocked the gate, got back behind the wheel and drove through.
To the right was the glittering surface of the Kiev reservoir, where the dammed waters of the Dnieper river swell into an inland sea dotted with reed-beds. Then came a narrow causeway over a pond by a small boathouse, with a dock. Ducks fussed around wooden houses on little floating islands. Finally, Anton pulled up at a turning circle in front of a two-storey log mansion. This was where Yanukovich came with old friends and new girlfriends when he wanted to relax.
Anton came here with his daughter in the first few hours after the president fled his capital in February 2014. He drove down that immaculate road to the gate, where he told the policemen he was from the revolution. They gave him the key, let him pass. He pulled up in front of the mansion and marvelled at it, and at its grounds, dotted with mature trees. There was a chapel and an open-sided summerhouse housing a barbecue. The ground sloped gently down to a marina, for yachts. The staff came out to ask Anton what he was doing at the president’s hunting lodge. He told them the revolution had taken over, the hunting lodge belonged to the people.
Now Anton opened the door, and led the way in. He had changed nothing: the long dining table with its eighteen over-stuffed chairs were as he had found them, as was the heated marble massage table. The walls were dotted with low-grade sub-impressionist nudes – the kind of thing Pierre-Auguste Renoir might have painted if he’d moved towards soft porn. The floor was of polished boards, tropical hardwood; the walls were squared softwood logs, deliberately left unfinished, yellow as sesame seeds. There were no books.
Anton walked from room to room, pulling out the karaoke machine, opening up the plunge pool, showing off the function rooms. Strange though it sounds, it was the bathrooms that really got to me. The house held nine televisions, and two of them were positioned opposite the toilets, at sitting down height. It was a personal touch of the most intimate kind: President Yanukovich had been someone who liked to watch television, and someone who needed to spend extended periods on the toilet. While Ukraine’s citizens died early, and worked hard for subsistence wages, while the country’s roads rotted and its officials stole, the president had been preoccupied with ensuring his constipation didn’t impede his enjoyment of his favourite television programmes. Those two televisions became little symbols to me of everything that had gone wrong, not just in Ukraine, but in all the ex-Soviet countries I’d worked in.
The Soviet Union fell when I was thirteen years old, and I was highly jealous of anyone old enough to have experienced the moment for themselves. In the summer of 1991, when hardliners in Moscow tried and failed to re-impose the old Soviet ways on their country, I was on a family holiday in the Scottish Highlands, where I spent days trying to coax the radio into cutting through the mountains to tell me what was going on. By the time our holiday was over, the coup had failed, and a new world was dawning. The previously sober historian Francis Fukuyama declared it to be the End of History. The whole world was going to be free. The Good Guys Had Won.
I longed to see what was happening in Eastern Europe, and I read hundreds of books by those who had been there before me. While at university, I spent every long summer wandering through the previously forbidden countries of the old Warsaw Pact, revelling in Europe’s reunification. At graduation, most of my fellow students had lined up jobs to go to, but not me. Instead, I moved to St Petersburg, Russia’s second city, in September 1999, overcome with excitement, drunk on the possibilities of democratic transformation, of the flowering of a new society. I was so full of the moment that I didn’t realise I had already missed it, if it had ever existed in the first place. Three weeks before my plane touched down at Pulkovo airport, an obscure ex-spy called Vladimir Putin had become prime minister. Instead of writing about freedom and friendship, over the next decade or so I found myself reporting on wars and abuses, experiencing paranoia and harassment. History had not ended. If anything, it had accelerated.
By 2014, when I found myself contemplating presidential toilets, I had already written two books about the former USSR. The first, which grew out of the misery I’d seen in and around Chechnya, described the peoples of the Caucasus and their repeated failures to secure the freedoms they desired. The second addressed the ethnic Russians themselves, and how alcoholism and despair were undermining their continued existence as a nation. Beneath both books, though unaddressed (I now realise) by either of them, was a question: what went wrong? Why had the dreams of 1991 failed to become reality? And that question was forcefully presented to me by the en suite bathroom at the hunting lodge of Ukraine’s exiled head of state: why had all these nations gained, not liberty and prosperity, but politicians who cared more about their own defecatory comfort than the well-being of the nations they ruled?
Because Ukraine wasn’t an isolated example. A Bentley showroom within half a mile of the Kremlin sold cars for hundreds of thousands of dollars, and the Russian media boasted that it was the luxury brand’s busiest outlet anywhere on Earth. Just a few hours’ travel away – and this was well into the age of the iPhone – I once met a man who offered to swap his entire smallholding for my Nokia. In Azerbaijan, President Ilham Aliyev commissioned Zaha Hadid, perhaps the most glamorous architect in the world at the time, to build a spectacular swooping sinuous museum in honour of his late father (and predecessor as president) on a prime location in the centre of the capital, Baku. Thousands of his subjects lived in makeshift refugee centres, as they had done since losing their homes in a war with Armenia two decades earlier. In Kyrgyzstan, the president created a three-storey yurt (yurts are a kind of tent, and like all tents they usually have just the one storey) in which he could pose as a nomadic horse lord of old, while residents of his own capital still went to communal pumps for their water.
In Ukraine, Yanukovich and his ruling clique ran a shadow state operation, which operated alongside the official government apparatus. Instead of ruling, they stole. Where taxes were supposed to be paid, they took bribes to help people avoid them. Where permits were being given, they awarded them to their friends. Where businesses were flourishing, they sent policemen to demand protection money. State officials moonlighted for the shadow state, neglecting their real duties for their more lucrative side careers. Ukraine had 18,500 prosecutors, who operated like foot soldiers for a mafia don. If they decided to take you to court, the judge did what they asked. With the entire legal system onside, insiders’ opportunities to make money were limited only by their imaginations.
