84 The Economist November 13th 2021
Books & arts
DealingwithdirtymoneyHear no lies
N
ext monthJoe Biden will host a virtu
al “Summit for Democracy”. The aim of
the powwow is to galvanise likeminded
leaders to counter the global growth of au
thoritarianism. One of its themes will be
combating kleptocracy: the plunder and
laundering of national wealth, typically
using international banks as conduits for
the illgotten gains and Western property
markets as a destination. Campaigners
hope the meeting will renew momentum
in the fight against such looting—a fight
Donald Trump did not exactly lead from
the front. Leaked documents that highlight
the use of offshore financial networks to
move money in secret, from the Panama
Papers in 2016 to the Pandora Papers this
October, underline the urgency of the task.
Measuring the private wealth parked in
“secrecy jurisdictions” is, by definition,
impossible. Estimates range from a few
trillion dollars to $32trn. The proportion
that is dodgy is also hard to estimate. At
one extreme is perfectly legitimate mon
ey—personal funds seeking privacy, or
crossborder jointventures using offshore
structures for the purposes of neutrality. Attheotherisblackcash,stashedinshell
companies or trusts to mask corruption or
launder drug money. In between is a large
grey area that includes legal but ethically
dubious tax avoidance.
And where exactly is “offshore”? The
stereotypical haven is a palmfringed is
land with biddable politicians. Yet bigger
states that harrumph at such places have
questions to answer, too. The most com
prehensive study of shell companies
found that providers in members of the
oecd, a club of mostly welloff countries,
were more likely to offer true anonymity
than those in classic offshore financial
centres. British shell companies and part
nerships feature prominently in giant
“laundromat” schemes emanating from
Russia and Azerbaijan. Several eucoun
tries are conduits for tax trickery. Andmuch of the world’s dirty money ends up
invested in luxury pads in places like Lon
don, Paris and Miami.
Casey Michel’s title leaves no doubt
where the journalist and fellow of the Hud
son Institute, an American thinktank, be
lieves much of the blame lies. For all its
claims to moral leadership in finance, he
argues, America has become “the world’s
greatest offshore haven” and the largest
provider of the “financialsecrecy services”
that facilitate moneylaundering. This has
let it pull in unrivalled amounts of tainted
cash from “the world’s worst”, from cor
rupt regimes to extremist networks.
America was one of the first countries
to criminalise moneylaundering and
since the 1980s has been the most aggres
sive in trying to curb it. It drove efforts to
create the Financial Action Task Force
(fatf), a global antimoneylaundering
standardssetter that was founded in 1989.
Since the 9/11 attacks of 2001 it has taken
the lead in disrupting terroristfinance
networks. It was an American law that in
stigated the global exchange of tax data to
curb crossborder tax evasion.
Yet at home America tolerated many of
the bad practices for which it hammered
other countries. As American states com
peted against each other for corporate reg
istrations, shell companies proliferated in
Delaware, Wyoming and Nevada—the last
being a crucial bridgehead for Mossack
Fonseca, the law firm at the centre of the
Panama Papers (and forced to close by
those revelations). South Dakota develKleptocracy will flourish as long as Western countries welcome the loot—and
Western professionals help to move and hide it→Alsointhissection
85 Witchcraftinthe17thcentury
86 Thecoldwaronthecouch
86 An artcollectionopensup
87 Johnson: Double troubleAmerican Kleptocracy. By Casey Michel.
St Martin’s Press; 368 pages; $29.99.
Scribe; £18.99
The Enablers.By Frank Vogl. Rowman &
Littlefield; 216 pages; $32 and £25