It would be nice to think of bank employees deployed to fight financial crime as super-effective old-school gumshoes, with a bottle of bourbon in the bottom drawer and an inexhaustible stock of one-liners, but in reality their jobs are more like something from ‘The Office’ than ‘The Big Sleep’.

Thousands of people sit in cubicles in Warsaw or Bengaluru, checking through transactions flagged as possibly abnormal by banks’ automated systems, and confirming that 99% of them are, in fact, normal. Anything that might conceivably be abnormal gets sent up the chain, where someone more senior will almost certainly decide it wasn’t. 

It is a ruinously expensive process and, as far as we can tell, completely ineffective. The best estimates we have for the size of the criminal economy suggest it has grown, untroubled, along with everything else for decades despite all the laws, fines, and prosecutions that we’ve thrown at the problem. 

But banks’ financial crime compliance isn’t about stopping financial crime at all: it’s about stopping banks from being fined, as Standard Chartered has previously been, enormous sums in both the U.S. and the UK. As long as banks can be sure that AI checks boxes in ways that satisfy regulators, then they’ll be happy.

This is a little bit worrying because AI is already getting very good at fraud. I am very alert to attempts to trick me but was sufficiently fooled by an AI email yesterday to forward it on to someone. Fortunately, a very similar one arrived (purportedly from someone else) a few minutes later, alerting me to my mistake. Money laundering is a laborious activity and criminal gangs will be as keen as banks to cut their back office expenditure, and AI could help automate the processing of the many small transactions that add up to a large amount of money. Phishing and smurfing are just a couple of its use cases, however.

“Scammers can leverage AI to scrape data from social media and dating platforms to identify vulnerable targets (e.g. lonely individuals, recent retirees, or people interested in finance) for pig butchering scams,” notes TRM Labs. “Bots can sustain long-term, emotionally persuasive conversations without tiring or making mistakes, making the scam more scalable.”

And that’s before you get onto AI’s ability to exploit cryptocurrencies and smart contracts to really start rampaging through the crypto world. “TRM observed a roughly 500% increase in AI-enabled scam activity over the past year. The convergence of generative AI, programmable financial infrastructure, and global crypto liquidity has altered the economics, velocity, and scalability of fraud,” the blockchain analytics firm said in a follow-up report. This is very bad indeed.

So, although I can see why people are annoyed that Withers referred to his bank’s employees in such a disparaging way, I am more troubled that he’s planning to replace them with AI, rather than to retain them and train them in how to counter it.

It was remarkable, however, to see Warren Davidson, chair of the illicit finance subcommittee at the House of Representatives Financial Services Committee, draw precisely the wrong conclusion from all this. Although he was correct in condemning the defensive nature of compliance, and its focus on generating paperwork over results, he then got lost in praising the White House’s decisions to attack corporate transparency legislation.

"As we focus on risk, we must also ensure that tools like artificial intelligence are fully deployed to counter the AI-enabled crimes of today,” he said, without realising that, without reliable information to train the AI models on, this is as useless an approach as the one he says has failed. If you don’t know who owns what, neither will a computer, no matter how cleverly it can pretend to be human.

I sincerely hope he listened to the testimony of Carole House of the Atlantic Council who forcefully pointed out the harm to national security and to ordinary Americans caused by the United States’ failure to create even an approximation of a decent corporate registry, as well as the historic idiocy of its current crypto policy. “Without a secure identity foundation, AI agents will simply scale up fraud at a speed and volume that human investigators can't possibly track, destroying trust in the whole system,” she said in testimony that I highly recommend you take a look at.

I very much doubt Davidson was listening, however, because that is not the direction the Republican Party is going in right now. I would write more about that, but frankly it’s all too depressing, and I’d rather move on.

So let me point you towards this excellent paper on how online scam marketplaces work, with criminals using the messaging app Telegram and the stablecoin Tether to launder hundreds of billions of dollars. It argues that our current approach of sanctioning exchanges is futile since their owners just shut them down and switch to a new platform that works in the same way but hasn’t yet been sanctioned.

“As long as the underlying digital infrastructure remains permissive, criminal syndicates will simply migrate to new channels. To move from reactive disruption to systemic prevention, the international community must shift its focus toward the structural enablers of these marketplaces,” Elliptic’s Tom Robinson argues. Elliptic is unusual among blockchain analytics companies in being willing to name Tether as a major vector for money launderers. Its rivals tend to just say “stablecoins,” I have no idea why.

Meanwhile, there is something grimly depressing about the fact that — against the backdrop of, well, everything — the UK has postponed June’s illicit finance summit due to “scheduling issues in the international calendar.” Everyone is so busy dealing with the consequences of illicit finance, that no one has time to talk about illicit finance.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

The post AI is not the answer to AI-enabled fraud appeared first on Coda Story.

Committee chairman Tim Scott is delighted: “For me, this is personal. My mother raised my brother and me with faith, grit, and determination, and she taught me that the American Dream should be within reach for every family, including single mothers working hard to build a better life for their children.”

I quote Scott partly because it’s such a weird justification for passing crypto regulation (or perhaps he just says that sort of thing about literally everything he ever does?), but mainly because it’s pretty clear that the bill as it stands will be a disaster for the kind of vulnerable people he claims to be fighting for.

In a sign of experts’ concerns, Transparency International’s U.S. office put out a statement quoting nearly all the most respected voices on money laundering in America arguing that the bill needs better safeguards against dirty money. “At a time when we know that hostile actors like (Iran’s Revolutionary Guards) are looking to circumvent U.S. sanctions to rearm and threaten Americans and U.S. interests around the world, it is inconceivable to me that we would open new, effective channels for sanctions evasion,” said Richard Nephew, former U.S. Coordinator on Global Anti-Corruption and Deputy Special Envoy for Iran.

“Terrorists, violent drug traffickers, and organized criminals who prey upon the elderly and unlearned in increasingly sophisticated financial and AI generated schemes are, quite literally, getting away with murder, funded by untraceable cryptocurrency transactions hidden behind an anonymous block chain,” said former FBI agent Karen Greenaway.

There is an awful lot of money in crypto, and Tether alone now has three people among the richest 100 in the world. Tether’s largest single shareholder Giancarlo Devasini’s wealth has grown from $9.2 billion in 2024 to $89.3 billion now, while chief executive Paolo Ardoino and former CEO Jean-Louis van der Velde have done pretty well too. Though none of them have done quite as well as Changpeng “Binance” Zhao, crypto’s only centibillionaire (so far).

In the UK, there’s a lot of concern about the millions of pounds going from crypto investors to Reform’s Nigel Farage, who has become a crypto champion, no doubt coincidentally. But, wow, look at what’s happening in Alabama for a sign of what the future looks like if crypto people really get their hands on the purse strings and try to buy their way into the Senate. 

That much money doesn’t just help supporters win, it also terrifies opponents: standing up to the crypto lobby guarantees you’ll be swamped in hostile advertising. How do you want to be paid, as Pablo Escobar used to say, in silver or lead? 

But why should the rest of the world care that this is happening? I’m sure I’m not the only foreigner who’s been staring in bewilderment at the growth of U.S. prediction markets, and how efficiently they allow insiders to monetise their privileged access to inside information. A lot of those markets are barred in other countries, but the U.S. soldier who was arrested for betting on the Maduro capture was trading on polymarket, a crypto-denominated market which is blocked in the United States too, despite Donald Trump Jr. being an investor.

Such restrictions can be easily bypassed by using a Virtual Private Network, so U.S. regulators are using artificial intelligence to track down insider trading on polymarket. After that soldier’s arrest, I suspect Americans will be much more careful about what they do.

Prediction markets claim they don’t want insiders trading on privileged information. But if the markets are to function in a way that supports their founders’ justification for them, as a price signal for future events, they rely on people with knowledge to be using them to make bets and thus to move prices in a useful direction. So clearly the temptation will always be there for anyone with inside information to use it to make some easy money.

And does anyone think U.S. regulators will care about Indians, Brits, South Africans Ukrainians, or other foreigners using crypto to trade on information from their own countries? They after all have a track record of treating foreigners and U.S. citizens differently. That’s why it was Francesca Albanese, with her American husband and daughter, who managed to have sanctions cancelled for daring to investigate Israel’s behaviour in Gaza, whereas non-U.S. connected people have failed to do so.

The new U.S. crypto bill coupled with U.S.-based crypto-denominated prediction markets points towards the United States becoming a gigantic offshore enabler of corruption for the rest of the world; a digital version of what Switzerland was in the analogue years, with everyone else reduced to begging its regulators for assistance. 

“Crypto prediction markets are accessible to anyone with an internet connection and a wallet, pooling liquidity from a global user base rather than a regional one,” says Chainalysis. I think they mean that to be a good thing, because the blockchain is transparent and malefactors can be spotted easily yada yada, but it sounds beyond dystopian to me. I’m genuinely a bit terrified of what this will mean for corruption in the next few years, and I haven’t heard of any politicians who are alert to it yet.

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The post Crypto’s corrupt American dream appeared first on Coda Story.

Believers in democracy need to start advocating for more transparency, more enforcement and more restrictions on murky finance if they want to stop unaccountable money from buying influence in their countries. It is not enough to rely on journalists and activists to produce the occasional investigation, and expect voters to do the rest: we need properly-resourced agencies that can keep dirty money out of our systems if we want them to remain clean. If history tells us anything, it’s that criminals get elected all too often.

This is urgent. Tether made more than $1 billion in profits this year, in the first quarter, and is thinking hard about the midterms and how candidates might be encouraged to fight for crypto. And that’s just one company. Progressives who believe in fairer finance, a state’s right to regulate its own economy and the power to oversee who’s buying whom, don’t have that kind of money to spend to influence elections, so they need to start making the argument for campaign finance restrictions much more forcefully.

But there’s another point here too. I am working on an article about money laundering at the moment, and was chatting to two UK detectives last week. They led a successful operation in their city (I’ll post the article when it’s done) and I asked if they thought it had made a lasting difference. “With all crime, you take one out and there is another,” one of the detectives told me. “I'd like to think it has made a dent but there will always be more.”

In the case they worked on, gangs were bringing cash generated via the cocaine trade to be laundered into crypto (no prizes for guessing which cryptocurrency they preferred). The detectives identified £53 million in turnover over two years. It’s great that they jailed the ringleaders, but you can see why they’re not getting too carried away. That total is about a quarter of a percent of the UK cocaine market’s turnover, so the gangs really won’t have noticed the loss. And, for the police, it was five years’ work.

To a fairly large extent, since the first U.S. operation in Miami in 1980, when we’ve spoken about fighting dirty money, we have really been talking about stopping cocaine gangs by taking away their ability to make a profit. And, despite occasional successes like the one I’m writing about, this approach has overall been a catastrophic failure. Cocaine is cheaper, more abundant, and more widespread than ever before.

This is important for many reasons, obviously because entrusting the supply of a dangerous substance to criminals is bad, but also because the existence of a vast underground financial system to move the cocaine trade’s profits creates a mechanism through which Russian spies, terrorists and others can hide their cash too. For me though, the real problem is that we have an urgent threat to democracy posed by hidden unaccountable money. Instead of tackling that problem though, our police officers are fighting an endless war against drugs that was lost decades ago.

My modest proposal therefore is to legalise cocaine. It’s available everywhere already, so there’s no downside. We should tax it, regulate it, make sure kids can’t buy it and, as a useful side effect, take all the liquidity out of the underground economy. Our police officers could then stop running to go backwards, and instead fight a battle they might actually win, which is to stop fascists and kleptocrats from buying our democracies.

Use oligarchs to undermine Putin

Here’s a good article from The Economist by “a former senior official in the Russian Government,” arguing that Vladimir Putin is losing his grip. Now, I’m always a little cautious about articles that tell me what I want to hear, as well as the veracity of information and analysis provided by Russian officials, former or current, but it does make some very interesting points.

Of particular interest to me is the idea that Russia’s elite is annoyed with Putin because its members are worried about having their assets stolen, with $60 billion worth of property nationalised or seized by corrupt officials in the last three years. 

“Previously their property rights were outsourced to the West. They used London courts, offshore structures and international arbitration to resolve conflicts or seek protection. Now conflicts must be resolved domestically, without functioning institutions. Demand for rules grows more urgent as redistribution of assets gathers pace,” the article states.

One of the reasons why democracy failed in Russia is because the oligarchs were able to keep their wealth offshore, and thus to essentially colonise their own country, secure in the knowledge they were themselves immune from the unfairness. It would be a pleasing irony if the horrific war in Ukraine ended up undermining not just Putin, but Putinism as a whole.

There is a huge opportunity here for Western governments to capitalise on the dissent, and to start quietly offering sanctions relief to Russians willing to break with Putin, and who’re prepared to surrender a decent chunk of their wealth to help Ukraine in return for being able to keep the rest. There aren’t enough police officers to actually bring the cases needed to investigate, prosecute and confiscate the oligarchs’ wealth anyway (see item above), so we may as well start negotiating and see what they’re willing to do to get it back. In short, this is a big week for me making unfashionable policy proposals.

AI-generated launderers

There’s debate in the United States about getting rid of the Corporate Transparency Act, with Jeff Bezos’ Washington Post supporting repeal, even though the law has never actually been implemented. Opaque shell companies are a weird outgrowth of capitalism that corporations’ original inventors — who wanted to create insurance for entrepreneurs, not getaway vehicles for crooks — never intended to happen, so it’s very odd that they’re now being presented as some kind of human right.

If you want a reason why the appallingly lax American system should be cleaned up, here’s a post on X about someone who tasked two AI agents with making money, and came back to find out they’d registered a Wyoming LLC all by themselves. This suggests the opening of a whole new frontier of automated money laundering, and the consequences are frankly pretty terrifying. The Corporate Transparency Act should be strengthened, not abolished.

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The post Legalize Cocaine to save democracy appeared first on Coda Story.

“Reducing smoking and improving diet and physical activity can delay the onset of illness and improve day-to-day wellbeing,” notes this extremely commonsensical analysis from the UK healthcare think tank The Health Foundation. “Secure work, good-quality housing and supportive local environments all influence physical and mental health.”

Being unhealthy is just terrible in all ways, and the problem is clearly getting worse, so you would expect the disrupters of our new economy to be finding ways to respond to this challenge. And at first glance, the Sam Altman-backed Retro Biosciences — with its focus on targeting “aging mechanisms to increase healthy lifespan” — looks promising. So does Altos Labs, with its mission to reverse “disease, injury, and the disabilities that can occur throughout life.” And there’s Saudi Arabia’s Hevolution, which is catalysing “the shift from lifespan to healthspan.”

And that’s before we get to the start-ups operating in a “free city” off the coast of Honduras, which has the brave approach of basically letting people do whatever medical research they like (“Prospera is a unique place where we can do such things,” says one businessman) to help drive progress towards an illness-free future.

But don’t get your hopes up. They’re not looking at ways to help people to get vaccinated, eat healthily, stop smoking or do more exercise. Instead, they’re working on gene therapy, stem cells, and other extremely expensive treatments that will only benefit people who can afford them, and who are thus already likely to be doing well. In the UK meanwhile, Genflow is also aiming to slow the ageing process in dogs, to make sure the super-rich aren’t left without their pets in this artificially prolonged future.