Take medicines, for example: the government bought drugs on the open market for a health system that had a constitutional duty to provide free care to everyone who needed it. Any company that met the relevant standards was technically allowed to participate. In reality, officials found endless ways to exclude anyone who wasn’t prepared to pay them off. They would disqualify entries for being written in the wrong font, if the signature at the foot of the document was too large or too small, or for anything else they could come up with. Excluded companies could appeal, but that required them to go to a court that was another part of the corrupt system, enmeshing them further in the scams, so they tended not to bother taking part in the first place. After all, if they made a fuss, they would be hassled in perpetuity by one of the several dozen state agencies empowered to conduct on-the-spot inspections: for compliance with fire regulations; for compliance with hygiene regulations; and so on, and so on. That meant the medicine market was dominated by the bureaucrats’ friends via shady intermediary companies, registered abroad, who colluded with each other and with insiders to jack up prices. The trade abided by the letter of the Ukrainian law, and still made big profits for the businessmen and officials who dominated it.
The health ministry ended up paying more than double what it needed to for anti-retrovirals, the drugs required to control HIV and prevent it developing into full-blown AIDS – despite Ukraine having the fastest growing epidemic of HIV in Europe. When international agencies took over procurement after the revolution, they managed to reduce the cost of cancer medicines by almost 40 per cent, without compromising on the quality of the drugs. Previously, all of that money had gone into officials’ pockets.
And that was just the beginning. The government bought everything it used from someone, and every single purchase was an opportunity for an insider to get rich. Fraud of the state procurement system may have cost the government as much as $15 billion a year. In 2015, two Ukrainian children caught polio and were paralysed, despite it being a disease that had supposedly been eradicated from Europe. A faulty vaccination programme, undermined by corrupt and cynical politicians, was to blame. What went wrong?
It may seem like this question is specific to Ukraine and its former Soviet neighbours. In fact, it has a far wider significance. The kind of industrial-scale corruption that enriched Yanukovich and undermined his country has driven anger and unrest in a great arc stretching from the Philippines in the east to Peru in the west, and affected most places in between. In Tunisia, official greed became so bad a street vendor set himself on fire, and launched what became the Arab Spring. In Malaysia, a group of young well-connected investors looted a sovereign wealth fund, and spent the proceeds on drugs, sex and Hollywood stars. In Equatorial Guinea, the president’s son had an official salary of $4,000 a month, yet bought himself a $35 million mansion in Malibu. 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.

As I walked out of the hunting lodge, still mulling over the toilets, the televisions and the unwelcome visions they conjured up, I asked Anton how his fellow Ukrainians had let their ruler get away with this. How could they not have known what was going on? ‘We didn’t know the details, of course we didn’t,’ he replied, with a hint of frustration. ‘This land we’re standing on, it’s not even in Ukraine, it’s in England. Look it up.’
He was right. If you had wanted to know who owned this 76,000 acre former nature reserve, perhaps because you wondered how it had come to be privatised in the first place, you could have looked in the registry of land ownership. And in that registry, you would have found that the official owner was a Ukrainian company called Dom Lesnika. To find out who owned Dom Lesnika, you would have needed to look in another registry, where you would have found the name of a British company, which yet another registry would have told you was owned by an anonymous foundation in Liechtenstein. To an outside observer, this would have looked like an innocent piece of foreign investment, the kind of thing all governments are keen to encourage. If you had been particularly persistent, and had tried to reach Sukholuchya to check it out for yourself, the police officers guarding the gate in the forest would have stopped you. That might have made you suspicious, but there would still have been no proof that anything wrong was going on. The theft was well hidden.
Thankfully for investigators, Yanukovich kept records of what he was up to. His palace sat on a wooded hill, which sloped down to the Dnieper river. The shoreline below the palace was adorned with a yacht harbour and a bar shaped like a galleon. In their haste to leave, the president’s aides had dumped 200 folders’-worth of financial records into the harbour, hoping they’d sink. But they didn’t. Protesters fished the papers out, and dried them in a sauna. They provided a glimpse into the heart of the financial engineering that had allowed Yanukovich to fleece the country.
It wasn’t just Yanukovich’s shooting lodge that was owned overseas, his palace was, too. So were his coal mining companies in the Donbas and his palaces in Crimea, which were eventually owned in the Caribbean. And he wasn’t the only insider to use these offshore schemes: the medicine racket was run out of Cyprus; the illegal arms trade traced back to Scotland; the biggest market selling knock-off designer goods was legally owned in the Seychelles. All of this meant that any investigators now trying to unknot the densely woven cloth of official corruption had to deal with lawyers and officials in multiple tax havens, as well as police forces in dozens of foreign countries.
‘These high-ranking officials are all registered abroad, in Monaco, or Cyprus, or Belize, or the British Virgin Islands,’ one Ukrainian prosecutor tasked with trying to recover these stolen assets told me. ‘We write requests to them, we wait for three or four years, or there’s no response at all. As a rule, the British Virgin Islands don’t reply, we don’t have an agreement with them. And that’s that, and it all falls apart. We wait, and it has been re-registered five times just while we’re waiting for an answer to come. It’s all been re-registered, and that’s our main problem, checking and receiving these documents.’
