Naomi Fowler ■ Ukraine, Russia: the finance curse and the resource curse go hand in hand with financial secrecy


The tragedy that’s unfolding now with Russia and Ukraine is the consequence of the resource curse and the finance curse, hand in hand with ‘Butler Britain’ and other tax havens and secrecy jurisdictions.

All roads lead back to global financial secrecy and all the things we at the Tax Justice Network have been campaigning about for so many years. War can be a time when decades can happen in a few days. It is now clear that the economic costs of handling all that dirty money hurts every country involved. It’s hurting Russia and Russia’s majority populations, because it has helped Vladimir Putin turn Russia into a kleptocratic, mafia-infested gangster state. It’s hurting Ukraine, for reasons we all know. And it’s hurting countries like Britain, handlers of corrupt Russian loot, not least by corrupting its politics – and its national security.

Among the world’s people who understand corruption better than anyone else in the world are Russians and Ukrainians. For them, corruption has had clear and terrible consequences. In Britain it has taken much longer for the effects to be felt. It’s surely no coincidence that Ukraine was the world’s first country to introduce a public registry of the real owners of companies. They wanted to do what they could to make it harder for another Yanukovich to steal and loot again with the same impunity. But they also needed other countries to step up and take action, not only to protect them, but to stop the poison from running through the veins of other nations too. (You can read our 10 measures to expose sanctioned Russian oligarchs’ hidden assets here).

Back in 2014 I interviewed the incredible Daria Kaleniuk of Ukraine’s Anti-Corruption Action Centre on the Taxcast, the Tax Justice Network podcast. It wasn’t long after the fall of the outrageously corrupt Yanukovich. You may have seen her on television recently, as she harangued an uncomfortable looking British Prime Minister on the Polish/Ukrainian border about all the Russian oligarchic money that has been welcomed in London, and the abject failures of the British to seize corrupt money.

During his time in power, Yanukovich and his associates used offshore services and shell companies prolifically – at least $70 billion flowed out within a few years and by the time he fell, only half a million dollars was left in the state coffers. Ukrainians famously raided his opulent palace and work by the Ukrainian investigative journalist, Sergii Leshchenko and the Ukrainian Anti-Corruption Action Centre revealed that the palace compound had been one-third owned by an anonymous UK shell company and two-thirds owned by an Austrian bank.  In other words, the ownership structure of the palace hid the identity of the true owner.

What Daria Kaleniuk told me when we spoke on the Taxcast back in 2014 is sadly as crucial now as it was then to get through to voters, to citizens and their politicians in tax haven/financial secrecy nations such as the UK. I wonder if the war currently raging means we might really start to listen. I asked her how she and other Ukrainians felt about the fact that so much of the Ukrainian people’s money ended up in the City of London.

“We see that when Europe wants us to change and asks that we have to change, Europe has to change itself as well. It’s not enough to only change Ukraine. If they want to prevent corrupt capital to flow into the EU they can do this, and there are anti money laundering directives that are just not implemented well in Europe because it’s profitable to get this cash and it looks like for the benefit of developed countries to receive the proceeds of corruption while they appear not be corrupt themselves, and I think it’s not right. We are surprised that there is not the political will to pass the law on beneficial ownership…including trusts. We can’t understand why these countries don’t want to create a really powerful anti-corruption tool especially when we know..these jurisdictions were used to launder billions from the developing country of Ukraine.”

She speaks of the critical need to include trusts and foundations in public beneficial ownership registries – because if we don’t, she says, ‘all the money will flow to trusts,’ making the job of those such as the Anti-Corruption Action Centre even harder when trying to protect the public interest of Ukrainians.

As she also says, “I believe beneficial ownership law…will be a really long and hard fight but we have to win it because we’ve paid too high a price.”

Now governments appear to be scrambling to cut off dirty money flows, which they’ve been warned about for so long. But when the British Prime Minister says ‘no country is doing more than the UK to tackle this issue,’ it is false. His own political party is hopelessly compromised, financed heavily by Russians who bought British passports, as well as by the City of London which has resisted anti-corruption measures for decades (along with lawyers, accountants, high net worth wealth managers, gallery owners, estate agents, luxury goods sellers, company formation agents, private equity investors, private schools, and the like.) UK laws have helped oligarchs go after British journalists, rather than the other way around (do read this link, it’s pretty terrifying, even if there is a presumably Ukraine-related bright spot).

The solutions remain the same as we have been advocating for years. Those very wealthy people who put assets in their own names are known as ‘the stupid rich’ in some circles. If what is now happening in Ukraine doesn’t alert us to the dangers of secret ownership and financial secrecy, perhaps nothing ever will.

Now is the time to properly resource our law enforcement and equip them for the battle ahead, in the interests of all people bar the crooked elites – in Russia, in Ukraine, in Britain, and anywhere else.

Image: “20140224_101416” by Journalist/Dutch RTL News/Berlin is marked with CC BY-NC-SA 2.0.

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