How kleptocrats hide their ill-gotten gains in Ireland and Britain
In 2019, the US Department of Justice brought bribery charges against Gulnara Karimova, the daughter of the former president of Uzbekistan, alleging she had received around $1bn in corrupt payments from telecoms companies.
Kleptocracy — literally “rule by thieves”, where a leader corruptly steals their country’s wealth — is not a new concept. Rulers, both ancient and modern, have exploited their position to siphon off public assets, entrenching their power through corruption and repression. Yet what is a relatively new phenomenon is how modern-day kleptocrats are able to utilise a transnational network of professional enablers located in the West — wealth managers, real estate agents, lawyers — to extract money and maintain power.
As a result, a lot of this corrupted wealth makes its way from kleptocracies to democracies like Ireland and Britain. In 2019, the US Department of Justice brought bribery charges against Gulnara Karimova, the daughter of the former president of Uzbekistan, alleging she had received around $1bn in corrupt payments from telecoms companies, with up to $300m frozen in a bank account in Dublin.
Kleptocracy is intimately tied up with organised crime and again here Irish entities can be used to facilitate the transfer of criminal cash with Irish shell companies, special purpose vehicles (SPVs) and investment limited partnerships (ILPs) used, according to Transparency International, “as a conduit for laundering illicit financial flows from overseas".
Kleptocracy therefore depends on an ecosystem of interlocking companies, trusts and bank accounts, created by enablers both here and abroad, that provide the financial, legal and reputational tools to legitimise stolen wealth. But professional enablers do not simply move money, and they don’t just supply their services. They create the structures that sustain kleptocracy, embedding it into our political and economic fabric.
Our new book, , analyses many cases of professional enabling of people whose wealth originates in post-Soviet countries such as Uzbekistan and Russia. In many instances, we found that it was the professionals who make the difference to whether a kleptocrat was able to succeed in moving money, buying a property, or laundering a reputation.
It is these professionals who find creative ways to find loopholes in the rules, and come up with new products which benefit the corrupt, such as citizenship-by-investment schemes, which grant an individual a passport in exchange for a set fee.
We also look at political donations, and even donations to universities, where the lack of transparency has allowed shady payments from overseas to flow into venerable institutions such as Cambridge and Oxford University. In doing so, these professionals have indulged kleptocrats much like the Catholic church once sold indulgences — offering absolution for a price.
The effect on the kleptocrats’ countries of origin is clear — money gets stolen, poverty increases, and autocratic rule is entrenched. What is less understood is the effect that transnational kleptocracy has on us in the West. On a purely commercial level, house prices can be distorted when there is an influx of cash, as happened in London in the 21st century with the billions invested in real estate by Russian oligarchs and other shady investors from abroad.
But the issues run deeper than this. Over half of British tier 1 investment visas — where individuals from abroad could gain residency by paying £1m — were reviewed by the British government for potential security concerns.
Corporate intelligence firms and libel lawyers act against journalists and researchers on behalf of their elite clients, undermining free speech and public interest research. Political donations from corrupted individuals undermine democracy, and without restrictions such corrosive capital can begin to challenge the efficiency and effectiveness of the rule of law.
With Russia’s full-scale invasion of Ukraine, there was a realisation — at least in certain quarters — that the open-door policy to oligarchic cash may not have been a good idea. Along with wide-ranging sanctions, the British parliament passed two acts in 2022 and 2023 to counter economic crime, with an eye on illicit financial activity from Russia.
However, if it was just a legal question, the solution would be easy: investigate those enablers who are breaking the law. Yet the overall picture from the nine indulgences we study in our book, from “hiding money” (banking) to “silencing critics” (defamation law), is of regulators outgunned by the private sector.
Enablers aren’t usually accessories to crimes. They may not be interacting directly with the grand corruption that produces the wealth and are typically compliant with the law. In most cases, they appear to be either aware of who they are acting for or wilfully unwitting. It cannot easily be legislated out of existence — think of a company owned by the offspring of a corrupt president receiving a lucrative oil contract, for example.
How then to indulge no more in kleptocracy? Regarding legislation, in some ways, Ireland was ahead of the game, at least in response to tackling criminal assets in general.
The introduction of the Proceeds of Crime Act and the Criminal Asset Bureau Act in 1996, made the Republic one of the first countries to adopt a model where asset recovery could occur without a criminal conviction. However, unlike Britain’s more recent attempt to tackle the problem (the Unexplained Wealth Order, introduced in 2017) Ireland’s legislation is primarily focused on persons suspected of being involved in serious and organised crime and has no specific provisions on corrupt officials from overseas.
Cases often fail against these individuals because it is near impossible to get the necessary evidence from the kleptocratic state (which of course will not be cooperative) to prove that the asset has been bought with the proceeds of crime.
We suggest introducing legislation which allows law enforcement to designate “kleptocratic enterprises” as organised crime, allowing assets to be seized by anyone who is part of such a network. This would also allow law enforcement to more easily target the enablers as they would also be part then of a criminal network.
But new legislation is only as strong as its enforcement, and for that, there needs to be greater resourcing of An Garda Síochána, as many have called for, in the tackling of economic crime.
Legislation regarding company formation should be tightened, requiring a nominated officer to be resident in Ireland who is liable for prosecution should the company be shown to be involved in criminal activity. This would stop company service providers from simply signing off on hundreds of companies with overseas owners.
Across the world, there needs to be transparency from charities, universities and political parties, and there should be more protection for investigators, journalists and whistleblowers.
Without such actions, the transformation to a world where kleptocratic and oligarchic wealth and influence sit easily within democracies — witness Trump’s America, as an ongoing example — will continue apace.