This makes me dizzy, like a maths problem too complicated to understand, a sinkhole opening at my feet. These assets are attached to Ukraine, yet legally they are elsewhere, somewhere that we cannot follow them. No wonder crooked politicians have found these vertiginous structures so useful: they defy comprehension. And Ukraine is just the start of it.
Officials in Nigeria, Russia, Malaysia, Kenya, Equatorial Guinea, Brazil, Indonesia, the Philippines, China, Afghanistan, Libya, Egypt and dozens of other countries have likewise stashed their wealth beyond the reach and the oversight of their fellow citizens. Estimates for the total amount stolen each year from the developing world range from a massive $20 billion to an almost unimaginable trillion dollars. And this money makes its way, via the offshore secrecy jurisdictions, into a handful of Western cities: Miami, New York, Los Angeles, London, Monaco, Geneva.
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. You may have read how millions of dollars have been sent back to Nigeria, Indonesia, Angola or Kazakhstan, and that is true. But they represent less than one cent of every dollar that was originally stolen. The corrupt rulers have got so good at hiding their wealth that, essentially, once it’s stolen it’s gone for ever, and they get to keep their luxury properties in west London, their superyachts in the Caribbean and their villas in the South of France, even if they lose their jobs.
The damage this does to the countries that lose the money is clear. Nigeria has lost control of its northern regions, and millions of people have been displaced. Libya is barely recognisable as a state, with multiple armed factions vying for control, leaving a free path for people traffickers. The corruption of Afghanistan’s rulers has stopped them battling opium growers, meaning cheap heroin continues to flow wherever smugglers wish to send it. Russia, which consumes much of the heroin, has more than a million HIV-positive inhabitants, while its health service remains underfunded and its government would rather pursue cheap propaganda wins than help its citizens.
Ukraine, meanwhile, is a mess. The roads running between its cities are poorly maintained, while those in the villages are scarcely maintained at all. Travelling around the country is an ordeal, made worse by the constant threat of being stopped and shaken down by traffic cops looking for infringements of the dozens of traffic regulations, or inventing them if necessary.
At 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. And this again is a feature of many developing countries that have been wrecked by corruption. 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. The daughter of Azerbaijan’s president produces films and publishes glossy magazines, and the sons of its emergencies minister run a lobbying operation from the heart of London. It is all but impossible to imagine countries with such skewed economies building healthy democracies, or honest political systems, or even being able to defend themselves.
The consequences became obvious in Crimea, directly after Ukraine’s revolution. Crimea was technically part of Ukraine, and had been since the 1950s. Yet, when Russian troops – in unmarked uniforms, but driving vehicles with Russian military number plates – fanned out into the peninsula’s cities, and blockaded its military bases, the authorities were so demoralised that no one tried to stop them. An admiral turned over not just himself but the ships of the Ukrainian navy to Russia, despite the oath of loyalty he had supposedly given to his country. The border guards in the airport stamped my passport with the Ukrainian trident, while the country they were serving evaporated around them. Later, in eastern Ukraine, the same pattern repeated. Hardly anyone wanted to defend Ukraine against armed and well-trained Russian-backed insurgents. 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.
This kind of anger undermined Ukraine, and it undermines other countries, too. It helps motivate people to join terrorist groups in Afghanistan, Nigeria and the Middle East. ‘The great challenge to Afghanistan’s future isn’t the Taliban, or the Pakistani safe havens, or even an incipiently hostile Pakistan. The existential threat to the long-term viability of modern Afghanistan is corruption,’ said US Marine Corps General John Allen, formerly head of international forces in Afghanistan, in testimony he gave to a Senate committee in April 2014. ‘The ideological insurgency, the criminal patronage networks, and the drug enterprise have formed an unholy alliance, which relies for its success on the criminal capture of your government functions at all levels. For too long, we’ve focused our attention on the Taliban as the existential threat to Afghanistan. They are an annoyance compared to the scope and magnitude of corruption with which you must contend.’
And I keep wanting to ask everyone – just like I asked Anton – how could they not know what’s going on? It’s so obvious, isn’t it? Well, no, Anton’s right. It isn’t. It’s only easy to find the money when you already know where it is. Likewise, this problem is only obvious if you already know it exists.

On the morning after Halloween 2017, a carved pumpkin appeared on the doorstep of 377 Union Street, a handsome brownstone in the extensive grid of streets south of Brooklyn Heights, New York. The pumpkin, when examined closely, bore a good likeness of Robert Mueller, former director of the Federal Bureau of Investigation turned Special Counsel for probing whether Russia illegally interfered in the election of Donald Trump. The pumpkin was the work of a local photographer called Amy Finkel, and it sat beneath a makeshift ‘designated landmark’ sign declaring the property to be ‘The House That Brought Down a President’. Locals, who voted overwhelmingly for Hillary Clinton in the 2016 presidential election, were having some fun with 377 Union Street.
According to an indictment that had been unsealed by Mueller two days earlier, this property was part of an extensive money-laundering scheme run by Paul Manafort, formerly Trump’s campaign manager (and who has pleaded not guilty to all charges). The indictment stated that Manafort bought the property in 2012 with $3 million from a Cypriot bank account, then mortgaged it for $5 million and used that money to buy other properties and to pay off loans, in a complicated tax-dodging scam.
Manafort worked for Yanukovich in the years before he worked for Trump, and used a similar campaign style for both clients. Under Manafort’s skilled guidance, Yanukovich presented himself as a plain-talking no-nonsense man who would stand up for the forgotten and the left behind. Mueller’s charges against him related to this Ukraine work, and what he did with the money he earned from it. ‘They lobbied multiple Members of Congress and their staffs about Ukraine sanctions, the validity of Ukraine elections, the propriety of Yanukovich’s imprisoning his presidential rival,’ the indictment stated.