It’s tempting to see this as a metaphor for late-stage capitalism in the West, with its focus on the needs of the few (and their pets) rather than of society as a whole, except that we’re seeing a similar pattern in other places too. In Russia, Moscovites live longer than people from the provinces (although the picture is complicated by the relatively good health of the non-drinkers from Muslim regions), so you would have expected Vladimir Putin to be concerned about how to close that gap. But when he was chatting with Xi Jinping last year in China (where inequality has also harmed health), they were instead more focused on how to live forever. 

“Human organs can be continuously transplanted, and people can live younger and younger, and even achieve immortality,” Putin said. (Three important questions: firstly, does this mean he will be president of Russia literally forever, the world’s first un-dead head of state? Secondly, are they farming people as a source of organs for him? Thirdly, does he really believe this?)

“This century, there's a chance of also living to 150,” replied Xi, who could — under that scenario — rule China for another 77 years, which is longer than he’s been alive, by which time his nation’s population could well, according to UN estimates, have halved.

I, for one, wouldn’t mind having a vote on whether this is a future I want to be a part of.

An insider betting scam

Here’s a fascinating piece of research from the Anti-Corruption Data Collective about prediction markets, looking at how often “long shot” bets on military and security matters pay off compared to what you would expect: fully 52% succeed, compared to only 14% across Polymarket as a whole.

“Government officials and members of our military being able to turn a profit on insider information incentivises corrosive corruption in public office and undermines national security,” notes David Szakonyi, Co-Founder of the Anti-Corruption Data Collective.

The analysis follows the indictment of a U.S. serviceman who made $400,000 betting on the bid to capture Nicolas Maduro in Venezuela, with 13 “yes” wagers on various aspects of the operation in December and January. And that was only a comparatively small military campaign. Just imagine how much money privileged insiders could have made in the past, if only they’d had access to prediction markets before D-Day, before the first nuclear bomb test, or before the assassination of Archduke Ferdinand in Sarajevo.

I really enjoyed this recent episode of Planet Money about prediction markets, particularly with its clear explanation that — like so much “financial innovation” of the past — they’ve not invented anything new at all; they’ve just found a clever way around regulations that previously stopped people making bets in this way.

There is fierce competition between the two leading players — Kalshi and Polymarket — although they have common ground in one area: they both employ Donald Trump Jr.

Trump sues his own government

There are so many things happening in the United States at the moment that it’s hard to keep track, but I did like this analysis from David Allen Green of a particularly strange lawsuit, in which President Trump is suing the federal government for $10 billion. The judge is, unsurprisingly, concerned about a situation where the president is basically suing himself, and wants more information about how that’s going to work.

This could, however, be a whole new money-making front for the first family, and why should the Trumps stop at just $10 billion? They could presumably take the government for every penny it’s got. I’m amazed no one has done this before.

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He also had a key role in transforming Trump from cryptosceptic into cryptoenthusiast after investing millions of dollars in World Liberty Financial in late 2024, which helped to persuade the president — then running for re-election — that there was money to be made on the blockchain. 

Considering the improbability of the Trump family building an actually successful crypto company, and the strong likelihood World Liberty Financial would find a way to keep investors’ money as has happened with Trump ventures in the past, quite a lot of people assumed Sun’s money was in reality more of a gift than an investment. But it appears these doubters were wrong, at any rate that’s what it says in the suit that Sun has filed in California alleging that World Liberty Financial has abused his rights.

“Mr. Sun invested $45 million to purchase $WLFI tokens from World Liberty not only because of the project’s claims that it would promote adoption of decentralized finance… but also because of the Trump family’s association with the project,” his claim states. “But as Mr. Sun unfortunately has learned, World Liberty’s operators, including Chase Herro, see the project as a golden opportunity to leverage the Trump brand to profit through fraud.”

Sun has been careful to make clear this is not an attack on the president (“Unfortunately, certain individuals on the World Liberty project team have been operating the project in a manner that goes against President Trump’s values,” he posted on X), who is, he says, being betrayed by underlings — as autocrats have always been throughout history —  but he is certainly airing a lot of dirty laundry, which is likely to upset influential people.

Perhaps the most significant allegations, which World Liberty Financial denies, is that the Trump family’s company is on the verge of collapse, having paid most of its money to its owners, and that it tried to extort money from Sun to keep it in business. This is not just significant for its investors but also for America’s diplomatic ties, since Abu Dhabi has invested $2 billion via World Liberty Financial’s USD1 stablecoin, and the United States can ill-afford to further irritate its allies in the Gulf right now.

The timing of the lawsuit is interesting. It was notable that, shortly after Trump returned to the White House, the Securities and Exchange Commission paused its investigation into Sun. In March, that investigation was finally wrapped up, with Sun paying $10 million but not admitting wrong-doing, so he is perhaps no longer concerned about facing legal action himself.

Sun was also a major investor in Trump’s memecoin, but is not the only person who seems to have soured on that particularly unlovely project. One of the perks of being an investor in the token is the right to have dinner with Trump, but the value of that ticket dropped this year to just $539,000 from $3.28 million in 2025, with the Financial Times quoting an expert as calling the friendship between Trump and the crypto-world “a shotgun marriage,” which seems fair.

The Trump family has, however, made $320 million in fees from the memecoin alone, so I suspect they’re not that bothered.

A tale of two scammers

There was, hard though it is to imagine, a time when Trump was just a strangely-tinted TV personality with strong views on where Barack Obama was born. And back then, in those prelapsarian days, 2014’s billion-dollar Moldovan bank fraud was a big deal. It’s great to see that mega-oligarch Vlad Plahotniuc has been jailed for 19 years for his involvement in a crime that ruined his homeland.

Moldova has struggled through the resulting period of economic, financial, diplomatic and political turmoil, and it was great to see that Viktor Orbán’s defeat in Hungary has meant it can make progress on its movement towards membership of the European Union.

The other mastermind of the bank fraud is pro-Kremlin politician Ilan Shor who was convicted and sentenced in absentia. He remains, of course, at liberty. Though his A7A5 sanctions-evading cryptocurrency has still not recovered the trading volume it had before the recent hack of the Grinex trading platform where people bought and sold it. Grinex blamed the hack on Western intelligence agencies, but Chainalysis has an interesting alternative explanation, based on the fact that A7A5 is gradually being squeezed by Western sanctions (including the latest ones from the European Union).

“Faced with mounting international pressure and a shrinking operational footprint, actors associated with Grinex could be using the guise of an alleged hack to quietly siphon liquidity and execute an exit scam,” Chainalysis suggested. I’m not saying that is what happened and to be honest, I think it’s more likely that this was the handiwork of Ukrainian hackers or standard financial criminals. I mention it, however, because Shor does have a previous record when it comes to setting up a money laundering scheme and then defrauding everyone who was foolish enough to trust him with their money. 

The billion-dollar bank fraud was a clever way to profit out of the ‘Moldovan Laundromat,’ which had been allowing Russians to smuggle money out of their homeland before Shor and his co-conspirators destroyed the Moldovan banking system and stole everyone’s cash. It would be remarkable if he had basically done the same thing for a second time with his stablecoin. Crypto people call it a rug pull.

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There are reasons for this: Donald Trump does not appear particularly interested in Ukraine; the now former Hungarian prime minister Viktor Orbán has been snarling things up; and so on, as laid out in this analysis from Tom Keatinge. To make things worse, Trump’s latest adventure in Iran has pushed the oil prices sharply higher, earning more money for Russia while also giving Trump cover to lift sanctions, a temporary measure he has recently extended.

Keatinge argues that European countries need to be far more focussed on going after Russia’s payment mechanisms, particularly digital. “The extent to which crypto activity supports Russia’s war effort is clear,” he writes, “yet repeated initiatives to elevate the importance of opening a concerted line of effort on this issue are ignored. This must change.”

I agree, though it won’t be easy, considering the diffuse crypto ecosystem, and the increasing sophistication of Russian involvement in it. As long as Telegram is willing to host markets, the markets will continue to function to some extent whatever Western countries do (see the story of Xinbi, a Chinese-language hub for illicit crypto.) However, it does look like someone somewhere has lost patience with the ease with which Russia is funding itself.

“The sanctioned Russia-linked cryptoasset exchange Grinex announced an immediate suspension of its operations, citing a ‘large-scale cyberattack,’” reports Elliptic. According to the statement, which Kyrgyzstan-registered Grinex posted on Telegram, it lost around $13 million worth of USDT in the hack, blaming the theft on Western intelligence agencies.

“Today the attempts to destabilise our fatherland’s financial sector hit a new level, with the direct theft of the assets of Russian citizens and companies with the involvement of complex cyberattacks,” the statement said. Grinex is the successor to Garantex, which was shut down just over a year ago after years of effort by Western law enforcement. I would be surprised if Western countries had decided to take direct action against Grinex, as the exchange claims they did. Westerners tend to be a bit too legalistic for this kind of smash-and-grab, and I would expect any operation to more closely resemble what worked a year ago, conducted with Tether’s cooperation.

Instead, I suspect this attack is the work of hacktivists, perhaps working for or with the Ukrainians. Whatever the answer, it is embarrassing for the Russians, shows their crypto-security is not impregnable, and has made a noticeable dent in trading volumes of the A7A5 ruble-denominated stablecoin, which has become a key sanctions evasion tool. Three birds with one stone.

The important point is that sanctions were never supposed to be permanent: they are a foreign policy tool, not a law enforcement one. Hundreds of billions of Russian-owned dollars are languishing in various frozen bank accounts, and Western countries need to start thinking about what to do with them. They can confiscate them, investigate them or — if they’re feeling brave — use their potential return as leverage to persuade wealthy Russians to break with the Kremlin. What they shouldn’t do is leave them as they are to gather dust.

Hopefully, now that Orbán is out of the way, European countries will be able to take firmer collective action but they also need to be imaginative, and to start behaving as if they actually want Ukraine to win, rather than just not lose.

A defeat for transparency 

Of course, the United States will have a lot to say about that too, and what it ends up saying about how to tackle the Russian crypto operations will depend on what happens in the midterm elections this year. So, it strikes me as a big deal that crypto firms are once more pouring tens of millions of dollars into campaign vehicles in their quest for, what they euphemistically refer to as, “regulatory clarity.” Among them, of course, is Tether.

If you’re wondering quite how it’s possible to spend that much money on elections, I draw your attention once more to the great Integrity Index, with its records for who’s been spending what. It boggles my mind that, for example, the three Democratic rivals to the Republicans’ Susan Collins for the Maine Senate seat have raised more than $17 million just for the primary. Collins herself has raised over $10.5 million. There really shouldn’t be that much money in politics.

Besides, when it comes to value for money, investing in court cases beats investing in politics every day of the week. I don’t know how much the (ironically) anonymous plaintiffs in the 2022 case against corporate transparency in Luxembourg paid their lawyers, but its effects just seem to keep compounding to the benefit of those who want to hide their wealth from society. 

The European Union’s retreat from revealing the ownership of shell companies has given cover for Britain’s tax havens as they resisted efforts from London to force them to open up their own corporate registries. It looks like those efforts may have finally failed. “We are committed to full transparency, but I don’t think there will be any turning back,” said the British Virgin Islands’ Junior Minister for Financial Services Lorna Smith in comments confirming that the islands are in fact very much not committed to full transparency.

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The Netherlands hosts the largest port in Europe, and is therefore home to a vast smuggling industry — Dutch politicians not infrequently warn that it’s becoming a narco-state — which requires an equally vast money laundering industry to service its profits. The Court of Audit set out to check the government’s response to this challenge, concluding that it cost banks €1.6 billion a year. It’s a price tag that has increased by almost 17% between 2021 and 2024, during which time the number of reports the banks’ 13,000 compliance officers made more than doubled.

“We think it is important that these employees make a meaningful societal contribution to preventing and combatting money laundering. There is no evidence that shows that they do,” the report witheringly observes.

The court sent surveys out to “politically-exposed people” (PEP is a jargon term meaning anyone in a position of power, or a close relative or associate) asking about their experiences. One person’s 83-year-old mother was asked to explain the source of an inheritance she received after the PEP applied for a loan. It is an eye-opening section, revealing how process is prioritised over any kind of judgement about where the risk of money laundering genuinely lies, but the real shock is in the section about different religious groups, which shows how the transactions of immigrant-focussed churches and mosques are systematically checked more thoroughly than local Protestant or Catholic congregations.

“A bank told a mosque that it was not possible to collect so much money after a prayer meeting,” the report notes. “The mosque’s trustees said the bank could come and see for itself but the bank declined. Feeling powerless and unable to deposit the money with the bank, the trustees hid it in the mosque.”

Imagine if we had an ongoing health crisis. And imagine that the government had created an expensive, intrusive system to tackle it, which was generating an endlessly increasing amount of paperwork, employing thousands of people and actively discriminating against religious and ethnic minorities. Surely, someone would at least put in the hours to check if the system worked, whether it was making people healthier, and assess therefore whether all these bad side effects were justified? 

With anti-money laundering policy, that is simply not happening. It’s based on faith rather than facts: we just need to do more of the same thing, and eventually we’ll get the results we want; if we don’t, we need to do the same thing even more. Interestingly, Texan judge Jeremy Kernodle — fresh from gutting the Corporate Transparency Act — has returned to the fight against anti-money laundering regulation. He has killed Geographic Targeting Orders, which were supposed to collect information around real estate transactions. “FinCEN’s explanations are vague, conclusory, and unpersuasive,” the court ruled. “The fact that some bad actors have conducted non-financed real estate transactions does not make such transactions categorically ‘suspicious.’”

I’m not saying I agree with Mr. Kernodle, because I don’t, but I don’t think pushback on anti-money laundering orthodoxy is necessarily a bad thing, since it obliges us to think more deeply about what actually works, rather than just going along with ineffective old policies. I hope people outside the Netherlands read the Court of Audit’s report and start wondering whether this approach isn’t long past time for a complete overhaul.

How do you solve a problem like crypto?

It’s quite unusual for there to be a divide in the UK’s anti-corruption community, which tends to agree on technocratic solutions to the problems around illicit finance, but one has emerged around the role of cryptocurrencies in political donations. Spotlight on Corruption doesn’t think the government’s moratorium on crypto donations goes far enough. There needs to be a ban, they argue, in primary legislation with additional safeguards. I agree.

The folks at RUSI, on the other hand, think a moratorium on crypto donations is a better idea since it would prime the country to take regulating cryptocurrencies more seriously, and prepare the way for them to be widespread. Take a look, judge for yourself, and let me know what you think. The difference may reflect deeper and unresolvable political differences in how countries should respond to globalisation, but it’s an interesting one to think about.

One thing I think we all agree on is the need for an urgent overhaul of all rules around electoral finance, while there’s still an honest system to approve them.

On that note, interesting news from Cambodia, which has extradited Li Xiong to China. Xiong, who is accused by governments worldwide of playing a key role in the now-collapsed Huione group, which was laundering money for crime syndicates on an industrial scale, with particular expertise in cryptocurrencies. Of course, the criminals have not stood still and have new markets up and running, but it is striking how quickly the extradition went ahead.

In contrast, the legal proceedings around the mammoth tax fraud exposed two decades ago by Sergei Magnitsky grind tortuously on, with the culprits still safe in Russia. They certainly enjoyed themselves in Europe for a while, however, as a court case in Paris shows. “The spending spree included: €668,517, ($771,703) at a Parisian art and antique gallery; €696,015 ($803,445) across two high-end French women’s fashion brands; €96,814 ($111,757) at a luxury jewellery store in Courchevel, an exclusive ski resort in the French Alps; and €127,182 ($146,813) for a Courchevel tour package.”

