Oligarchy

LITTLE BLUE MEN

This is going to be a short newsletter this week because I am in London running from meeting to meeting, including this one, which is dedicated to the oversight of Ukraine’s reconstruction efforts. It is obviously crucial for the success of Ukraine’s rebuilding program and for its continued legitimacy in the eyes of both Ukrainians and others that the money sent to pay for it is not stolen. If even a small amount of money does end up buying houses in London instead of rebuilding them in Mariupol, international donors and Ukrainian citizens alike will get fed up quickly.

Perhaps of even greater significance, a well-run reconstruction program would not only rebuild the bridges, roads, factories and houses that Vladimir Putin’s war has destroyed but could also help build the solid and accountable institutions necessary for a robust democracy, which oligarchs have undermined in the past.

• “There is a widespread view that the savvy and strategic use of reconstruction funds can set Ukraine on this path, but that without strong oversight in the use of these funds, international financial support risks reversing the country’s progress in fighting corruption,” is the view of this pithy analysis from Transparency International’s Helpdesk.

There are differences of opinion (of course) on how to make that happen, with an inevitable tension between democratic legitimacy at home and international supervision abroad. Balancing those two competing demands is easier to call for than to actually implement. There has been some progress in strengthening Ukraine’s anti-corruption institutions over the past year, so international donors will hopefully be willing to trust officials in Kyiv a bit more than they might have done in the past. But the recent competition for a new head of Ukraine’s National Anti-Corruption Bureau, which returned a candidate with whom the country’s leading anti-corruption activists were unhappy, is a reminder that oversight remains necessary. There is a colossal amount of money at stake, as well as the future of a civilization, and stuff like that, so the pressure is on.

On a slightly more frivolous note, I’m giving a solid 8 out of 10 to whoever came up with the name “Supervising and Monitoring Ukraine’s Reconstruction Funds” for the civil society oversight program and the acronym that results from it.

• “The SMURF project aims to empower Ukraine’s ‘second line of defense’ – civil society and investigative journalists – to gather the expertise and tools that will enable it to monitor the proper allocation of funds and discourage kleptocracy and corruption.”

As many of you may know, smurfing is a money laundering technique that involves breaking large amounts of cash down into smaller quantities that can pass undetected through automated compliance procedures. I once asked a police source why it was called smurfing, and he said it was because it involved an army of people doing repetitive tasks like the little blue mushroom-dwellers in the comic strip/cartoon. I admit that at the time I was dubious. It was an etymology that seemed too convenient (rather like the idea that “money laundering” derives from mobsters running cash through laundry businesses to disguise its origin), but I’ve been reading congressional committee transcripts from the 1980s over the past week, and it looks like my source was right.

• “For years, launderers attempted to evade the money trail created by this reporting requirement by using a technique called structuring or “smurfing.” Structuring works as follows: launderers divide large amounts of cash into smaller portions and deposit the latter into separate accounts in amounts of less than $10,000, or into the same account on different business days. The Anti-Drug Abuse Act of 1986 modified the law to make it clear that smurfing was a felony,” it says here from all the way back in 1989.

Smurfing appears to have originated with the Florida-based Colombian Alberto Barrera Duran who broke down cash bundles into totals of less than $10,000 to avoid the cash disclosure requirements of the Banking Secrecy Act and had the smaller quantities taken to incurious tellers in regional banks where they were exchanged for cashier’s checks. He thus gained the nickname Papa Smurf after the cartoon character who — while still being blue and small — has red trousers and a beard and who keeps the other smurfs in line. Smurfs themselves use the verb “to smurf” to mean pretty much anything and, in the original French, where the name for a smurf is a schtroumpf, “schtroumpfer” has the same universal meaning. So I’m wondering if schtroumpfer does the same job in French money laundering parlance as “to smurf” does in English. Any French speakers among my readership who are willing to let me know? Whether it does or not, it would be 20 out of 10 for anyone who could come up with a parallel French-language oversight program for the disbursal of international funds to Ukraine with the acronym SCHTROUMPF.

RACE TO THE TOP

It was good to see that the U.K.’s newly-updated strategic review has a solid commitment to tackle the misuse of the City of London by oligarchs.

• “We will go further in stopping the exploitation of the U.K.’s financial systems and economic openness for domestic and international criminality and corruption… and make it harder for organized criminals, kleptocrats and terrorists to use opaque entities to abuse the U.K.’s financial system,” it says.