According to the indictment’s exhaustive breakdown of his expenses, Manafort loved luxury almost as much as Yanukovich. He spent $934,350 on antique rugs; $849,215 on clothing; $112,825 on audio and video equipment (perhaps he, too, had televisions at sitting-down height in the toilets). But it was the property that was the biggest expense. A condo in New York cost him $1.5 million, a house in Virginia came to another $1.9 million (like Yanukovich, and indeed Trump, Manafort appreciated the votes of people left behind by economic change, but did not want them as neighbours), all of it money that came from the government of Ukraine.
And here the questions are uncomfortable. It is amusing that Manafort’s Brooklyn neighbours trolled him with pumpkins and home-made signs, but worrying that they didn’t know what was going on at the time, any more than Ukrainians knew the true owner of Sukholuchya. But they couldn’t have done. If they had looked up the name of the company that owned the brownstone – MC Brooklyn Holdings LLC – on the New York registry, they would have found no information guiding them to its true owner. The company in question was a local one, but it disguised the owner of this property just as well as the British and Liechtenstein structures disguised Yanukovich. And if they’d been able to ask questions about the origin of the funds used to buy the properties, or to improve them, or to buy the smart clothes, the hi-fi systems and the antique rugs, they would have found the names of companies in Cyprus, St Vincent and the Grenadines, or the UK. Once again, when contemplating the work done by Mueller’s team to reveal the details in the indictment, gravity seems to intensify and the ground falls away. Once you start going down the hole, tracking company ownership and bank accounts, it is hard to stop.
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. I am not an economist, and so am not qualified to address whether structural issues favour capital over workers. I 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.
The fact that rich people can afford to take advantage of offshore tricks unavailable to others is also part of the explanation for why our societies have become so much less equal, but one that has gained relatively little attention. Western governments have struggled to keep on top of these legal games, but at least they have the institutions and traditions required to keep themselves broadly honest while doing so. In newer and poorer countries, however, those institutions and traditions do not exist. Officials and politicians have been swept away by the tsunami of money. 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.
Commentators from all sides of politics have expressed concerns about the effect of inequality on the fabric of society in the United States, where the share of wealth held by the richest 1 per cent of the country rose from a quarter to two-fifths between 1990 and 2012. But if you think that’s bad, look what’s happened to the world as a whole: in the ten years after 2000, the richest 1 per cent of the world’s population increased its wealth from one-third of everything to a half. That increase is driven by places like Russia. In the fifteen years since Vladimir Putin took over in 2000, the 4 per cent of Russians that Credit Suisse considers to be middle class (worth $18,000–180,000) saw their collective wealth increase by $137 billion, which looks good until you see what the country’s upper class achieved over the same period. The 0.5 per cent of Russians who have more than $180,000 saw their wealth increase by an astonishing $687 billion. 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.

We habitually think of the world as a patchwork of countries. As a boy, I had jigsaws of the world, of Britain, America and Europe, in which I could place the shapes of the counties, states and countries into the holes left by their borders; my own children now play with them. France is a hexagon; Italy looks like a boot; Wyoming and Colorado are almost perfect rectangles, hard to tell apart; Chile is helpfully long and thin. This reflects an approach to the world that divides things up between states, and in some ways that approach is relevant and correct. If discussing the number of children born each year, or the number murdered with guns, or football-playing populations, it makes sense to apportion the people involved to the countries where the relevant events take place.
Sometimes, however, that approach is less appropriate. Transparency International (TI), the anti-corruption campaigning group, publishes an annual Corruption Perceptions Index, in which it rates almost all the countries in the world by how corrupt they are, from Denmark and New Zealand at the clean end, down to North Korea, South Sudan and Somalia at the other. It even produces a map, showing corruption in terms of colour. Most of Africa is an alarming red, as is South America and Asia, while Europe, North America and Australasia are various friendly shades of yellow. This is helpful in as far as it goes, and it’s true that you are more likely to be shaken down for a bribe in Kinshasa than Copenhagen, but what about the more sophisticated forms of corruption used by Yanukovich or, if Mueller’s indictment proves to be true, by Manafort?
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? From the money’s perspective, the borders are unimportant. It has been a long time since borders got in the way of money flows. When I go to Kiev, I can use my British credit card, just like I can use it in California or Cambridge or St Kitts. That does not mean the borders have disappeared, though. 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.
One place we often pass through is Eaton Square – now perhaps London’s most prestigious address – a magnificent oblong of grand cream-painted foursquare houses, all tucked behind shoulder-height black railings and looking on to private gardens. In January 2017, a group of activists – they call themselves the Autonomous Nation of Anarchist Libertarians, which gives them the acronym ANAL – snuck into 102 Eaton Square via an open window, and opened it as a shelter for the homeless. The house is vast and stucco-fronted, with a pediment on pillars stretching from a balcony on the first floor up to the fourth. When I called, a black flag was flying from one of its flagpoles, and a bearded man was leaning on the balustrade smoking. He shouted down to ask what I wanted and promised to be out in a second.