There are few things that reveal the moral bankruptcy of the regime in the Kremlin more than this case. It’s not enough that corrupt officials could kill a good man who exposed their $230 million theft from the Russian people, but the Russian state then shielded them while they splashed the loot on European luxury holidays, and continues to do so to this day. 

Nothing on the same scale is happening in the United States of course, but still this analysis of how enforcement of the Foreign Corrupt Practices Act is being politicised is a bit grim: “The transformation of U.S. antibribery tools into economic weapons also threatens to undo the global system the United States helped establish to punish business corruption.”

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This policy came from the independent Rycroft Review into foreign interference in UK politics, which other countries will be looking at closely as well. For believers in liberal democracy, which is on the retreat everywhere, this issue has only been getting more urgent thanks to Russian interference in Moldova, Romania and Hungary; as well as Chinese spying scandals; and the new U.S. strategy of supporting far right parties in Europe.

There’s a good summary of the Rycroft report here, but perhaps the most contentious recommendation is for a moratorium on any cryptocurrency donations to politicians until a time when the government feels regulations around digital assets are robust enough for them to be safe. Nigel Farage of the Reform Party popped up to say this was a retrograde step against innovation, but the real question is whether a moratorium is strong enough.

So much of the threat to democracy arises from the fact that wealthy people have been able to park their money wherever they like, to exploit multiple countries’ loopholes to evade taxes, scrutiny and investigations, and then use their money to project influence anywhere they wish. This is what doomed Russia’s chance of gaining democracy, and it’s now threatening many other places too. 

I would love to see the governments of the remaining few liberal democracies be far more proactive in advocating the benefits of their systems, rather than staying in the perpetual defensive crouch that they seem to be in at the moment. 

Money is global, but politics is local, so rich people can buy influence in ways that are not available to others, not just because they’re richer but because they can afford a whole world full of tricks to make their money go further. The answer to this problem is either to make politics more global, so it can stand up to the money, or to make money more local, so it is subject to countries’ political processes.

This is what the Rycroft review is doing with its cap on overseas donations, and it’s also why I think a complete ban on crypto donations would be better than just a moratorium. 

The health of democracy is far too important to be subject to the whims of the unaccountable, nomadic class of the mega-rich, and nothing exemplifies their influence so much as cryptocurrencies, which are privatised money. A ban would be harder for a future government to overturn than a moratorium. And it would also send a signal that liberal democracy has its own currency, which is that it abides by rules set democratically and doesn’t need or want to outsource any aspect of that to the billionaires who dominate crypto.

A moratorium on crypto suggests a time when crypto may become acceptable, and thus a time when we won’t want money to have democratic oversight, and will be comfortable with obeying the whims of its owners. Financial innovation can be good, but we don’t need to innovate in how we pay politicians, that is too risky a game to play. So play with crypto by all means, but if you want to play with democracy, you need to abide by its rules. And democracies need to be more confident about asserting that principle. 

Democracies also need to enforce their own laws properly, which means — as Rycroft suggests — hiring and training specialist police officers who can investigate attempts to slip dirty money into politics.

Crypto’s digital dodge

On that note, I’m glad it wasn’t me that had to write the new U.S. national money laundering risk assessment. Glad it wasn’t me who had to balance the obvious reality that cryptocurrencies are the most potent new tool for financial criminals since the invention of the shell company with the political fact that the White House really likes cryptocurrencies. “Uneven and often inadequate regulation and supervision across jurisdictions allows digital asset service providers and illicit actors to engage in regulatory arbitrage,” notes the report. But without pointing out that the United States itself is a major source of that particular problem.

Case in point, Tether, the El Salvador-headquartered company behind the dollar-pegged USDT stablecoin, has hired the Big Four accountancy firm KPMG to audit its books and confirm everything is as it should be. This is, the FT notes, all part of a plan to expand into the United States and to raise money there, though you would imagine that a first audit of a company with a murky regulatory history and claiming such a vast haul of assets could take a while. 

In other crypto news: the UK has sanctioned Xinbi, an illicit online marketplace in Southeast Asia, and #8 Park, a compound where criminals can keep up to 20,000 trafficked people to engage in global scam operations. Xinbi moved something like $20 billion between 2021 and 2025, much of it stolen from vulnerable victims, to the benefit of Chinese gangsters. The transactions tend to be arranged on the messaging app Telegram. Vladimir Putin has been restricting access to Telegram for a while now, to build a government-issued surveillance app. I don’t agree with Putin’s reasons for shutting Telegram down, but I do think that the world would be better off without it. And without Tether.

It’s hard to imagine that Tether will care about British sanctions nor that they will make much of a dent in these activities, but I think we need to keep an eye on how the situation evolves when other countries take an interest too. Xinbi has already launched its own payment app, and has expanded to use other messaging apps, including Telegram, suggesting it is working to make itself immune from regulatory actions.

This replicates what we saw with Russian crypto operators moving to the rouble-denominated A7A5 in response to the freezing of notorious crypto exchange Garantex’s assets last year. USDT is still central to how value moves globally, but the new tokens create a secure bridge in and out of it, which cannot be touched by Western regulators or governments.

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So huge kudos to Earth League International for producing a detailed, specific and thoughtful report on how corruption facilitates wildlife crime globally, which is packed full of lessons for the study of corruption in general as well. Corruption is a system, everything is connected. It’s the water in which criminals swim, and it will drown the rest of us if we let it.

Earth League International embeds investigators in corrupt networks all over the world, and reveals how it is so much more than just the “abuse of entrusted power for private gain” and their report quotes multiple specific examples. The choice for an official standing in the way of a Transnational Criminal Organisation (TCO) is not between taking a bribe and being honest, it’s between taking a bribe and having a family member killed. 

“Corruption tilts the playing field of justice by turning some officials or even agencies into additional arms of criminal networks, akin to painting a group of white chess pieces red and then commencing a match, giving the criminal side a decided advantage”, notes the report. And, it adds, “Transnational Criminal Organisations are savvy about which officials they approach, assessing weaknesses such as debt or family ties that may make them more vulnerable to financial offers or threats.”

It estimates the value of global wildlife-related crime at over $1 trillion annually, which is an astonishing amount of money, but an important point to take is that this is not a separate form of corruption. The same border officials that wave through illegal shipments of timber or shark fins also help with other forms of smuggling. The money that criminals funnel into politics undermines democracy in all ways. “Corruption is not the sole purview of less wealthy nations. It is everywhere. During investigations into illegal wildlife trafficking for (traditional Chinese medicine) in Europe, for example, Earth League International found enablers in San Marino, Italy, Belgium, and Poland,” notes the report.

There is something grimly ironic that so much of the despoliation that is making things worse for everyone is driven by the trade in “medicine” and thus a desire to make the world better. In reality, of course, pangolin scales and totoaba swim bladders are no more medicinal than my toenail clippings. Perhaps the ultimate expression of this is the demand for hallucinogenic toad venom, as detailed in this excellent article from a few years ago, which supposedly helps us all access the inner divine, but which is meanwhile wiping out the unfortunate toads that secrete it. “Most harvesters don’t have a consciousness about the sacredness of the species”, said a toad practitioner. “It’s just a hustle business.”

On a more geopolitical and less psychedelic level, this report on how Russia is repurposing its influence networks in Europe so as to maintain its fossil fuel exports show that other forms of corruption have huge environmental impact of their own. “The time for polite half-measures is over. Stronger enforcement, embargoes and tariffs on Russian fossil fuels to cripple exports, personal sanctions, and transparency rules are the only way to dismantle Russia’s covert influence architecture,” it concludes.

I’d add to that: we all need to build renewable energy sources like there’s a war on, because there is, and democracies urgently need to gain the freedom to act independently of autocracies’ control of fossil fuel supplies. You can’t act freely if someone’s hands are around your neck.

So, what’s the answer? As so often with financial crime, it’s possible to be overawed by the scale of the challenge. But the important thing is just to start. Here’s a manifesto from a coalition of British environmental groups, which gives some ideas. I particularly approve of this one: “government should introduce comprehensive protections and safeguards for whistleblowers, followed by financial incentives, to enable whistleblowers to disclose evidence of corruption and money laundering”.

Of course, corrupt officials are not just standing still while we agonise about how to stop them. I am particularly alarmed by the potential appeal of modern prediction markets for allowing politicians, military officers or anyone to profit from their privileged access to advance knowledge of government actions. Here’s a remarkable story about how people betting on the specific details of the Iran War sent death threats to a Times of Israel journalist whose reporting threatened to lose them a wager.

U.S. lawmakers have introduced a bill, the BETS OFF Act, for which acronym they deserve credit — to crack down on the markets that encourage this kind of behaviour, which was also observed in the hours leading up to the U.S. attack on Venezuela. “There’s no getting around the fact that any prediction market where somebody knows or controls the outcome of a bet is ripe for corruption,” said Senator Chris Murphy of Connecticut. “When events that involve good and evil, life and death become just another financial product, morality no longer matters and the soul of America is fundamentally corrupted.” 

On that note, I see that someone is trying to juice the price of the $TRUMP memecoin by inviting its biggest holders to dinner at Mar-a-Lago, apparently with a speech by President Donald Trump (or whoever that is in the decidedly weird picture accompanying the announcement — Nigel Farage in a blond wig?), and an exclusive audience for the 29 biggest holders. The president, should he attend, will not, however, be accepting gifts, which is a weight off my mind. I had been worrying that this whole event was a bit dodgy.

The announcement of the event did boost the price of the $TRUMP tokens, as presumably did the announcement that Tether head Paolo Ardoino would be the headlining speaker, a remarkable turnaround for someone whose company was, just 18 months ago, having to vehemently deny it was the subject of a Department of Justice probe. Whether corruption will continue to be seriously investigated and punished, in a newly transactional world order, remains to be seen. The signs, though, are not promising.

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But to get the real headliner, we need to drop down to number 17 where we find Changpeng Zhao ($110 billion, since you ask), founder of cryptocurrency exchange Binance and business partner of the Trump family’s own crypto firm. Centibillionaires are old hat now but CZ is, as far as I can tell, the first centibillionaire on the Forbes list to have been pardoned by the U.S. president for egregious financial criminality. That feels like quite a big deal so congratulations to him.

CZ’s pardon last October was, according to the White House, because his 2023 plea deal and $4.3 billion fine for enabling money laundering on an industrial scale were the result of “an overly prosecuted case by the Biden administration” and part of a war on cryptocurrency.

Awkwardly for all concerned, Binance is now suing the Wall Street Journal after it reported that $1 billion had moved through the company to Iran-backed terror groups. And the Wall Street Journal has not only declined to spike the story, it has doubled down by reporting that the Justice Department is now investigating the firm’s actions. “The Wall Street Journal couldn’t determine whether the Justice Department is investigating Binance itself for potential misconduct, or solely the customers on its platform,” the WSJ said. But either way, considering the White House has committed to wiping out Iran’s support of terror groups and upended the global energy markets in its quest to do so, the news reports alleging that CZ’s company enabled those same groups would surely be embarrassing for all concerned, were any of them the kind of people capable of embarrassment.

After all, the fact that Iran is using crypto on a huge scale to evade the sanctions placed on its activities, and to support foreign proxies like Hezbollah, with the active connivance of some of the biggest companies in the crypto world, could only be a surprise to the most witlessly incurious of numbskulls. Or perhaps, I suppose, they are all making so much money from crypto that they don’t care who else might be.

While we’re on the subject of Trump, he’s at No. 640 on the list of billionaires as I write this, nearly tripling his wealth in just the last two years. Forbes has this very apropos explanation: “Donald Trump has presided over the most lucrative presidency in American history, adding billions to his net worth, largely by cashing in on crypto.” 

But, I hear you ask, what about non-billionaires? How are the few billion of us whose net worth isn’t counted in the billions doing? Well, not great. And I’m beginning to feel a bit concerned about what this all means for democracy. “The widening gap between the rich and the rest is at the same time creating a political deficit that is highly dangerous and unsustainable,” said Oxfam International Executive Director Amitabh Behar back in January, and the situation has gotten worse since then.

The Bank of England’s animal stories 

I spend a lot of time at the moment talking in public about money laundering because of my new book. Top of my list for policy suggestions for tackling financial crime, if anyone were to ask, is that governments should stop printing large denomination bills: $100 bills, €200 notes or — worst of all — Switzerland’s colossal 1,000-france banknote are little used by ordinary people, but extremely helpful for criminals looking to transport large amounts of wealth in a small space.

So, in one way it was great that Britain was temporarily convulsed by controversy around banknotes last week. It’s high time we talked more about them. Could this spell the end of the UK’s own big bill: the £50, of which the Bank of England issued almost an extra 30 million last year, even though pretty much the only people that ever use them are criminals and tax dodgers? Would Britain finally get serious about ending the epidemic of financial crime?

No, of course not, the controversy was entirely about the Bank of England’s decision to replace the pictures of people on its next series of banknotes with pictures of animals. For some reason, badgers were mentioned. Also otters. “It says all you need to know about the lack of seriousness of the Bank,” said former business secretary Sir Jacob Rees-Mogg, without any apparent irony, considering his own spectacular lack of seriousness in agreeing to comment on this absurdly unserious confection.

A sledgehammer that cracks nuts

While researching the anti-money laundering system that has grown over the last few decades, I have come to find it strange that there isn’t more public disquiet over the powers that governments have awarded themselves to check ordinary people’s transactions. When there is concern, it tends to come from crypto/libertarian bores (the kind of people who talk about ‘Operation Choke Point 2.0’), so perhaps no one else wants to be associated with it. But I think the situation would be a bit healthier if more of us engaged with what is being done to us in ways that we can get.

I obviously think that tackling money laundering is of huge importance, but I am coming round to the view that more public pushback over exactly how that is being done would be good. It would force policymakers to justify what they’re doing, and therefore come up with some techniques that actually work, instead of the ineffective but intrusive mess we have at the moment.

To cut a long story short, I found this contribution from the Dutch non-profit organisation ‘Privacy First’ to be interesting. “Instead of managing risk, banks seek to eliminate it by withdrawing altogether from customers or sectors perceived as problematic. The burden of compliance and over-enforcement often falls not on criminals, but on already marginalised communities with limited access to remedies,” it says.

I agree with that, and I agree also with its argument that beneficial ownership transparency should not be absolute. Were there to be opt-outs from ownership registries for vulnerable people, there would be less scope for rich crooks to argue that shell company transparency is a violation of their human rights. 

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If it is extracting wealth, hiding that wealth offshore and thus secure in its future, it is able to take risks and make decisions without concerning itself about their effect on ordinary people. “While ordinary Iranians contend with a collapsing currency, rising prices, fuel shortages and now war, elites like (Hossein) Shamkhani have translated political lineage into global capital — buying property abroad, securing foreign passports and moving freely through systems that everyday citizens cannot enter,” Bloomberg notes.

Much of the elite’s ability to enrich itself has come from its evasion of Western sanctions, which Iranians have had decades of practice in learning how to dodge. And the role of cryptocurrencies in enabling Iran’s kleptocrats is clearly significant, as demonstrated by this report from Chainalysis. But of course the backbone of the corruption has been the elite’s control over trade, and thus its ability to move value to safe havens like Dubai (that’s not looking as safe as it did of course but, don’t worry, the money can easily find a new home), which gives it the security to fire missiles without worrying too much about retaliation.