I think but am not sure that this is the first time we’ve seen the word “kleptocrats” in an official U.K. strategy document. And the anti-oligarch mood is now fully bipartisan, judging by what David Lammy, who speaks on foreign affairs for the opposition Labour Party, had to say in a column in the Economist. He was vocal in his support for a Transatlantic Anti-Corruption Council, which has been backed by U.S. senators like Sheldon Whitehouse and Jeanne Shaheen and which was first proposed by Ben Judah, who is admirably well connected on both sides of the Atlantic and deserves a lot of credit for getting this idea onto politicians’ desks.

• “In Labour’s first year in office, we will invite all the foreign and interior ministers from “five eyes” (an intelligence pact between America, Britain, Canada, Australia and New Zealand) and the EU to London to develop a common strategy and platform to co-ordinate how best to (combat) money-laundering, influence-buying and economic crime. With such help we will clean up the London laundromat and defeat cronyism. The exercise will be a perfect example of where foreign and domestic politics meet,” Lammy writes.

Wouldn’t it be amazing if anti-corruption efforts gained the kind of race to the top momentum that the campaign to arm Ukraine has had? I recognize that nothing has come of this yet, and that cheering the competing rhetorical commitments of the two main political parties to tackling oligarchs is a bit like cheering a contest for who can more ostentatiously sign up to a stop smoking program when no one has even discarded their cigarettes yet, but still, it’s better than them puffing away on the couch.

BELARUS

For most of the post-Soviet period, the authorities in Belarus played a clever game of balancing between Moscow and the West, showing a bit of leg here, flashing an ankle there and winning concessions from both. That approach has clearly run its course, and Belarus is now as much a pariah as Russia. It was interesting that the first legal challenge to the U.K.’s post-Brexit sanctions routine should have come from a Belarussian company.

The judgment is pretty dystopian, in that it gives insights into the capabilities of face-tracking software produced by the sanctioned company, which can scan 200,000 faces a second from real-time CCTV footage, including that of then-fugitive activist Nikolai Dedka.

• “With the use of this information, presumably read in conjunction with bus timetables or similar information, the security forces were able to work out Mr Dedka’s hiding place and his likely movements. When he was arrested, gas was sprayed into his face.”

But probably of greater significance is the fact that a judge accepted broader sources of evidence than would be admissible in a criminal or civil proceeding, which will be a comfort to government ministers worried about the more meaningful sanctions they’ve imposed on Russian oligarchs and any challenges brought against them in court.

• “The role of the court in reviewing sanctions decisions is limited – in particular to whether the decision was irrational, plus the court will grant ministers considerable room for maneuver as experts on government policy,” noted Spotlight on Corruption.

I understand that the hearings in the challenge brought by Eugene Shvidler are due to start imminently, and they will undoubtedly prove a sterner test for the sanctions regime.

WAR CRIMES

I am still digesting the news that Vladimir Putin has been indicted for war crimes. I spent years talking to people from Russia’s North Caucasus whose relatives were tortured, murdered or disappeared and had no prospects for justice from Putin’s government (and I would recommend you check out the work of the European Human Rights Advocacy Centre for examples of how many, and how appalling, these cases were), and it is extremely disorientating — if undeniably very welcome — to see a court finally go after the man responsible for all that.

I am sure this will not be the last indictment that the International Criminal Court brings against a Russian official, and most of them will undoubtedly and rightly be for the horrific crimes against humanity committed in Ukraine. However, the Rome Statute also lays out at least one oligarch-adjacent offense by declaring that “extensive destruction and appropriation of property, not justified by military necessity and carried out unlawfully and wantonly” is listed among the recognized war crimes.

Alexei Navalny’s Anti-Corruption Foundation published an expose at the end of last year about how a deputy defense minister got Very Rich from the reconstruction of Mariupol, which was written up by Meduza here. That certainly looks like it deserves some of the words in the Rome Statute, and hopefully will attract some attention from the prosecutors, as does the illegal grain trade. Russian officials of course insist that the reconstruction is entirely above board, and perhaps it would be if it weren’t being conducted by an occupying army in an illegally-annexed region of an illegally-invaded sovereign state.

WHAT I’M READING

Half of my brain is currently living in the 1970s and 1980s and seeking to understand the mechanisms and approaches of that time toward money laundering in the United States, which is why I’ve been delving into congressional transcripts. On that note, I really enjoyed “The Year of Dangerous Days: Riots, Refugees and Cocaine in Miami 1980” by Nicholas Griffin, which is detailed and gripping in the best tradition of American journalism.

Incidentally, after finishing the book, I discovered to my delight that he was the same Nicholas Griffin who wrote “Caucasus: A Journey to the Land Between Christianity and Islam,” which I read enthusiastically during that past life when I obsessed about the peoples of southern Russia.