A middle-aged man in purple corduroys and a waxed jacket witnessed our exchange, and crossed the road with his wife to inform me I was the ‘scum of the earth’. The bearded anarchist, emerging on to the pavement, caught the tail of this and grinned at me. He was Hungarian. He led me down a flight of stairs into the basement, through a fire exit, and into what had once been a cinema. They had just lost a court battle against eviction, he explained, and would be moving out. But I was free to explore if I wanted to. The floor was parquet, and the stairwells extended up to lanterns cut into the roof. Rooms led into rooms led into rooms. Scribbled graffiti on the walls did nothing to detract from the fact that this would make someone a glorious house.
That someone was Andrei Goncharenko, a manager at a subsidiary of the Russian gas giant Gazprom, who bought a string of properties in west London over the three years up to 2014. This one was the cheapest, at a mere £15 million, which is perhaps why he had left it empty. ‘Our main priority is to highlight the large number of empty buildings in London and to try to ensure they don’t go to waste when there are so many homeless people,’ Jed Miller, one of the anarchists who appeared in court to argue against the eviction, told journalists in January 2017. ‘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’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. Goncharenko himself preferred Gibraltar as home for his company MCA Shipping. Across England and Wales, more than 100,000 properties are owned offshore, just like Yanukovich’s and Manafort’s properties were.
If the time ever comes when someone asks Londoners, as I asked Anton, how they could not have known what was going on, they’ll reply too that it was hidden from them. Any of these properties could be owned by a crook, but it’s impossible to say which ones. One apartment stretches across a single floor of two adjoining properties, and cost Cane Garden Services Ltd, a company registered in the British Virgin Islands, almost £13 million. This luxury-loving and profligate shell company is registered at a betting shop on the Caledonian Road, an unlovely thoroughfare in north London on which you’d be more likely to find amphetamines than a top-notch lawyer. Is that a red flag? Perhaps, or perhaps not. It’s that dizzy feeling again. Once you start looking for red flags you see them everywhere. Houses number 85 and 102 are both owned by offshore companies registered to the same address in Hong Kong. The Liberian company that owns number 73 is registered in Monaco. One flat in number 86 is owned by Panoceanic Trading Corporation, a Panamanian company with a name that appears to have come straight out of a 1960s thriller. Surely a crook wouldn’t be that obvious? Or is it a double bluff?
On our Kleptocracy Tours, we habitually manage to describe six or seven properties in an afternoon. That means, if we wanted to explore the provenance of all the offshore-owned properties on Eaton Square, it would take us around two weeks. Then we would have to start on the neighbouring roads. Every adjoining street has as many offshore properties, all intermeshed in a great web of confusion and deceit that extends as far as Britain does, and then some more. 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. There will be plenty more about this pick and mix approach to legislation later: it’s the subject of this book.
The physicist Richard Feynman supposedly once said: ‘If you think you understand quantum mechanics, you don’t understand quantum mechanics.’ I feel the same way about the way offshore structures have warped the fabric of the world. But if this dizzying realisation sends me out of the house and away from my screen, there’s no escaping it. The building where I buy my 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.
This is a phenomenon with novel consequences that go to the heart of what a government is supposed to be for. The American sociologist Mancur Olson traced the origin of civilisation back to the moment when pre-historic ‘roving bandits’ realised that, instead of raiding groups of humans and moving on, they could earn more by staying put and stealing from their victims all the time. Early humans submitted to this, because – although they lost some of their freedom when they submitted to these ‘stationary bandits’ – they gained in return stability and security. The bandits’ interests, and the community’s interests, became aligned. Without bandits constantly raiding them, and stealing their property, groups of humans built increasingly complex communities and economies, becoming increasingly prosperous, which led eventually to the birth of the state, to civilisation, and to everything we now take for granted.
‘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.
These ‘offshore bandits’ combine the worst features of the old roving bandits with the worst features of their stationary successors. Thanks to the magic of the modern financial system and the anonymity provided by offshore jurisdictions that accept money whatever its provenance, they are oppressing their subjects without contributing to increased security and prosperity.
Ukraine’s revolution of 2014 was the country’s second in a decade. The first uprising – called ‘the Orange Revolution’, after the colour of the protesters’ flags – was a joyous occasion, a street party in the depths of a bitter winter. When the government finally conceded the protesters’ demand that an election marred by fraud be re-run, the feeling was euphoric. I was one of the hundreds of thousands of people who danced and partied at the prospect of a better future, a more honest country governed by rules rather than by the arbitrary dictates of crooked politicians. It felt as if those wishes I had brought with me to Russia in 1999 had finally come true. This was the hopeful future I had travelled so far to find.
I should have known better. The Orange Revolution failed to end corruption. If anything, things got worse. It is so easy to steal money and stash it in Moneyland, where it will be safe for ever, that it takes an effort of will not to join in, particularly in countries without strong institutions or independent law enforcement. And the lessons of Ukraine apply to Nigeria, Malaysia and Afghanistan, too. These countries are different in language, culture, religion and almost everything else, but if you look at them from the perspective of money, such distinctions vanish.
Wherever money is stolen from, it ends up in the same places: London, New York, Miami. And wherever it ends up, it is laundered in the same ways, through shell companies or other legal structures in the same handful of jurisdictions. These last few years, we have got used to criticising globalisation for the way it has stripped jobs from Western countries and re-located them elsewhere, with no concern for those left behind. Globalisation’s defenders counter-argue that by allocating capital to wherever it can work most efficiently, it has lifted more people out of poverty in China, India and elsewhere than any other movement ever.
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. This is the dark side of globalisation, and there is no positive case to be made for it, unless you are a thief or a thief’s enabler.