In this though, I’m not sure Iran is particularly unusual. A lot of the governments involved in the crisis in the Middle East are a bit like those F. Scott Fitzgerald characters who “smashed up things and creatures and then retreated back into their money or their vast carelessness”.

Israel’s Benjamin Netanyahu has been dancing on the edge of a corruption trial for the best part of a decade, ever since he was indicted in 2019 for, among other things, accepting “hundreds of thousands of pounds in luxury gifts from billionaire friends”. Donald Trump’s family has assets worth more than double what they were just two and a half years ago. The earnings from crypto alone are enough to guarantee the most comfortable of futures. These two are very definitely careless people, as is everyone around them.

If this ill-planned military adventure ends badly, then the elites of none of the combatant countries will end up suffering in the way that ordinary Iranians, Israelis or Americans will. This sense of impunity infects much of the discussion of the war: how, for example, could someone who feels any connection to other people be exulting in their death in the way that U.S. Secretary of War Pete Hegseth does? In this bloodthirstiness, as in so many other aspects of kleptocracy of course, Russia led the way, but the rest of the world is catching up and I don’t think we’re ready for what that will look like.

An important aspect of this, again long visible in Russia with its dreadful public services and military failure in Ukraine, is that corruption does not just enrich elites, it also degrades state capabilities. “Corruption at the top always rolls downhill. Once it becomes open and acknowledged, it leads to corrupt and slovenly acts throughout a system,” as Phillips Payson O’Brien argues, in a piece which builds on another article in which he lays out how the Russian model might be worth applying to much of what’s happening in the United States.

This of course adds fresh weight, not that it’s needed, to the urgency of shoring up defences not just against foreign interference in the democratic processes of those countries that still have them, but to getting big money out too. It’s great that a U.S. politician has, for the first time, taken the Political Integrity Pledge and won (though admittedly only a primary), but just to get to the stage of standing in the general election, he’s had to raise more than $20 million. Too much of that and pretty soon you’re talking about real money.

This week at Tether

Talking about real money, the latest episode of Tether watch is a weird one: our favourite crypto concern has just invested $50 million in a smart mattress company. Now admittedly, that isn’t even two days’ worth of last year’s profits, so it’s not exactly a big deal for CEO Paolo Ardoino but it’s still sufficiently sinister to be worthy of mention.

I find it disturbing enough that tech companies are harvesting our browsing history to make money from, but it’s a whole other level to have Tether — Tether!?! — monitoring what people get up to in bed. It’s all, apparently, about personal sovereignty, which is to say you should stop trusting big companies with your data and instead trust it to Tether, including with what’s happening in your head: “Paolo's $200 million acquisition of a majority stake in brain-computer interface company Blackrock Neurotech may not be because he is optimistic about the size of the brain-computer interface market, but because he does not want the brain-computer interface to be controlled by others”.

Historians are going to be so confused by this; assuming of course that there will still be historians, which may be an over-optimistic assumption about a future with brain-computer interfaces.

The need to know your enemy

I’ve been talking to quite a lot of people about money laundering of late, and one of the enduring problems is the lack of reliable ways to gauge the scale of the problem. We’ve been saying it’s between 2% to 5% of the world economy since the late 1990s, but beyond repeating that age-hallowed guesstimate, how do you measure it? 

Often we turn to other measures, such as how many suspicious activity reports get filed, or how many fines get imposed. So, on that note, is it good or bad that the UK’s Financial Conduct Authority imposed fines last year of just £124 million, a decline of 78% from half a decade earlier? Maybe this means there’s 78% less crime? Or maybe it means that the FCA has stopped investigating 78% of crime? Or maybe 2021 was just a really big year for fines (which it was)? Or maybe something else happened?

The answer to this is that we should properly investigate money laundering not just criminally but also academically, looking at gaps in statistics and devising new methods of measuring how large the criminal economy is, rather than rely on proxies for it. That would not only help us identify what to target, but also help us see what techniques are working as criminal wealth rises and falls. As it stands, it feels like we’re waging a war without a clear idea of where the enemy is, and what the final goal might be, and there’s quite enough of that going on elsewhere at the moment.

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This whole process will not be quick, and there will be the usual abundant opportunity for acronyms, circumlocution and horse-trading. But eventually the hooves are going to have to hit the road. There is simply no way of hiding the fact that, under Donald Trump, the United States has broken its promise to bring greater transparency to shell companies; nor that it has scaled back prosecution of financial crimes, pardoned convicted financial criminals, and unleashed a crypto frenzy.

Throughout its history the FATF, set up by the G7, has been able and willing to overlook transgressions from big countries that it wouldn’t tolerate from smaller ones. It punished the remote island states of Niue and the Marshall Islands in its first ever blacklist for their lack of transparency around shell companies, for example, while merrily tolerating the fact that not even the Federal Bureau of Investigation could figure out who owned a corporation in Nevada. Nauru got punished for moving dirty Russian wealth while the UK and Switzerland didn’t.

The FATF’s structure, which ensures it is dominated by large economies, is a classic example of how, if you’re not at the table, you’re on the menu. But, in the past, those large economies have at least pretended to go along with its recommendations. They’ve made promises, passed legislation, convened working groups, said the right things: all of which has given everyone the diplomatic cover they need to keep each other off the naughty step.

Trump’s not doing any of that, and it’s hard to believe that he’s going to change that habit. If the FATF criticizes his administration, I think we can safely assume Trump won’t take that well, and could — if past behavior is any guide — pull the United States out. But if the FATF doesn’t criticize what he’s been up to, it will lose all credibility. 

Speaking for myself, I think the FATF’s conception, structure and techniques are all flawed, perhaps irreparably, and that it has been part of the problem, rather than part of the solution, for most if not all of its 37-year history. Perhaps, therefore, Giles Thomson should get ahead of the looming fiasco by declaring a complete overhaul of the whole organization, re-examining its recommendations, its memberships, its strategy, and more.

What are the chances of that happening? Well, here’s some news from the Pacific: “Papua New Guinea one step away from being blacklisted, global money laundering watchdog warns”. Is Papua New Guinea the problem? No. Do we get anywhere by pretending that it is? Also no. Will the FATF carry on regardless anyway? I would love to be surprised by the answer to that question.

The need to clean house 

I’m a big fan of this video from Transparency International’s UK chapter, which lays out the inglorious history of corruption in British politics, and urges the government to be more ambitious in its new piece of legislation. TI has pointed out three areas where it thinks the government should go further, and I agree with all of them, but I would also like to see a complete ban on crypto donations, which would help prevent compliance departments being overwhelmed by automated efforts to circumvent donation limits.

I would also urge you to read this comment piece from RUSI about the threat to democracy posed by big funders from the American right, which has significance far beyond British politics. The world’s remaining democracies have been slow to recognize how radically the values of many U.S. billionaires have diverged from what we traditionally associate with conservatism, and to shore up their defences against them. “The task now is to strengthen our democratic guardrails — calmly, transparently and proportionately — before those boundaries are redrawn by others,” the writers Neil Barnett and Eliza Lockhart conclude.

Transparency International’s Russian chapter has been in exile since 2022 for obvious reasons (last year, for example, it had to issue a statement to argue that “fighting corruption is not terrorism”) but it has continued to conduct really valuable investigations into how illicit wealth flows in and out of its home country, including a recent one detailing the use of shell companies in the UK’s tax havens to trade with Russia, and identifying $8 billion worth of transactions.

The worst offender as a source of opaque companies was the British Virgin Islands, though Bermuda was also a problem, moving sanctioned products — including lead and zinc — as well as oil and other fossil fuels, a surprisingly large number of yachts, and a jet that ended up belonging to Chechen strongman Ramzan Kadyrov (whose ill-health is, apparently, once more the subject of speculation, poor chap).

“For many years now, we have observed a dysfunctional equilibrium in which illicit financial flows, tax evasion, sanctions circumvention, and other forms of misconduct are channelled through firms and intermediaries registered in unaccountable jurisdictions,” TI-Russia notes. Fortunately, however, the British government is hosting an illicit finance summit this June and so has the perfect opportunity to set an example by making sure this kind of thing stops happening on the territory it’s responsible for if nowhere else.

Here’s an interesting story from the Netherlands, where luxury firm Louis Vuitton was fined half a million euros for failing to identify customers spending large amounts of cash. This case was part of an investigation into the Chinese money laundering technique known as ‘daigou’, in which value is transferred internationally not via the financial system but by buying expensive objects and then reselling them in China. High-end fashion is often used in the system, and it will be intriguing to see if other countries follow the Dutch lead and investigate unusual cash purchases.

And here’s a piece on our favorite crypto company Tether, which is apparently valued by market participants at between $200 and $350 billion. That is less than estimates made in the summer, but still an awful lot of money. Fun fact: finance firm Cantor Fitzgerald has a five percent stake in Tether, which is thus worth $10 to $17.5 billion, via a convertible bond. Another fun fact: Cantor Fitzgerald is owned by Commerce Secretary Howard Lutnick’s children. 

Interesting question, would the prospect of your family earning a windfall of that size affect how stringently you would approach the regulation of a financial institution accused of involvement in industrial-scale money laundering? Lutnick, who led Cantor Fitzgerald for over 30 years, is of course not the kind of man who would let petty cash cloud his judgement, so this question is of academic interest only, but still, worth thinking about.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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Few tiny details are more consequential than the rules around democratic processes, and particularly those that define who pays for them: just look at the effects of the U.S. Supreme Court’s decision in a dull-sounding case in 2010. A lot of other democracies are looking at the U.S. right now and thinking they’d like to avoid replicating this experiment with endless money, which is one reason why the UK has a new ‘Representation of the People Bill’.

As it stands, it looks like a big missed opportunity.

Much of the requirement for the tighter rules proposed in the bill is the need to tackle foreign interference, a concern stoked by suggestions that the Kremlin helped secure victory for both Brexit and Donald Trump in 2016. Although I can see why we don’t want Vladimir Putin near our political systems, I’ve always thought these concerns missed the point: home-grown oligarchs dislike democracy as much as Russian ones do and, since they are more numerous, richer and far better-connected, we should worry about them more.

So, it is a great shame that the UK’s new bill hasn’t imposed a cap on political donations to prevent the kind of funding arms race that has infected the United States, and which is gearing up in the UK too, or stripped away a lot of the unnecessary complexity in the existing regulations that create the kind of loopholes exploited in the Brexit referendum. Most importantly, it has failed to address the growing threat of cryptocurrencies and impose the same kind of ban on crypto donations that Ireland has.

A democracy is sovereign, and a crucial defence of that sovereignty is ensuring only actual voters fund its operations. British law enforcement agencies acknowledge that they already don’t have the resources they need to keep up with what bad actors are doing with crypto, so why would politicians take the risk of allowing crooks to buy influence by making it easier for them to hide what they’re doing?

“If you put an element of crypto in what is already a complicated and sometimes lengthy trail to hide the true source of the funds, you are just adding another layer of complexity. Anything we can do to take away that friction is good,” said Rachael Herbert, director of the National Economic Crime Centre, to a parliamentary committee.

It is not too late to close this gap in the bill, and to prevent it from becoming one of those little details with huge consequences. Blocking cryptocurrencies will not solve the problem caused by oligarchs’ assault on democracy, but at least it would help not make it worse, and it is always easier to mend things before they break.

On that note, credit to Daniel Lobo-Lewis for trying to use some of the mechanisms of the unregulated U.S. political funding system for a good cause (“Give us money to get money out of politics. It makes sense if you don't think about it too hard”) by creating the political integrity project. He’s built a tracker so you can see how much cash different candidates have raised, and which of them have pledged to try to get money out of politics, and it’s a lot of fun to play around with. 

Here’s what it looks like when there is unfettered money in politics. Lobbyists for crypto firms are planning to spend $263 million on the midterm elections this year. That is not only more than the entire oil and gas industry spent in 2024, but more than double the total spent by all parties in the UK’s last general election. This is not healthy.

I’ve largely avoided writing about the Jeffrey Epstein revelations, because I don’t feel like I have anything to add to what everyone else has already said, but they do spectacularly demonstrate the size of the threat posed to girls in particular and society in general when the political, cultural, financial and economic elites of a country become entangled, give each other money, do each other favours, and generally take over the world. 

Preventing this kind of collusion is why it’s important to keep big money out of politics, so at least there is a source of power in society that’s independent of the oligarchs.

Crooks thriving in chaos

While on the subject of human trafficking, Chainalysis has produced this alarming report on how crypto helped traffickers move their profits last year, including from child sexual abuse material (CSAM), with a staggering 85% increase in them dong so over 2024.

“CSAM networks have evolved to subscription-based models and show increasing overlap with sadistic online extremism (SOE) communities, while strategic use of U.S.-based infrastructure suggests sophisticated operational planning,” the report notes.

The report gives more evidence for how Chinese money laundering networks based in Southeast Asia are using cryptocurrencies to expand their influence globally (as they also are in fraud), with business deals coordinated via the encrypted messaging app Telegram, and laundered via sophisticated techniques beyond the reach of law enforcement even at the best of times.

And this is not the best of times, what with the United States having abdicated its traditional role as the only country serious about investigating, prosecuting and convicting financial criminals.

“Enforcement is now solely in Washington’s hands, allowing politically driven cases to proceed or be stifled,” noted John Lothian in this scathing commentary contextualised by the FT. “Given the pardons issued by President Trump, there has never been a better time to be a crook. This chaotic formula for enforcement is a disaster or a cluster of disasters waiting to happen, given the explosive growth in retail futures trading, prediction markets, and legitimized crypto trading… ‘God help us’ is the last defence.”

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But I do think it’s important that, this year, influential Western countries are sliding down the rankings: the United States has dropped to its lowest-ever score and last year’s crackdown on independent media and judges haven’t even been reflected in that score yet. “We’re seeing a concerning picture of long-term decline in leadership to tackle corruption,” noted TI. “Even established democracies, like the U.S., UK and New Zealand, are experiencing a drop in performance. The absence of bold leadership is leading to weaker standards and enforcement, lowering ambition on anti-corruption efforts around the world.”

Hopefully, TI’s index and its grave conclusions will help galvanize opposition to the pro-oligarch policies that are infesting the world, and help to stave off oligarchical takeover in places that are still doing okay. That is, I suppose, valuable. 

Still, I haven’t changed my opinion that the Corruption Perceptions Index should be abolished. It is absurd that Hong Kong is ranked as the 12th cleanest jurisdiction in the world, while China — the country it exists to loot — is 76th. Just as ridiculous is the position of the United Arab Emirates at 21st in the list, considering its growing role as a lynchpin of global kleptocracy, including from Russia (ranked a lowly 157).

The United Kingdom may have fallen to 20th but that is still far too high for a country that, by its own admission, launders a hundred billion pounds a year. That’s equivalent to the entire GDP of Kenya, which is down at 130 in the list.

You simply cannot understand corruption on a country-by-country basis because kleptocracy is a globalized phenomenon, and anything that suggests you can — particularly something so crude as a league table — is too misleading to be useful. 

Talking about multijurisdictional wizardry, check out this report from the FACT coalition on how U.S. companies structure their affairs. Thanks to new accounting rules, it is possible to see how and where U.S. corporations pay tax. Some of the results are pretty remarkable: Boeing pays more tax in Germany than in the United States; Tesla pays only $28 million to the U.S. Treasury, fully 27 (!) times less tax than it pays in China.

Of course, a large chunk of these companies’ profits barely get taxed at all, but instead are routed to countries that treat them generously, of which Ireland, the Netherlands, Bermuda and Singapore are particular standouts. 

