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kottke.org posts about Casey Michel

Sanctions Would Bite Russia Harder with Pro-Transparency Finance Reforms

posted by Jason Kottke   Mar 09, 2022

The other day I shared a video and article by Oliver Bullough on how the UK enables Russia’s oligarchs to launder their money: Putin’s Oligarchs and the London Laundromat. Writer and researcher Casey Michel, author of American Kleptocracy: How the U.S. Created the World’s Greatest Money Laundering Scheme in History, is here to tell us that the US and EU countries are also guilty here. In a piece for The Atlantic, Michel argues that the present sanctions against Russia would be much more effective if the West were willing to address the use of anonymous shell companies and trusts to launder funds.

The Western response has been far broader than most experts anticipated, and threatens to throw the Russian economy into chaos. Yet there’s a catch. Absent significant domestic reforms in the West — reforms that should have been enacted long ago — sanctions targeted at the oligarchic and official figures close to Russian President Vladmir Putin risk inflicting little more than a flesh wound on Russia’s imperial kleptocracy.

Rampant financial anonymity in places like the U.S. makes it relatively easy for powerful rich people to evade sanctions. A Russian oligarch may have multimillion-dollar mansions in Washington, D.C.; or multiple steel plants across the Rust Belt; or a controlling stake in a hedge fund in Greenwich, Connecticut; or an entire fleet of private jets in California; or an array of lawyers setting up purchases at art houses around the country. And all of that wealth can be hidden-perfectly legally-behind anonymous shell companies and trusts that are enormously difficult to penetrate.

If Western policy makers hope to hold Putin’s cronies truly accountable, sanctions will have to be paired with pro-transparency reforms that can disassemble this web of secrecy. Western governments should start by ending anonymity in shell companies and trusts; demanding basic anti-money-laundering checks for lawyers, art gallerists, and auction-house managers; and closing loopholes that allow anonymity in the real-estate, private-equity, and hedge-fund industries. That is, if the sanctions are to retain their bite, the entire counter-kleptocracy playbook needs to be implemented-immediately.