Moneyland is not an easy place to confront, however. You can’t send in an army against it, since it doesn’t feature on any maps. Nor can you implement sanctions against it, or send diplomats to talk it round. Unlike conventional countries, it has no border guards to stamp your passport, no flag to salute and no foreign minister to talk to on the phone. It has no army to protect it, because it doesn’t need one. It exists wherever there is someone who wants to keep their money out of the reach of their country’s government, and who can afford the lawyers and financiers required to do so. If 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 have structured this book both chronologically and thematically, picking and choosing illustrative examples from as much of the world as I can to reveal quite how widespread Moneyland is. Firstly, I begin by describing how Moneyland works, how it conceals wealth, and how small jurisdictions have made a living from crafting their laws to facilitate that. Then I describe what it means when the powerful take advantage of Moneyland to steal, starting with the story of one Ukrainian hospital, then showing how that one hospital is representative of much of the world.
Thirdly, I describe how Moneyland defends both its citizens and their wealth: how it sells them passports; how it protects their reputations from journalists; how it prevents their stolen wealth being recovered by its true owners. Moneyland can let you get away with murder, and it has. Fourthly, 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.
Finally, I describe how governments have tried to fight back, focusing on the way the United States targeted Swiss banks, and then how clever lawyers and bankers used that opportunity to make Moneyland stronger and safer than ever. This may not seem a hopeful prospect, but if the first step to solving a problem is recognising its existence, then we are perhaps now on our way.
Researching this book has not been easy. Moneyland is well guarded, and does not give up its secrets without a tussle. It also challenges everything we think we know about how the world works. 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.
That is why I begin by describing how Moneyland came into existence, and how it defeated a previous attempt to make the world safe for democracy. In the dark days of the Second World War, the Allied powers confronted a threat to open societies more severe than any before or since. In response, they crafted a global financial architecture intended to give primacy to democracy in perpetuity. Never again, they hoped, would democratically elected governments be threatened by any rival. Their attempt failed, and the story of how it failed is the story of the birth of Moneyland.


STANDING UP TO MONEYLAND

There is an enduring point of view that none of this matters. Yes, much of the world is being looted by greedy thugs posing as politicians; yes, rich people are minimising their taxes through elaborate offshore structures; but as long as the Moneylanders spend their money in our countries, then we come out on top. This argument is the basis for the economies of Jersey and Nevis, as well as for the kind of economy Nevada would like to become. It also underpins a lot of the discussion around the London and New York property markets: it may be true that few Brits or Americans can afford a house in large sections of their own cities, but that doesn’t matter because estate agents and lawyers and accountants make a good living assisting the people who can. Once upon a time – before Andy Murray spoiled it by being both British and good at tennis – this could have been called the Wimbledon hypothesis: it doesn’t matter if you don’t win the trophy, as long as you host the tournament.
I 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.
Another country not on the list is Ukraine, which has produced so many stories of high-level egregious corruption, from people claiming such different political beliefs, over such an extended period, that you could be forgiven for concluding that this is simply what Ukrainian politicians do. Antipodean bower birds just happen to make elaborate displays of beetle wing cases; the moon just happens to fit precisely over the sun during a solar eclipse; ministers in Kiev just happen to steal.
The indictment of Paul Manafort, signed by special investigator Robert Mueller in October 2017, puts that view of corruption – as a form of behaviour specific to a particular culture – into perspective, however. Manafort is a veteran Washington operator, and Donald Trump’s successful election bid was the fifth presidential campaign he had been involved in. At the time of writing, he had not been convicted, and he insists he is not guilty of any of the charges in the indictment, but it is striking how closely the behaviour he is accused of tallies with that of Ukrainian politicians over the decades since independence. He even had a British company, Pompolo Limited, although it was not registered at 29 Harley Street, but instead at a house in a remote part of north London, opposite a Homebase. He spent his money on luxury goods and property in the United States, in the same kind of upscale neighbourhoods favoured by the clients of Gennady Perepada, the ebullient bilingual broker I met in New York. The expenditure breakdown could have come from a Senate investigation into a luxury-loving African politician.
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.
In one of the Harry Potter books, Mr Weasley warns his children: ‘Never trust anything that can think for itself if you can’t see where it keeps its brain.’ He was referring to a diary that magically replied every time his daughter Ginny wrote in it, and which turned out to be possessed by the spirit of the evil Lord Voldemort, but the principle is equally sound in the Muggle world. Anonymous companies act rationally, but have no clear controlling intelligence, and that should perturb anyone who comes into contact with them. It is striking that even their defenders struggle to come up with a justification for their existence. The most frequent argument I have heard is one based on the Disney Corporation’s quest to buy up land in Florida, which it did via multiple small companies, rather than in its own name. Had it been unable to hide its identity, the argument goes, the sellers would have increased the sale price because of their knowledge of its wealth, which would have been unfair. If that is the best case that anonymous companies’ defenders can make, then it’s clear there really is no argument for them. At the very least, political parties should refuse to accept money from any entity if they can’t see where it keeps its brain.
The widespread acceptance of this anonymous money into politics is contributing to a broad loss of trust in democratic processes. As I write, some eighteen months have passed since the Brexit referendum, and we still do not know who gave £425,000 to a body called the Constitutional Research Council, which passed it to Northern Ireland’s Democratic Unionist Party, which spent most of it on advertisements urging Britons to vote Leave. No rules were broken here, because of the special circumstances of Northern Ireland where party donors have their identities hidden for security reasons, but rules were very definitely bent. Almost all of the money was spent in England and Scotland, where the DUP fields no candidates, and where the money would normally have had to declare its provenance.
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.’