The fact that this information is disclosed is good, because it allows ordinary citizens to see how big companies win special treatment, and hopefully thus increases public pressure for fair taxation. I would not therefore be at all surprised if some skilled and energetic lobbyists are right now working very hard to make sure the disclosures end as soon as possible.

Of course, you do not need to leave the United States to obtain complicated corporate structures, as shown in this recent piece from Bloomberg, about how the Russian oligarch, party-goer and billionaire Suleiman Kerimov opened a Delaware-based trust to, er, manage assets held by a Liechtenstein-based foundation but originating from his business empire in Russia, where he remains a member of the upper house of parliament. But then Kerimov was sanctioned in 2018 for what the first Trump administration called “worldwide malign activity”. He was specifically accused of bringing millions of euros into France in suitcases, using it to purchase villas, and evading taxes on them (there’s no school like the old school).

Despite the sanctions, Kerimov continued to benefit from the trust, according to Bloomberg. But the Treasury Department has gradually been catching up with everyone involved: a $216 million fine for a venture capital firm in June; an $11.5 million settlement from a private equity firm in December; and a $1.1 million fine for an attorney around the same time.

I’d like to say that hopefully this will focus minds on the majesty of sanctions and the importance of complying with them. And there are certainly some — such as the excellent folks of Collectif Sassoufit who are campaigning against corruption in Congo — who want the United States to designate more people, since justice can’t be obtained at home. I, however, think it’s time to have a serious reconsideration of Western over-reliance on sanctions, particularly in the light of the way that the United States is using them now. 

If you want an example of what I mean, consider the case of Kimberly Prost, an impeccably-credentialled Canadian judge at the International Criminal Court who was sanctioned because the White House didn’t like the way she’d authorised investigations into U.S. military personnel in Afghanistan (other ICC staff were also sanctioned for investigating other alleged American and Israeli transgressions), and who suffers repeated indignities as a result. “I have an e-reader,” she said. “it’s not even an American product, but for some reason, I assume tied to the payment, I’d purchase books, I’d start to read them and then they’d disappear.” You just, she admitted, “sort of end up using cash a lot.”

Frivolous sanctions like this are just driving countries to find ways around the restrictions (it’s notable that banks in Canada, the UK, and the Netherlands are happy to keep serving her, and it seems unlikely they’d be doing that without permission from their respective governments) and, in decades to come when genuine criminals can bank with impunity, future generations will despair at how U.S. governments wasted the powerful weapon that was their dominance of the global financial system.

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This story is intended to illustrate how one of the reasons for the world’s failure to stop money laundering is that politicians are addicted to the sugar rush of new policy announcements, but shun the hard work of enforcing old ones. But it’s indicative of a problem with journalism too. Journalists like to talk about shiny new things — crypto! AI! — and ignore the old ones that we’ve already reported on. 

This is the lesson I draw from the horror of the Jeffrey Epstein revelations, with the rich, powerful men dividing up the world between themselves. Crooks and thieves may invent new tools, but they’re always designed to do the same old job: steal. A world-weary shrug — “politicians on the take? How is that a story? Bring me something new” — just lets them off the hook.

So in a small gesture towards being the change I want to see in the world, this week’s newsletter is about massive problems that have been going on for so long that everyone’s kind of forgotten about them, but which we should still be trying to solve because they’re still massive problems.

Global Financial Integrity, a research and advocacy organisation in Washington DC, has been arguing for almost two decades that we need to spend as much time looking at how illicit value flows through the trade system as we do looking at the financial system. In simple terms, by lying on the documentation that accompanies trade shipments, exporters can suck wealth out of poorer countries and — according to GFI’s analysis — have been doing so on a vast scale for decades.

In its latest analysis of trade flows out of Sub-Saharan African nations, GFI has identified “a renewed intensification of trade misinvoicing risks across the region”, with an average of $112.97 billion in value disappearing each year over the past decade, and at an accelerating rate. This total significantly exceeds that of the countries’ new debt over the same period, meaning that they should be seen effectively as net creditors to the world, rather than as net debtors.

“Illicit outflows on the scale observed in Africa have dire consequences for development. Every dollar siphoned out of African economies is a dollar not taxed or invested at home,” GFI concludes.

This phenomenon is often called ‘Trade-Based Money Laundering’, and is central to how illicit finance works, including the business model of the giant new ‘Chinese Money Laundering Networks’, but policy proposals for how to tackle it are sorely lacking. 

There has been, however, no shortage of suggestions for how to stop criminals being able to hide their identities behind shell companies when moving illicit funds. Corporate transparency has been pushed by the Financial Action Task Force since its earliest days. 

Efforts to achieve that goal have foundered in the European Union and the United States, but the UK has been a bright spot, with its notoriously filthy corporate registry of a decade ago adopting new rules to clean itself up. It would be nice to think this would mean we’d no longer see insiders from ex-Soviet republics using UK-registered companies to arrange questionable deals, but here’s the Organised Crime and Reporting Project to set us right.

“Two UK companies with no prior record in the mining industry have won tens of millions of dollars in Uzbek state procurement contracts,” the report states. “One was owned, on paper, by a septuagenarian British bookkeeper with no evident ties to Central Asia. The other, by a UK corporate services provider that for years managed corporate structures that shielded their true ownership from public view.”

The real meat in this sandwich, however, is how — after the journalists asked questions about the companies — their owners were able to seamlessly change the inconsistent pieces of information in the registry, much of it backdated, despite the supposedly more stringent new requirements.

I know this may all seem a bit academic because, thanks to the gutting of the U.S. Corporate Transparency Act, it’s easier, cheaper and murkier to use an American shell company these days anyway, but it’s important to remember that the battle hasn’t yet been won anywhere.

And one of the reasons it hasn’t been won is incompetence by underfunded and under-supported regulatory bodies. This was once again on display in the disastrous attempt to punish a British lawyer for allegedly persecuting a whistleblower who helped to expose the workings of the vast OneCoin scam. 

Everything about the case has been a fiasco: the fact that the fraud happened in the first place; the fact that the fraudster was able to retain a British lawyer; the fact that the regulatory action took eight years to happen; the fact the tribunal threw the case out; and now the fact the regulator is on the hook for everyone’s costs. I would say this has achieved nothing, but it’s worse than that: now the regulators have a reason to be even more timid than they already are.

It means that theft keeps happening and even when efforts are made to find the stolen wealth and punish those responsible, the damage has already been done. For instance, it’s good that UK prosecutors are launching a case against Nigeria’s notorious former oil minister, but how much better would it have been if theft hadn’t been so easy in the first case?

Of course that’s not to say that we shouldn’t talk about shiny new problems too, so here’s this week’s instalment of Tether watch. Fair warning — it is unusually gross, even by the low standards of this newsletter’s most regularly-appearing crypto company.

“Private Telegram groups for the sharing of secretly taken footage of women and girls take payment via the popular Chinese digital payments systems Alipay and WeChat Pay, as well as the cryptocurrency Tether.” One group “offers access to more than 40,000 videos of secretly taken footage from hotels, homes and public toilets for a $20 ‘V.I.P.’ membership”.

Tether denies any wrongdoing, and says that it cooperates with dozens of law enforcement agencies worldwide. It’s clearly doing something right anyway, since it claims to have made more than $10 billion in profits last year, having issued $50 billion worth of new crypto currency, and has launched a separate stablecoin — USAT, as opposed its normal USDT — for the American market.

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The post Why the law lets financial criminals off the hook appeared first on Coda Story.

There’s a small insight into what this looks like in practice from a fine imposed on Britain’s Bank of Scotland last week over its failure to notice that a new customer had been sanctioned for his role in Russian-occupied Crimea. He had registered with a slightly-different spelling of his name — “a changed character and an additional character in the forename, a missing middle name and a changed character in the surname” — which briefly out-foxed the bank’s compliance systems.

I’ve written about this particular gentleman’s adventures in transliteration before. Having opened the account, the bank failed to notice that although he had been removed from the European Union’s sanctions list, he had not been removed from the equivalent UK list, meaning that for 18 days he had access to financial services he should not have had, until various automatic systems and manual checks caught up with him.

In the circumstances, the Bank of Scotland is probably happy to pay its 160,000-pound fine, which also serves to remind financial institutions to invest in all possible compliance-related software, to employ more people who can check and double-check everyone and everything, just in case the next fine is bigger and comes with sharper teeth. 

The upshot is that sanctions just got more expensive, more laborious and more complicated. But have they got any more effective? For that, we need to remember what they were supposed to achieve. “Our actions, taken in coordination with partners and allies, will degrade Russia’s ability to project power and threaten the peace and stability of Europe,” said then-Treasury Secretary Janet Yellen in February 2022, when announcing a first tranche of sanctions, to which many others have since been added, in many countries.

Now, I’m not saying this hasn’t been completely without effect – Russian oil revenues dropped sharply last year, for example — but it’s important to remember she was talking almost exactly four years ago, which means Ukraine has been resisting Vladimir Putin’s Russia for longer than either the USSR or the USA spent fighting Adolf Hitler’s Germany. Whatever the argument about the effectiveness or otherwise of sanctions in eventually stopping Putin’s war machine, you have to agree that they haven’t worked very quickly.

And this creates a problem. As with incompletely applied restrictions on money laundering, sanctions imposed without other enforcement mechanisms fail to defeat the people they’re aiming at, while incentivising them to learn how to circumvent restraints. 

So what’s the solution? Should we just give up on sanctions altogether and create a financial free-for-all equivalent of this year’s Enhanced Games, when cheating will be legalised so a rich man “with a mission to build superhumanity” can pay poorer people to take performance-enhancing drugs and see what happens?

You might think that’s a rhetorical question to which the answer is “OBVIOUSLY NOT!!!”, but that’s kind of what’s already happened. In April, Donald Trump’s Department of Justice decided to step back from the Biden administration’s policy of trying to make crypto companies obey the law. “The Department will no longer target virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users,” the deputy attorney general said in a memorandum titled ‘ending regulation by prosecution’.

It is hard to over-stress quite how wildly this Enhanced Games-esque policy diverges from the approach taken towards money laundering since 1970, when the authors of the Bank Secrecy Act specifically stated that banks were responsible for the criminal acts of their clients, a financial anti-doping policy subsequently adopted by the whole world.

What’s been the result of the White House’s unilateral surrender? Obviously, it’s too early to see the full effects, but the general outlines of a catastrophe are already visible.

“Illicit cryptocurrency addresses received at least $154 billion in 2025. This represents a 162% increase year-over-year, primarily driven by a dramatic 694% increase in the value received by sanctioned entities,” said Chainalysis, the respected crypto investigations organisation. “We must caveat that this figure represents a lower-bound estimate based on illicit addresses we’ve identified to date.”

That means sanctioned entities moved almost seven times more value via crypto in 2025 than in 2024! That whole approach of using Western dominance of the financial system to restrain geopolitical adversaries is gone, and who knows what, if anything, will replace it.

Stablecoins now account for 84% of all illicit volume, according to Chainalysis, which also separated out the booming business being done by Chinese money laundering networks, which are seizing an ever-greater share of the market with their “industrial-scale processing capacity, operational resilience, and technical sophistication”.

US officials love stablecoins, since their issuers tend to buy Treasury bills to guarantee their assets’ value, which helps provide some extra support for the long-term U.S. policy of piling debt onto future generations rather than raising taxes on presidents’ wealthy friends. But if the approach now involves handing a sanctions-evasion opportunity to mobbed-up Chinese kleptocrats, Russians and others, then it is even more disastrously short-termist than it already appears.

Stablecoin giant Tether, by the way, may be buying a lot of U.S. government debt but is also hedging its bets and investing heavily in gold, of which it buys two tonnes a week. Of course, it keeps its stash in nuclear bunkers in Switzerland. Because why wouldn’t the people behind Tether want to resemble Bond villains even more than they do already? Next month perhaps they’ll announce a new corporate headquarters inside a Japanese volcano, with its own shark pool, stealth catamaran, and space station.

And that’s before we get to the effect of artificial intelligence on how criminals can complicate and obfuscate crypto laundering schemes, something I’ve been hearing about for a while. “The intersection of AI and cryptocurrency reflects the operational reality of contemporary jihadism,” notes one rather terrifying report. “Current counter-terrorism finance systems” it warns, “are structurally misaligned with how terrorists use crypto today.” I see no sign that any government minister anywhere is close to being ready for any of this, or to be honest, even aware that it’s happening.

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We’ve seen the same pattern all over the world — a criminal hands cash to a middleman, and receives cryptocurrency in exchange — but rarely has it been so well explained as in this affidavit attached to the indictment of Jorge Figueira, a 59-year-old Venezuelan charged this month with laundering more than a billion dollars.

In some ways, this was a very old-fashioned scheme, with funds derived from the South American drugs trade being shuttled between as many as seven different accounts to confuse any pursuers before being transferred to their recipients. Were it not for the crypto element, this could have happened at any time since the 1980s, but it is the crypto element I want to focus on: and, once again, it was Tether’s USDT.

“Basically, it is used for what we are doing,” said Figuera in a tapped phone conversation transcribed in the affidavit. “It is used to transfer money in a quick way, even to make it get to jurisdictions that have some type of issues, etc. For example, to send it to China… Let me be clear with you, (USDT) is used a lot for laundering money.”

The USDT was transferred specifically on the Tron blockchain which, said FBI Special Agent Stephen Walker, “is commonly used by individuals involved in money laundering.” You may be rolling your eyes that I’m talking about Tether yet again. And while a day may come, to egregiously misquote Aragorn, Son of Arathorn, when I don’t bang on about USDT, it is not this day. Because there is an important point to make here.

Last week, Commerce Secretary Howard Lutnick went to Davos as part of a strong U.S. team that wasted no time in expressing its contempt for everyone else in Europe, if not the world. “With President Trump, capitalism has a new sheriff in town,” Lutnick wrote in the Financial Times. (Question to American readers: is this kind of clichéd Wild West tosh as jarring to your ears as it is to mine when a UK politician does that whole “my dear chap” posho act?)

On the face of it, the indictment of Jorge Figueira does indeed look like the stereotypical muscular American sheriff in action again, ropin’ up the bad hombres and bringin’ ‘em into town tied to his saddle. America has after all historically been very good at prosecuting financial criminals. But this new sheriff operates in new ways.

It was Lutnick’s company Cantor Fitzgerald — overseen since last February by his sons Kyle and Brandon — that provided Tether with the services it needed to operate, which back in 2023 no other major institution would provide. With Tether valued at perhaps $500 billion thanks to the healthy demand for its products from people like Figueira, Cantor’s own windfall from it could total $25 billion, enough to vault members of Lutnick’s family into the stratospheric wealth club.

The owner of the Tron blockchain meanwhile — our old friend Justin Sun, consumer of a $6.2 million banana, generous investor in the Pitcairn islands, and so on — has been a substantial investor in the Trump family’s World Liberty Financial, although the relationship has not been entirely smooth.

I have no personal experience of the American Old West, but I’ve watched a lot of Westerns, and traditionally a good sheriff’s family members do not profit mightily from companies named in the indictments that the sheriff brings, nor from those that help the sheriff’s strategic enemies build a whole new system outside of the sheriff’s jurisdiction. (If you’d like a more extensive, thoughtful and sophisticated version of this argument, without the silly jokes, I think this is a very interesting paper.)