The system that the Allies created did not last as long as its creators hoped it would, and it was frequently criticised during its lifetime, but its achievements look remarkable in retrospect. As the British journalist Ed Conway points out in The Summit, his 2014 history of the Bretton Woods meeting and its aftermath: between 1948 and the early 1970s, the world enjoyed progress and stability never rivalled before or since. The world’s gross domestic product expanded by an average of 2.8 per cent a year, more than the equivalent rates for the preceding and succeeding periods. For those charmed two and a half decades, there was not a single global recession. Since the system collapsed, there have been four.
The Bretton Woods participants’ dream of locking speculative money behind national borders is dead. Globalisation is here to stay, so we must seek other solutions to the problems they identified. If we accept globalisation, however, we don’t need to accept its dark side: the profusion of anonymous money, which is nosing into our politics, our economies and our major institutions. The simple fact about offshore is that it only exists to allow people to do things they couldn’t do onshore. Offshore structures allow people to hide their ownership of money, which benefits those with something to be ashamed of, and bewilders everyone else.
There are some people with legitimate reasons to disguise their identity: film stars at risk of being stalked; political refugees pursued by rogue regimes; children with fortunes left to them by wealthy parents. Their privacy should be respected, but it should be provided systematically and consciously, for clear reasons, and to anyone that needs it, not just to the rich. At present, the favours of Moneyland go only to those who can afford them, not to those who need them. Once those with legitimate fears of exposure have been given privacy, then everyone else should be treated in exactly the same way.
I came across one example of why our failure to do this is a problem when I was researching an article about lobbying in the UK, which was never published for legal reasons. The European Azerbaijan Society (TEAS) had spent tens of thousands of pounds flying members of parliament to Baku, putting them in top-class hotels, and showing them around. When those MPs came back, they almost invariably then spoke favourably about Azerbaijan in the House of Commons, which seemed strange since this former Soviet republic is a hereditary dictatorship which jails journalists who reveal the business dealings of its ruling family, and there is thus little positive to say about it.
Azerbaijan ‘has made tremendous strides forward both politically and economically in recent years. That should be recognised and rewarded,’ said Tory MP Mark Field in 2011, who was at the time earning £4,000 a month from TEAS. Across on the opposition benches, there was equivalent enthusiasm. ‘We discovered that the trade unions there enjoyed better relationships and more employment rights than we do here in the UK. Azerbaijan is a young democracy,’ said Jim Sheridan, a Labour MP, six months after returning from a £3,100 trip of his own.
We can only speculate about whether there was a causal link between the all-expenses-paid trips to Azerbaijan and the on-the-record praise heard in the House of Commons, but TEAS’s founder, Tale Heydarov, was in no doubt about it. ‘Such visits have great effectiveness,’ he boasted at a conference in March 2012.
So where does the money come from? Heydarov, who is fluent and charming and who speaks the kind of beautiful English you’d expect from a graduate of the London School of Economics, told me at a drinks reception (when I had the bad manners to ask him) that TEAS raises money from members’ subscriptions. But it does not appear to have enough members to pay these kind of expenses; and that explanation does not tally with the words of Göran Lindblad, a Swedish politician who was on the TEAS payroll for a while. ‘Very often the documents that followed the money show a transaction starting in the Marshall Islands, via Estonia,’ he told me. ‘Every banker and taxman will directly think about money laundering … It’s lucky no bank reported it to the tax authorities.’ It is surprising that TEAS would route members’ subscriptions earned in Britain via the Marshall Islands and Estonia before spending them on MPs’ travel expenses.
And this is not the only mystery. Tale and his brother Nijat, who has also been involved in running TEAS, are not short of cash. They have both owned property in highly desirable parts of central London, as well as a café and a restaurant. Meanwhile, their father has been head of Azerbaijan’s Ministry of Emergency Situations (MES, which wags called the Ministry of Everything Significant) since 2006. In a US embassy cable revealed by WikiLeaks, an American diplomat told his superiors in Washington that Heydarov Sr had earned a vast fortune by exploiting his powers (Kamaladdin Heydarov has denied the allegations). ‘Only one name – Kamaladdin – is regularly whispered as the most powerful man in Azerbaijan,’ the cable said. ‘Heydarov expanded Customs income by systematising bribery within the organisation, in effect creating an extensive pyramid scheme.’
It may well be that TEAS does raise all its income from members, or that Tale Heydarov has another source of earnings. But if that is so, the evidence has never been presented, which leads to corrosive speculation that money embezzled from Azerbaijan’s state budget could have found its way to London, been spent on MPs, and thus persuaded them to praise the Azerbaijan government in the House of Commons. This is clearly a very worrying thought, and not the kind of speculation that helps expand one’s faith in democracy. And similarly opaque money trails can be found in many other countries. A Ukrainian friend alerted me to the existence of Aveiro, a Northern Ireland-registered limited partnership, that is listed on its corporate registration documents as involved in ‘international trade and investment’. In reality, it was spending money on Washington lobbyists on behalf of unidentified Ukrainian interests, and there was no way of finding out who they were. Aveiro’s two partners were offshore companies – Montfler SA and Nisbett Invest SA – and the documentation didn’t even reveal which jurisdiction they were based in, let alone who their shareholders were. You might trust in the good intentions of Aveiro’s owners, but in reality no one would employ such a roundabout approach to spending their money, unless they have something to hide.
There have been efforts to address this problem, in some parts of the world. Ukraine now insists that all companies identify their real owner. The database is poorly managed and hard to access, but it did allow me – when searching for the oligarch Mykola Zlochevsky, the man whose $23 million was temporarily frozen by a London court – to track down his mother, in a flat in central Kiev, and have a very nice chat with her. He had listed himself as living at her address, and she said she had got accustomed to journalists popping by occasionally. Other countries have done the same, although so far with the same kind of problems. Denmark is one of several European countries that has insisted that companies publish their ‘beneficial owners’, which puts paid to any repeats of the scams run by Bradley Birkenfeld before he blew the whistle on UBS, and for which he liked to use Danish companies.
Britain now requires companies to report a ‘person with significant control’ (PSC), which means we can sidestep the clever ownership structures used by Formations House, the company factory on Harley Street, and see who really owns its shares. The new PSC register shows that the company is owned by Charlotte Pawar, the evasive woman whom I briefly met (and who emailed to complain after I wrote a story about the long record of companies created by Formations House being involved in fraud).
Campaigners who have analysed the data point out that it shares the same problems with all of Britain’s corporate information, in that it is self-reported and not checked, but it is still a step forward in the quest to stop people hiding behind companies and other legal structures. The British parliament has voted to force its offshore territories to open up their registries of company ownership to public scrutiny, meaning we should eventually be able to see behind the veil of secrecy erected by the British Virgin Islands, Cayman, Anguilla, Gibraltar and others. Without the secrecy provided by corporate structures and numbered bank accounts, the central section of the Moneyland pathway – steal–hide–spend – falls away, and tracking the theft becomes far easier. Remember: John Tobon of Homeland Security Investigations in Miami said that fully half of his time was spent just working out who owns stuff. Other investigators said that was an understatement. If real names can be attached to property, it becomes very obvious, very fast, which property has been stolen.
All efforts to move in that direction are welcome but the problem so far is that those efforts have all been partial, and do not address the root cause of Moneyland, which is that money is international while laws are not. As long as some jurisdictions allow things that other jurisdictions do not, Moneyland’s gatekeepers will always find a way of exploiting the mismatches, just as they have with the differences in the information exchange requirements between the United States and the rest of the world. The companies that sell residency are now marketing their product to wealthy Russians and others, with the promise that their jurisdictions will keep financial secrets, since information is exchanged with the country of residence, not the country of origin. Loopholes provide opportunities, always.
Heidi-Lynn Sutton, the regulator in Nevis who found my concerns about corruption so amusing, made it clear her island would not be following the British territories and giving foreigners automatic access to its registries. ‘We are an independent country,’ she said. ‘So if law enforcement officials here in Nevis want to look at our register, that’s a different matter for us. But for another jurisdiction to do that without a warrant, that might be of concern.’
Her concerns are understandable, but they need to be overcome. If the world is to stop billions upon billions of dollars draining into Moneyland and away from oversight, it needs to act as one. This was understood at the Bretton Woods conference, where participants believed they were acting to keep democracy safe. Ironically enough, their actions required a certain disdain for democracy for them to be successful. The International Monetary Fund, and John Maynard Keynes’ proposal for an international currency, were both dominated by a supposedly enlightened technocratic elite. In democracy, the argument appeared to be, some things are too important to leave to the people. Any argument of this nature is inevitably vulnerable to a backlash from politicians able to whip up public distrust.
In the United States, Donald Trump’s campaign and presidency harnessed some of that same spirit, amid wide distrust of multilateral institutions. In his first six months in office, Washington scrapped two crucial measures that stopped US companies from bribing foreign officials: the Extractive Industries Transparency Initiative, and the related Cardin-Lugar amendment, both of which required energy companies to publish what they paid to foreign governments. Oil companies had argued that the requirements put them at a disadvantage compared to foreign rivals, which was preventing them from expanding. ‘The energy jobs are coming back. Lots of people going back to work now,’ said Trump, after signing the documents to scrap the rules – a clear example of a democratic imperative clashing with an international initiative.
Similarly, after the Brexit referendum, the UK government’s agenda to open up the offshore world to fight both tax dodging and corruption almost entirely halted. ‘The anti-corruption phone just stopped ringing,’ said Jon Benton, an ex-policeman who worked in the Cabinet Office as a senior adviser for the pre-referendum prime minister, David Cameron. In a country that is focused on its own troubles and concerns, there is little appetite for leading a global quest to rebuild the world’s financial architecture. It is possible to cheer this development, as a reassertion of one country’s democracy against the snares of international bureaucracy, which of course it is. But it is ironic, too, that a democratic outburst sparked by anger over the arrogance of a distant elite should have destroyed an initiative designed precisely to rein in that very elite.
This enduring tension – between democratic sovereignty in nation states and the need for international cooperation to control financial flows – will not go away, and will remain a point of opportunity for anyone keen to develop and expand Moneyland. Even large and wealthy countries are vulnerable to lobbying from rich people keen to keep more of their money for themselves, and to pay less into the taxes that support everyone else in society. Small jurisdictions, like Jersey or Nevada or St Kitts and Nevis, are inevitably even more vulnerable, since it takes less money to make a big impression. With money flowing freely, it seems impossible that some jurisdiction somewhere won’t undermine any international agreement that is created.
But if you are tempted therefore to say that this is just too difficult, and that Moneyland is simply the inevitable result of globalisation, and one that we must accept, please consider what that means. Moneyland is a country that subverts traditional nation states: it is everywhere and nowhere, somewhere ‘in the cloud’, a new development – a legal construct that is divorced from any place on the map. We cannot see it now, but the stronger it becomes, the more obvious it will be. And it will never be easier to confront than it is today.