Because it’s not just money laundering where companies like Tether are implicated. “The Central Bank of Iran has acquired at least $507 million in USDT, the US dollar-backed stablecoin,” notes Elliptic in this new piece of research. “The CBI also appears to be constructing a ‘sanctions-proof’ banking mechanism that replicates the utility of international dollar accounts. By treating USDT as ‘digital off-book eurodollar accounts’, the regime creates a shadow financial layer capable of holding US dollar value outside the reach of U.S. authorities.”

I’m sure everyone has either watched, read, or read about Mark Carney’s speech at Davos, and I think his conclusions — about mid-sized countries needing to help each other in this uncertain new world — apply as well to financial crime as they do to geopolitics. Their law enforcement agencies need to band together and start investigating the kind of companies that have been welcomed into the United States, and to stop relying on the U.S. to do their job for them because the new sheriff in town really is not like the old one. Perhaps these middle powers could call their cooperation “a posse.”

At present, however, I can see no recognition of the urgency of this task, although I notice that the European Union’s Anti-Money-Laundering Agency has laboriously ticked one more bureaucratic box in the mammoth task of thinking about maybe beginning to actually start doing something. Meanwhile, the UK has heroically completed part of a consultation into whether it should slightly change its own AML regulatory set-up. 

One of the offshore centres I wrote about in my last book was Gibraltar, which has not had nearly as much scrutiny as places like the British Virgin Islands, partly because it specialises in gambling rather than kleptocracy, but also because a particular kind of Brit sees any criticism of The Rock as tantamount to spitting at the royal family.

But there are serious problems in this strange little overseas territory, with worrying implications for the governance of a place that has previously been central to several European smuggling networks and could easily become so again. “Sir Peter Openshaw’s findings are clear as light and day: the man running Gibraltar had tried several times to hobble a police investigation into matters relating to national security, which was grossly improper,” says this Transparency International report, which deserves reading.

My new book is very shortly to be out in the wild, and has even had a nice review, so I am doing lots of events (come along!) in which I tell people about how dreadful the world’s money-laundering system is and hopefully don’t leave them so depressed that they break down and cry, which in this line of work is always a risk.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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The value of banknotes in circulation is a useful proxy for the size of the illicit economy, because they are used less than ever by ordinary people in ordinary transactions. So a primary source of demand for physical cash comes from criminals and money launderers. Since 2022, however, while the value of all the physical US dollars, Australian dollars, and pounds has been rising, the value of Euro banknotes in circulation has stagnated. 

This is especially notable because, in the giant €200 bill, the European Central Bank provides a super-convenient banknote for transporting large values around in a relatively small box. 

But it’s happy days for those looking for the green shoots of a revival in European criminal dynamism. In December, the value of Euro banknotes in circulation finally hit its first new all-time high — of €1.619 trillion — since June 2022, when it was €17 billion lower. Interestingly, however, the share of €200 bills in that total is falling. Consumers appear to prefer €100 bills and, if there are any money launderers out there able to explain why that is, please get in touch.

The Geenland gyp

I’m not going to express an opinion on the embarrassing idiocy of Donald Trump’s “policy” on Greenland, but I am interested in what the world’s biggest island would look like as the 51st state (as proposed in this bill from the improbably-named Congressman Randy Fine) from a financial crime perspective.

Greenland may be larger than Alaska, but it is the world’s least-densely populated territory, with only 57,000 inhabitants. That’s about the same number as people in Carson City, Nevada where there’s so little going on that it’s almost a relief to escape to the comparatively vast Reno, which isn’t something I’d otherwise imagine myself saying about such a barren wasteland. Greenland has a tenth of the population of Wyoming, the current least-populous US state, which might give you a clue about why I’m concerned should Greenland be accepted into the warm embrace of the USA. In recent decades, many of America’s least-populous states have enthusiastically embraced financial secrecy as a useful source of additional income, in that it allows them to swipe business/tax revenue from their larger fellows. 

South Dakota and Delaware are the most famous examples, but Wyoming, Nevada, Alaska, Oregon and others are involved too. It is famously easier to get a shell company up and running than a library card in many states, and those companies help their anonymous owners evade tax, launder money, hide stolen wealth, and more.

One of the reasons for this phenomenon is that it’s just so much easier for lobbyists to get pieces of enabling legislation passed through the legislatures of small states, which have fewer competing industries and smaller numbers of lawyers. Now, if that’s the case in Wyoming, just imagine what it would be like in Greenland – laws could be rushed through in minutes, rather than hours. There’s no tax revenue to speak of, so why bother having any taxes at all? It would be a criminality haven for the ages. 

It would, I admit, be quite amusing to watch the fury of Republican-voting states as they lost all this lucrative business to somewhere whose accession to the Union they had so enthusiastically endorsed. There would also be a tremendous irony in the extent to which shady Chinese and Russian money could pour through a secrecy haven even murkier than Delaware, considering the stated justification for the mooted annexation. But, more broadly, this would be absolutely awful for democratic accountability and other good things, so let’s hope it never happens.

Tether rides in with the cavalry

Tether, issuer of the world’s largest stablecoin USDT, has frozen $182 million worth of crypto that it thinks is linked to Venezuelan sanctions evasion. In this, it repeats a pattern familiar from its playbook of jumping aggressively to enforce Western governments’ rules just as soon as it has absolutely no choice about it. 

The fact that Caracas was relying on USDT to fund most of its oil trade was common knowledge, helping both to support a corrupt and dictatorial regime and to ensure a healthy source of demand for Tether’s signature product for years. The same was previously true of Garantex, a Russian crypto exchange much used by criminals and sanctions evaders, which continued to shift large amounts of USDT for two years after it was designated by US authorities. When Garantex was finally shut down in a laborious joint operation by Finnish, German and US authorities, Tether rushed into belated action, freezing $23 million. Similarly, it hurried to assist US authorities only after Trump had sent in special forces to kidnap the Venezuelan president, thus keeping the money flowing till the bitter end.

It shouldn’t be necessary to say it, but this isn’t supposed to be how anti-money laundering works. The whole point of global standards is that companies report their suspicions to the authorities and freeze accounts while those suspicions are investigated, so that assets can be confiscated if shown to be of criminal origin.

With Tether, however, it appears to be the other way round, that is keeping silent for as long as possible until the authorities compel them to act, which may help explain why USDT is proving to be so very popular. After all, who wouldn’t want a version of the dollar without any of the downsides?

Tether insists that it does cooperate with law enforcement agencies, and recently announced a partnership with the United Nations Office for Drugs and Crime. “Supporting victims of human trafficking and helping prevent exploitation requires coordinated action across sectors,” said Paolo Ardoino, CEO of Tether, in a recent joint statement with the UN agency. There is a grim irony to this, considering that USDT remains the currency of choice for the horrific scam farms of Southeast Asia, where huge numbers of trafficked people are abused if they fail to meet their fraud targets. 

“Aside from [the messaging app] Telegram, the cryptocurrency Tether also plays a key role in scam markets — the popular “stablecoin” is the preferred tool for all of the markets’ money-laundering transactions,” noted this analysis from Wired. “Tether and Telegram’s efforts to combat the ballooning scam industry’s use of their tools is comparable to Southeast Asian law enforcement’s minimal, often performative shows of raiding scam compounds, only to allow them to rebuild and resume operation.” Or indeed Tether’s performative rush to freeze Venezuelan crypto holdings.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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If you replied — “I’m sorry for your loss, of course you can borrow my bank account, I look forward to my cut” etc., etc. — then a correspondence would begin, and the scammer would eventually require you to pay a fee to arrange the transaction. If you paid the fee, the scammer would vanish, and you would be left wondering how you could have been so foolish, and lamenting the fact that your money was now in a bank in Beirut.

Until now.

The most random piece of New Year’s good news I’ve seen in some time is that “the Serious Fraud Office”" (SFO) has successfully recovered more than 400,000 pounds to be returned to nine fraud victims almost 24 years after they were defrauded.”

Abdullah Ali Jammal was the fraudster in question, but fled the UK before he could be convicted, so the SFO seized his money. Normally, if there has not been a conviction, the money goes to the government, but — in this case and, hopefully, in future ones too — it will go to his victims instead, who were laboriously traced in several different countries by law enforcement agents.

This is all very munificent (though it will be interesting to see if the UK’s generosity continues when larger sums of money are on the line), but the most interesting conclusion to draw is just how long financial crime cases take to come to any sort of conclusion. They are complicated, multi-jurisdictional, frequently packed with political and diplomatic complexities, and almost invariably feature defendants who can afford armies of lawyers.

My own personal favourite example is the case of Pavlo Lazarenko, a spectacularly corrupt Ukrainian politician who fled to California in 1999 when he fell from grace. This was an unwise choice of destination (there are reasons why they normally go to Russia or Belarus) and he was promptly arrested, tried and convicted on money laundering charges.

It is now 2026, he has been out of prison for more than a decade, but U.S. authorities have still not succeeded in confiscating his assets. Whole generations of lawyers have come and gone as the case has ground its way through the courts, yet Lazarenko fights on. I almost admire his tenacity, though I’m not quite sure what he is holding out for. Perhaps he is hoping for a pardon? To be fair, if he did receive one, he would be far from the least worthy recipient of late.

Money makes money and the money that money makes, makes money

Many thanks to the good folks at the Institute for Policy Studies for doing the sums on how U.S. oligarchs fared in 2025. “The biggest gains were among the top 15 U.S. billionaires, those with assets over $100 billion. This elite group saw their wealth surge to $3.2 trillion at the end of 2025, up from $2.4 trillion a year ago, a gain of 33% (more than double the S&P 500 increase of 16%),” the IPS said. 

I know we’ve all got used to this, and we’d all rather think about something less depressing like climate change or the return of gonorrhoea. But it is worth thinking about how weird this is. Oligarchs’ already enormous wealth is growing twice as fast as the wealth of even those who can afford to own shares, let alone the 40% of Americans who are cut out of the stock market altogether.

Five years ago, Elon Musk was worth $25 billion, which is an unimaginable fortune in and of itself; now, he’s worth $716 billion, which is a sum greater than Belgium’s GDP. But then, five years ago, the sheer idea of a centi-billionaire was so astonishing that the creation of a new one was worthy of remark. Now there are so many of them that they’re not even all American any more. 

This is bad news for democracy. No system supposedly based on equality but funded by political donations can survive for long when the richest 300,000 Americans own $19 trillion more wealth than the poorest 170 million. I am particularly concerned about how the oligarch class in the United States might copy their fellows in Russia and use the state’s machinery to maintain their grip on power if there is a backlash.

As such, I think it’s worth having a look at a report published last month from the House of Representatives Financial Services Committee on what Republicans and crypto-people call “Operation Choke Point 2.0”. In one interpretation, this is just a self-pitying conspiracy theory (named after a previous one), in which Joe Biden’s White House supposedly acted in the interests of monopolist banks and abused money laundering regulations to stop crypto firms from establishing themselves.

A more important interpretation though is to read the report and marvel at the huge amount of leeway that anti-money laundering (AML) regulations give to governments to exclude people and institutions from the financial system. Previously, this has largely affected Muslims, spuriously linked to terrorism in the UK, the U.S., Canada and indeed almost everywhere, and Russians accused of nothing much, and other marginalised groups. It has thus failed to gain the political traction it deserves, but it is genuinely a huge deal.

Authoritarian regimes have abused this power for decades and I think it deserves far more attention than it gets, so I’m actually quite pleased the Republicans are looking at it, even if they’re only doing it because it’s affected some big donors. The Cato Institute in this new report makes some very good points, not the least of which is the fact that there’s no evidence that the AML system is working anyway, so a proper re-examination of its inner mechanisms is long overdue. And perhaps with added urgency, given the question of whether you’d want those mechanisms to be in the hands of an authoritarian government with no interest in tackling corruption, but quite a lot of interest in swiping other people’s or indeed countries’ stuff.

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Why is this important? Because it “shouldn’t” be happening. People use far fewer banknotes in transactions these days, so there should be less demand for them, so central banks should be issuing fewer of them, so the total in circulation should be falling. But the reverse is true. Central bankers call it a paradox, chuck out a few explanations for the mystery source of demand concerning inflation, ATMs and distrust of the financial system, and move on. 

What they almost never do is ask whether demand for their products comes from criminals using banknotes to hide, move and launder their illicit wealth, which is weird because that is obviously what is happening. Why else would the most popular form of cash dollar be the $100 bill? I don’t know what explains central bankers’ profound lack of curiosity about the impact of their signature product (perhaps how much income they derive from it?), but it appears now to be infecting the crypto space as well.

Last week, the Federal Reserve published a new paper called “Banks in the Age of Stablecoins”, discussing what these fiat-pegged cryptocurrencies mean for the traditional financial system. Like all central bank papers, it is jargony, infested by Greek letters, and curiously banal (“the rise of stablecoins presents challenges and opportunities for traditional banking”), but I’m more interested by what it leaves out. If you do a ctrl-f on the document, you will find zero uses of the words “launder”, “crime”, and “illicit.”

I appreciate that analysing the misuse of financial instruments by criminals is not the Federal Reserve’s job, and that its analysts are interested instead in stuff like the stability of the financial system, but the problem is that it isn’t anyone else’s job either.

This means that, as with banknotes, no one is standing back and asking: why are these things so popular, are we okay with that, and should we have a bit of a think before unleashing them on the world? 

The currency of sabotage

In the absence of such thinking, business is booming. Tether, the world’s largest stablecoin company, has just offered to buy Juventus — the Italian chief executive’s favourite football club — and to invest a billion euros in it. This is the kind of profligacy associated with Russian oligarchs back when they were really coining it, but not what you’d expect from a financial institution. Particularly when the prudent thing might be to lie low, given the accusations of complicity in financial crime.

“It is reprehensible that Tether would let so much money flow through a service flagged for money laundering,” a former prosecutor is quoted as saying in a very troubling recent piece from the International Consortium of Independent Journalists. “They should have frozen this.”

The vast majority of stablecoins are denominated in dollars, which means their issuers need dollar reserves, thus ensuring healthy demand for U.S. government bonds, which helps to explain some of the enthusiasm for them in Washington, DC. But I’ve just been in Moldova for a week, talking to people about how very close the country came to succumbing to Russian interference in recent elections. The authorities worked tirelessly to intercept cash couriers and block bank transfers from Moscow, in their efforts to secure the integrity of their democratic process. 

But there was nothing the Moldovan authorities could do about crypto. Russia has now overtaken the UK as the biggest crypto market in Europe, with a 32% growth over the past year, most of it driven by transactions larger than $10 million. Ordinary Russians don’t have that kind of money to move, so this has nothing at all to do with the mooted “democratisation of finance”, and everything to do with the Russian state seeking financial channels outside the oversight of the West.

The Kremlin may have lost the battle to influence Moldova’s elections, but it learnt an important lesson from the battle. Don’t bother paying thousands of couriers to each smuggle $9,900 in cash on flights via Yerevan or Almaty, just use crypto and move as much as you like. Now, they are hiring petty criminals to engage in sabotage, arson or espionage activities and paying them in crypto in a way that threatens to overwhelm Europe’s financial and physical defences. I can see how, from the safe distance of the United States, decision-makers prefer to focus on the profits they’re personally making from crypto, rather than the potential harm their adversaries could cause their country by using it. 

But, if I could wish for one thing for Christmas, it would be for them to wake up. This isn’t going to stop at Moldova.

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“On the day of the executive order, former FCPA targets whose stocks are publicly traded experienced returns on equity markets that were about 0.69 percentage points higher than what would have been expected from stock market trends. The effects cumulated substantively, resulting in capitalisation gains for the portfolio of past targets of corporate corruption cases of about $39 billion and outsized returns to shareholders,” found three academics in a new paper titled ‘Making Bribery Popular Again?’.

The conclusion is clear. Investors thought that the threat to the future profitability of the 261 companies previously targeted for enforcement action was caused not by the corruption itself. What the investors didn’t like was the prospect of those companies being prosecuted for corruption. Once that threat was removed, they were happy to invest regardless of possible corruption. Interestingly, the average increase in the market capitalisation for the companies — $160 million — matched the size of the average fine previously imposed under the FCPA. Truly, capitalism is a magical thing.

To say that corrupt people and/or companies do well out of corruption may not sound particularly controversial, but this has important implications for how policies should be structured in a world where an important country has decided to stop doing the right thing. Enforcement matters and, if the U.S. has stepped back, everyone else needs to step forward.

The paper’s publication coincided with a report from Reuters looking at the impact on tax enforcement of the U.S. now that the government has sacked loads of tax enforcement agents and attorneys. Funnily enough, it isn’t great. Prosecutions have declined by 27%.

Again at the risk of being obvious: if you want people to be honest and to pay their taxes, you need to prosecute people that aren’t. Alternatively of course, if you don’t want either of those things, you can pause enforcement of key legislation, and sack everyone involved. After all, why bother going to all the trouble of changing the law when it’s so much easier to stop enforcing it? From there it’s a short hop to going full Kremlin and selectively enforcing the law against your enemies. Happy days.

It’s a sign of how grim global public debate has become that it’s genuinely refreshing that the UK’s new anti-corruption strategy so straightforwardly comes out and says corruption is a bad thing, and that the country will work harder to fight it. It’s a pretty good document, all being said, though it could be far more ambitious in how it tackles lobbying, abusive lawsuits, and conflicts of interest.

I was also sorry not to see firm commitments to toughen up rules around electoral funding: at the very least, there should be caps on donations, restrictions on the use of shell companies to disguise the identity of donors, and limitations on how foreign companies can route money into UK politics. “The strategy acknowledges that restoring trust in government is ‘the great test of our era’ yet it fails to address the elephant in the room,” said Daniel Bruce, the chief executive of Transparency International UK.

This is important. It doesn’t much matter how good the laws you pass to protect a country from dirty money are, if you don’t also secure its commanding heights against takeover by corrupt or ill-intentioned actors. Because they can then buy electoral victory and cease the enforcement of all those excellent laws, just like Trump did with the FCPA.

So it’s urgent that European democracies take steps to keep corrupting wealth out of their politics before it’s too late. We are accustomed to stories about Russian money, or Chinese money undermining democracy, but the White House’s national security strategy now explicitly states that America too intends to support European fascist (“patriotic”) parties. Liberal democracy is under attack from all sides and needs to get a lot better at defending itself.

An anti-corruption Oscars?

This is all a bit depressing, but it is the festive season so let’s cheer ourselves up a little. There are countless people toiling away at considerable cost to themselves to reduce corruption and to protect democracy, and they deserve a lot more recognition than they get. I’ve been talking to some friends about the best way to provide that, and obviously prizes are one idea.

The Organised Crime and Corruption Reporting Project (OCCRP) has traditionally given an award to the “Person of the Year in Organized Crime and Corruption” to highlight villains, such as Bashar Al-Assad in 2024, or Danske Bank in 2018. But it has clearly decided that there is already more than enough irony in the world now that Donald Trump has won the first ever FIFA peace prize, so it’s changed focus and collected nominations for “Anti-Crime and Corruption Heroes” instead. Winners are due to be selected this month. This is a good initiative, and I’m looking forward to seeing who they choose.

Elsewhere, there’s the Allard Prize and the ACE award (you may have questions about an anti-corruption prize supported by Qatar, considering some of the ways its government goes about its business, but the list of previous winners includes lots of good people). It would be nice, however, if there was something ritzy and glamorous, an integrity Oscars where people committed to making the world better could be celebrated like Hollywood A-listers.

So, this is where you come in. Send in ideas. How would it work? Who should be nominated? Who should decide the winners? What should they win? Which top-end venue should host the ceremony? Should Ricky Gervais be brought in to do an incredibly dull comedy ‘roast’? Should we invite an oligarch and/or financial institution to sponsor it in return for naming rights (“the HSBC Anti-Corruption Champion of the Year”)? How often should President Trump win before we give someone else a turn?

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The British constitution is a ramshackle thing, bashed together over the centuries, and technically the government in London could just tell these Overseas Territories (OTs) what to do. But it prefers to be democratic about it, so the JMC is what we have instead. It matters because several of these OTs have long been among the world’s most egregious tax/secrecy havens – the Cayman Islands, the British Virgin Islands, and Bermuda were the top three in 2024’s Corporate Tax Haven Index – and it would be nice if they stopped.

Back in 2018, two backbench MPs persuaded parliament to pass a law forcing the OTs to open up their corporate registries, so as to stop them selling shell companies to the world’s financial villains, but progress has since been slow.

“If any Overseas Territory continues to defy the will of the U.K. Parliament, the Government should be prepared to escalate its response. All legal and constitutional options should be on the table to ensure these commitments are delivered in full and without further delay,” said Transparency International last month.

Not all the OTs are being defiant – Saint Helena is doing great, as are the Falkland Islands -- but most of them are not havens for shell companies so they’re not relevant. The one that matters most is the British Virgin Islands, and it is not knuckling down at all. To access the BVI’s register, you need a “legitimate interest”, and the owner of the company you’re looking at will be tipped off and be allowed to object.

“This mechanism could expose journalists or civil society organisations to physical or legal intimidation by those looking to hide their identity. It also provides the opportunity for those being investigated to liquidate or move illicitly obtained assets to avoid detection,” said TI (which also had other objections).

It’s hard to overstate quite how central the BVI’s shell companies have been to globalised financial crime. Impatience with its foot-dragging is completely understandable, but – at the risk of being that person – we do need to recognise that things are more complicated than they at first seem if we want a durable solution.

Almost three-fifths of the BVI’s budget comes directly from the fees paid by companies listed on its corporate registry, and the law firms and other services that work for those companies are a significant local employer. Previous transparency drives have clearly affected the islands’ attractiveness: it had more than 480,000 companies on its registry back in 2014, which was before the British government insisted that its police could access the database. It only has 360,000 now, and monthly incorporations have dropped from 12,000 to 7,000.

Before the BVI became a tax haven, it was extremely poor, and its current prosperity is entirely due to the attractiveness of its shell companies. Its politicians therefore are as reluctant to embrace transparency as a petrostate would be to join the global net zero movement, and no amount of finger wagging is going to change their minds.

Besides, London’s chances of having its wagging finger heeded were really not helped by the fact that the 2018 vote in parliament applied to Britain’s Caribbean tax havens but not to European counterparts like Jersey, Guernsey and the Isle of Man. The MPs’ intentions may not have been racist, but the outcome was, which unsurprisingly rankled people in the BVI.

British politicians can of course tell OTs to find a new way to make a living because enabling kleptocracy is reprehensible; but then BVI politicians can reasonably reply that the only reason they were so poor to begin with was because Britain enslaved their ancestors, failed to compensate freed slaves, and then followed up with 150 years of neglect.

The solution to me is a genuinely just transition in which the U.K. recognises that, because it encouraged its OTs to become tax havens in the past in order to save its own budget, it now has a responsibility to help them find a new way to make a living in the future. This will take time, require thought/compromise, and cost money, but – unlike the current approach – it might actually work.

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The suit has been brought on behalf of 306 American victims of the October 7, 2023 Hamas attacks in Israel, and alleges that Binance accounts transferred $300 million to Hamas and other terrorist organisations, and received $700 million from them, figures that dwarf the sums detailed in the criminal prosecution of Binance that led to its $4.3 billion fine two years ago.

“This was not a compliance lapse, it was a business model,” said Jonathan Missner, managing partner of Stein Mitchell Beato & Missner LLP, the law firm behind the case. “Our investigation shows that Binance built systems designed to evade oversight, using its off-chain network and weak controls to move enormous sums for sanctioned groups. This platform became a conduit for financing murder, kidnappings, and rocket attacks. The families deserve justice—and the public deserves transparency.”

In a previous case brought under the same legislation, Jordan’s Arab Bank was sued and – despite procedural wrangling that went on for years -- ended up settling with the victims for an undisclosed but significant sum of money. 

Anything that forces Binance to start taking its responsibilities to victims of crime as seriously as it takes its willingness to accept money from perpetrators of crime is a good thing. And if you want to see how widespread those crimes can be, read this excellent investigation from the ICIJ which finds crypto platforms to be “awash with dirty money.” But there are always particular challenges around terrorism funding, which can have perverse outcomes.

In contrast to drug cartels, for instance, terrorists move relatively small amounts of money, which means financial institutions have to monitor a far larger array of transactions if they want to protect themselves from a lawsuit. Because terrorists use banks in the same way as anyone else does, what this tends to mean is that very large numbers of ordinary people lose their accounts just so compliance departments can be sure to sweep out the terrorists.

The result is the under-discussed phenomenon of debanking, which overwhelmingly affects Muslims and charities targeted towards Muslim beneficiaries. 

“Humanitarian charities are facing banking barriers because banks are adverse to giving large transactions to countries they deem a risk, like Syria,” said Abdulsami Arjumand, a senior executive at the U.K.’s Muslim Charities' Forum. “Banks determined to avoid any heavy fines from the US treasury or the FCA act with very strict risk appetite… There is a balance to strike between securing aid and fighting financial crime. At the moment, we are far from that equilibrium.”

People excluded from traditional finance by this kind of inherent unfairness have turned to cryptocurrencies, and it would be a shame if the Binance case were to lead to the same injustices being imported into the crypto world as well.

A sidenote to the Binance case is the fact that the company’s founder – Changpeng “CZ” Zhao – was recently pardoned by Donald Trump who claimed that Zhao was the victim of an anti-crypto witch hunt by Joe Biden. 

In reality, he was jailed (and his company fined $4.3 billion) because of Binance’s complete failure to maintain any kind of anti-money laundering programme. At the time, one Binance compliance staffer wrote: “We need a banner ‘is washing drug money too hard these days - come to binance we got cake for you’.” And though Zhao stepped down and Binance pledged to change its ways, it appears to have done little to stem the tide of dirty money flowing through its systems. 

Zhao’s hard-to-explain pardon once again draws attention to the peculiar folkway of the U.S. pardon process. The presidential ability to pardon people derives from the States’ origins as British colonies. It is something that kings could do back in the 1770s. Technically, King Charles III can still pardon anyone he likes, though he almost never does, which is something else he doesn’t have in common with Donald Trump.

Of course there have been controversial pardons in the past, but often they come at the very end of a presidential term. Trump seems to be unusual in his willingness to hand them out this early. It must have been particularly demoralising for the prosecutors who worked hard to secure a conviction against David Gentile, only to see him released after serving just two weeks of a seven-year sentence for defrauding more than 10,000 people.

Binance denies any wrongdoing related to the Hamas case. Still, it does raise the interesting prospect of Trump having to defend his decision to pardon a man subsequently ruled to have helped Hamas move its money. But then, CZ was already convicted of helping Iranians, Syrians, North Koreans and the Russian occupiers of Ukraine move money in defiance of sanctions, and Trump hasn’t faced any backlash for pardoning him for all of that, so perhaps not.

A plague on both their houses

In unrelated but entertaining crypto news, there’s a spat brewing between the hip young dudes at Tether, and the boring old squares at Standard and Poor’s, after the rating agency cut its rating for the stablecoin issuer to its lowest possible level, which I thought was fair comment but which Tether CEO Paolo Ardoino got rather irate about. “Tether is living proof that the traditional financial system is so broken that it's becoming feared by the emperors with no clothes,” he wrote in one of a number of posts on X in which he demonstrated how little he cared about S&P’s opinion by talking a lot about it. He later posted a clip from the movie ‘The Big Short’, in which a rating agency employee defends the absurdly high ratings given to mortgage bonds before the 2007-8 financial crisis. That too, it must be said, is fair comment. It would be nice – rather like a rugby match between South Africa and England – if we could find a way for both Tether and S&P to lose.

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It’s good that they’ve managed to trace the network further, linking it to Russian-Moldovan-Israeli tycoon Ilan Shor and a bank in Kyrgyzstan, but also worrying that the organisation appears still be to be functioning. Two cash couriers were busted carrying around £2 million each, which also does not suggest the organisers are too stressed: you don’t carry that much money in one go if you’re concerned about being caught.

The core of the scheme is that the money launderers collect cash from criminals all over Europe, and swap it for the cryptocurrency USDT (I published this about the issue earlier this year), and so it remains. “Tether, from what we can see, at least, appears to still be the majority token used by these networks,” a law enforcement source said.

Perhaps the most interesting difference between the boring old banks and the exciting new crypto industry is that, if a boring old bank had been so deeply involved in moving so much criminal wealth, it would have been fined a nine-figure sum and forced to radically change its ways. But Tether suffers no such indignities. Thanks to the inflation of the Trump crypto bubble, Tether made profits of $10 billion in the first three quarters of 2025, and is still coining it, despite the publicity around this operation and many other allegations of money laundering.

It now owns 116 tonnes of gold, which is more than Greece, South Korea or the UAE.  Last week Tether spent a billion dollars on Bitcoin, though that didn’t do much to arrest the slide in the Bitcoin price, which as I write this has dropped by a third since its peak in early October, and erased all of its gains since Trump’s 2024 election win. Tether also claims to own $135 billion of US government debt. So, to cut a long story short, it’s basically as potent as a reasonably-sized central bank, and doesn’t have to care what a law enforcement agency thinks of it.

“Look, you can point to various different parts of the global crypto infrastructure where you would say, ‘wouldn't it be great if you could rain fire upon them?’ And me, as a law enforcement professional, would say, ‘yeah, it'd be brilliant, right?’ But obviously, I don't have that capability at my fingertips,” the same law enforcement source said, which was pretty funny but also depressing.

Obviously, there’s not much anyone can do to limit crypto while Trump controls all branches of the U.S. government and his family members continue to do so well out of it, but it would be interesting to see what might happen if the Democrats won a majority in one or both of the houses of Congress, considering some of the questions they’re already asking. 

“Every time a governance token is sold, three-quarters of that money goes directly to President Trump and his family, even for sales to entities linked to North Korea and Russia,” said Senators Elizabeth Warren and Jack Reed in a letter to the Department of Justice. That’s the kind of allegation that could lead to some spicy committee hearings.

A small step towards transparency

Dr David Richard Hull gained a small footnote in the history books last week when he became the first person to verify his identity on Companies House, the UK’s corporate registry, which is trying hard to move from being part of the problem to part of the solution (at least The Dark Money Files’ Graham Barrow said he was, and Graham Barrow does tend to know).

For a long time, it was generally reckoned that the easier and cheaper it was to create a company, the more vibrant and dynamic your economy would be, and in few places was this principle applied more enthusiastically than in the UK. This unleashed a tsunami of shell-company-powered money laundering, with criminals buying British corporations for less than the price of a round of drinks, and using them to hide their identities.

Eventually, officials realised that rampant financial crime was actually bad for the economy, rather than beneficial, so brought in new checks on the identities of those creating companies. There is a lot of mess to sweep away before the corporate registry is truly cleaned up, but this is a good start, though it would be even better if some of the more far-flung bits of British territory could be persuaded to embrace transparency as enthusiastically.

There are similar registration rules in most European Union countries, although their registries are not necessarily open to everyone, as this survey from Transparency International shows. Of course, the United States has given up on its efforts to open up corporate registries, despite convincing arguments that shell companies from lax states like Nevada are a clear threat to national security. 

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“They were not necessarily ignorant or dumb,” is how Sorkin describes it. “They might know, or guess, that an investment pool was manipulating the price. But if they got the timing right, even a total outsider could capture a bit of the upside before the pool ‘pulled the plug’ and dumped its shares back on the market.”

It’s a weird truth about pyramid schemes: they’re actually very profitable if you get into them early enough, and no one knows when the money’s going to stop flowing so people keep investing even after they know it’s a con. There are very many places in the book when it felt like it could be about 2025 – the importance of murky lending to supporting asset prices; the corruption of the political class; the arrogance of the strutting business tycoons; the insistence that predatory practices were actually “democratising finance” and so on.

Above all, I feel a constant melancholy over how none of the foot soldiers in this campaign had any idea about the size of the wave rearing over them, and how it would sweep away everything for a generation. The subtitle of the book refers to the 1929 catastrophe as “the greatest crash in Wall Street history”, and I worry that it might before too long be relegated to being the second greatest. Buy the book, that’s my advice, while you’ve got some money to spare.

So anyway, to distract myself from the depressing nature of my historical musings, I listened to the latest episode of The Laundry podcast, which is a thoughtful and in-depth interview with Elisa de Andro Madazo and Giles Thomson, respectively the president and vice-president of the Financial Action Task Force, the world’s standard-setter on fighting money laundering. 

They are articulate and clearly both care and think deeply about their institution, as well as about their roles within it. They expressed careful and coherent opinions on the need to bring fairness and efficiency and effectiveness to a struggle that has (my words, not theirs) too often lacked all three. 

But, in a world in which cryptocurrencies are sweeping aside controls on finance, the United States has given up on corporate transparency, criminal groups are driving sanctions evasion, Chinese money laundering gangs are gaining ever-greater influence, and Western laws are failing to tackle kleptocrats, everything they said just seemed so irrelevant. Once again the historical parallel for the FATF was an institution in the interwar years. The League of Nations was a bureaucracy that was well-meaning, tireless, thoughtful to the end, but completely ineffective when faced with challenges from powerful nations. 

Laundering drug money

I mentioned Chinese money laundering organisations (CLMOs) above, and I’d like to draw your attention to this excellent new paper, from venerable British think tank RUSI, about their scope, approach and significance. The growth of Chinese gangs, and their rapid takeover of much of money laundering conducted for organised criminal groups (OCGs) over the last decade or so, is a remarkable and ill-understood phenomenon.

The secret of their popularity is not hard to understand, as the paper makes clear: “all the profit is made in China and therefore CMLOs can afford to offer their services to OCGs in the West for free, or close to free”. Traditional money launderers were charging Western criminals perhaps 15 percent to move money, so it is clear why OCGs would prefer to take their business to someone who’ll do it for nothing.

The CLMOs’ techniques are based around transferring value globally outside the banking system (i.e. by moving luxury goods, commodities, cryptocurrencies, etc) which means that much of the compliance system created under pressure from the FATF is essentially useless in detecting their activities. 

But why have they been able to launder money so cheaply when their Western rivals could not? 

I think the more important point to take from this is that they have been able to create their system because of restrictions imposed in both China and the West. Chinese capital controls have made it hard for wealthy citizens of the People’s Republic to get their money out of the country. Meanwhile Western drug laws have created a huge cash-rich criminal economy. It is by connecting this demand for cash (from Chinese people outside China) and supply of cash (from drug gangs in the West) that CMLOs have been able to corner the market. 

This is perhaps an unpopular opinion, but I’m going to offer it anyway: if you need another reason to take drug supplies out of the hands of criminals, CLMOs are it. Prohibition hasn’t just failed on its own terms, it has created the liquidity for a vast underground economy being exploited by our geopolitical rivals.

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The extinct mega-beasts were sold at a Christie’s auction last year for around $15 million, but are now in a warehouse, presumably ready to be resold, (unless the NCA plans to keep them. I can see the appeal of having something so magnificent as a dinosaur skeleton as a centrepiece in your house, although I do worry a little about the amount of dusting required, which may be why other money launderers have not invested in fossils. “I doubt that any of us will be dealing with one of these again,” said Judge Gavin Mansfield during the hearing. What a shame.

The value of the properties and fossils is a tiny fraction of the amount already recovered in Singapore in this case, which is said to have involved more than $3 billion, though it is troubling that many of the fugitives involved appear to have won effective immunity from prosecution in return for surrendering their assets.

Which cryptocurrency was involved in the scheme, I hear you ask? Well, funnily enough, it was Tether’s USDT like it always seems to be. Involvement in multiple scams has not been holding Tether back. Quite the reverse; in the first nine months of the year, it made $10 billion in profits, and expects to make $15 billion in 2025 as a whole. If Tether is not the most profitable company per employee in the world (it employs about 200 people), I’d like to know what is.

One of the few people who appears not to have been using Tether to hide illicit wealth was the former EU Justice Commissioner Didier Reynders. Though maybe he should have been. Reynders was recently charged with money laundering in Belgium in perhaps the strangest scheme I’ve read about this year. Reynders spent nearly $60,000 on lottery tickets in a single year.

Now, lotteries have been used by financial criminals for a long time. My favourite money laundering approach ever was one used in Puerto Rico in the 1980s when criminals would buy lottery tickets at a premium in cash, then (unconvincingly) explain to the authorities that their wealth was simply the result of weekly outbreaks of good fortune.

According to investigators, however, Reynders was doing something else. He was spending unusual amounts on lottery tickets and keeping the winnings. Why is this strange? Unlike gambling in a casino, lotteries are not a good way to launder money, because they distribute as prizes less than two thirds of what people spend on tickets, so you lose a huge amount on the trade. It’s really not very clever and, clearly, the unusual spending pattern raises the authorities’ suspicions. Reynders denies laundering money, and says he was just using private wealth. Whatever happened, he has a lot to explain.

The thankless task of crypto regulation

Reynders may not have tried to launder money via crypto, but many financial criminals do. And over in Washington, DC, regulators have got to do the boring-but-important work of figuring out how exactly the new GENIUS act controlling stablecoins will be implemented in practice. So credit to Transparency International U.S. for attempting to bend things in the direction of sanity. “A well-implemented framework can both support responsible innovation and prevent the kinds of corruption and financial crime that erode trust in financial systems and global markets,” it wrote in a letter to the Treasury Department.

Bitcoin prices may have taken a bit of a dip of late (no doubt irritating Donald Trump), but the crypto enthusiasm stoked by the White House shows no sign of abating. Senate Democrats sent a letter to the attorney general after Trump’s pardon of former Binance CEO Changpeng Zhao with a killer final question/essay prompt: “Do you believe President Trump’s substantial business ties to Mr Zhao influenced his decision to issue a pardon? Explain.”

Richard Teng, who now runs Binance, has denied that his company supported Trump’s own (largely moribund) stablecoin USD1 to curry favour with the first family on his predecessor’s behalf. But considering quite how much money the Trumps have made this year (Trump’s net worth has risen by $3 billion, according to Forbes), it seems unlikely they’ll concern themselves overmuch with the rules, let alone the complex, detailed rule-making around the GENIUS act. On the one hand, this leaves the field open for organisations like TI-US to push for good regulations; on the other, Trump will do what he wants, regardless of the regulations.

The Neom debacle

Trump, though, is not yet a law unto himself. Unlike, say, the Saudi royals. I have a slight obsession with Neom, Crown Prince Mohammed bin Salman’s pet development involving a ski resort, a superyacht harbour and The Line, a ludicrous mirrored linear city which a gazillion architects have been designing at a gigundous profit. Anyway, thanks to the FT, we have a deeper dive into this vainglorious horror show than we’ve ever had before.

There are many, many cars in this pile-up: the 30-storey building that would supposedly hang from the top of an arch over the harbour, despite architects warning that it would inevitably fall on everyone’s yachts below; the “hundreds of shuttle cars running back and forth” to pick up the poo because normal sewage systems couldn’t be made to work; the fact no one realised that buying more than half of the world’s steel each year to build Neom would affect steel prices; the airport shuttle envisaged without any room for luggage; the giant pumps required to circulate water in the giant marina; the disaster in store for migratory birds faced with a 500- metre high, 170-km wide mirror and so on and so forth.

“I was in a conversation one day with two physicists, quantum physicists,” says Antoni Vives, then Neom’s chief urban development officer, in a documentary about The Line. “One of them looks at the other and looks at me, and says: ‘you know what, perhaps it’s the time of the poets now. We need poets’.” No, Antoni, we need satirists. Or maybe sedatives.

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The free ice cream at the gate was sponsored by a crypto company promising seamless exchanges between roubles and the dollar stablecoin USDT; an exhibitor offered to deliver you cash in an hour when you transferred them some crypto; and the title sponsor was A7A5, fresh from being sanctioned by the European Union, but very much alive, kicking, and cheerfully distributing stickers to people who took a spin on its wheel of fortune.

The centre of the hall was dominated by a crypto-trading competition, in which a number of people sat behind screens and sought to make a profit while against the clock. Despite the best efforts of two fast-talking Russian MCs, as a spectator sport, it had all the charm of watching an HR department finishing up the month’s payroll. Still, the competition drew the biggest crowd simply for the lack of other things going on.

None of the whales that might once have come to a Dubai crypto conference were present, now all the action has spectacularly moved to Washington, DC. Check out this Reuters investigation into how much cash The Trump Organization has made in just the first six months of 2025: “the U.S. president’s family raked in more than $800 million from sales of crypto assets in the first half of 2025 alone”, with “potentially billions more in unrealized ‘on paper’ gains”, mostly from foreign sources.

Those who did make it to Dubai intoned the usual verities about crypto ushering in a new age of liberty, despite the huge contradictions all around them. Particularly bewildering was a panel featuring Vít Jedlička, a Czech libertarian and founder of “start-up nation” Liberland, alongside Nabil Arnous, whose job is to bring investment into “Innovation City”, a newly-renamed AI-powered free trade zone in the absolute monarchy that is Ras Al Khaimah, one of the seven emirates that make up the UAE. The blockchain is powerful indeed if it can unite people from such supposedly opposite political poles.

Even more head-scratching to me though was a presentation by Reeve Collins, who co-founded Tether and was an early advocate of all things crypto, He came to Dubai to pitch his idea for “white label” stablecoins which would allow companies to put their name on a dollar-pegged cryptocurrency while leaving all the hard work of running the blockchain to someone else.

Why might companies want to do that? Because every time they sell something, they get to collect even more data about their clients than they already do, as well as earning profit from issuing money that currently goes to the government. 

“Since this is programmable money, you get real data on all of the users, and you get to understand who are the power-users, who deserves more, who deserves to be rewarded,” Collins said. “This is loyalty points times a thousand. It really will supercharge what companies are able to offer their users, so they'll be able to extract more value.”

I kept expecting someone to speak up and point out how far his vision had strayed from cryptocurrencies as a tool for individual autonomy, rather than a tool that enables the world’s largest corporations to frack humanity even harder than they are now. But no one did. Instead, the conference moved onto a panel about how governments couldn’t be trusted.

At some point the music will stop, and none of us will have chairs, and there will be an almighty blow-up. The prospect slightly terrifies me.

Kyrgyzstan's crypto compulsion

For now, though, the music is very much still playing. Particularly in places like Kyrgyzstan, which seems to be doubling down on its strategy of becoming a ‘cryptatorship’ like El Salvador. Binance founder Changpeng Zhao, the crypto billionaire who pleaded guilty to violating U.S. anti-money laundering laws and was recently pardoned by Trump – though the U.S. president claimed not to know Zhao –  headed to Bishkek to talk up its transformation. “Had a great time in Kyrgyzstan in the past two days. I encourage more crypto companies to explore the country too,” he Xed.

There are already a number of crypto companies in Bishkek, including the sanctioned A7A5, and their close connections with the Kyrgyz government are of great interest to the country’s journalists. However, since Kyrgyzstan’s best investigative outlets – Kloop, Temirov Live and Ayt Ayt Dese -- have just been labelled as extremists, it will be difficult for reporters to bring attention to their findings.

“This is the first time in the history of Kyrgyzstan when media outlets have been labelled extremist,” said Kloop in a statement. “Now it is dangerous to like or share outlets’ material, or to circulate it. That could all be considered support for extremist organisations and the circulation of extremist material.” At least, “watching and reading it is currently safe.”

There used to be something admirable about Kyrgyzstan’s bloody-minded refusal to become a dictatorship like the other republics of Central Asia. Now there is something grotesque about the fact that it is the lure of crypto, a technology supposedly intended to enhance freedoms, that is helping to cement autocracy. The country is holding snap parliamentary elections on November 30. The president’s party, unsurprisingly, is expected to do very well.

Watching Kyrgyzstan heading towards autocracy is a reminder that the only plausible long-term solution to kleptocracy is for rich countries to stop enabling it. If Westerners started living up to their professed values, and made it impossible for crooks to buy property and launder money in the West, it would reduce the appeal of being one. 

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So, what will historians make of the latest developments in the United States? On Thursday, the government sanctioned Russia’s two most significant oil companies, in what threatens to be a massive blow to the financial underpinning of a key geopolitical adversary. On Friday, however, the government pardoned Changpeng Zhao, a crypto tycoon who two years ago pleaded guilty to, among many other things, facilitating sanctions busting by Iran, also a key geopolitical adversary.

How do you interpret that contradiction, or the fact that the US government is currently not paying its employees, while spending hundreds of millions of dollars, albeit privately raised, on a new ballroom? This could provide material for a hundred newsletters, and no doubt has already done, but I think there is value in asking whether the sole consistent factor here is inconsistency, and whether that itself is significant.

This is what happens when individual people make decisions without oversight, scrutiny or process and, although there may be some value in rapid decision-making, it also makes it far more likely that the decisions reached will be illogical, inconsistent and corrupt. I have been reading a lot recently about the last time inequality was as high as it is now, which was the time before World War One, a time that Americans call the “Gilded Age” and Brits call the Edwardian period. That too was a time of conflicts, inconsistency and excess, when plutocrats built ludicrous houses for themselves, and awarded themselves vast pay deals, when politicians got assassinated and political movements appeared and disappeared with dizzying speed.

I try to be optimistic, because there’s no sense in being otherwise, but the parallel is worrying. After all, the period before World War I all ended with World War I. If I were a plutocrat, I would be working very hard to steer the horse in another direction, away from disaster, rather than spurring it on ever faster.

Restitution from Russia?

But look, like a refugee from a different galaxy, here comes news of what should be the end of the long-running legal challenge brought by shareholders in the ex-oil company Yukos against the Kremlin’s expropriation of their assets. The Kremlin lost, and now the shareholders can seek to claim tens of billions of dollars from state assets worldwide. This saga sort of began 22 years ago when the Russian authorities arrested the country’s richest man, Mikhail Khodorkovsky, prosecuted him, and imposed such vast back tax bills that it could auction off his assets in a process that – funnily enough – was won by a state oil company run by a close ally of Vladimir Putin. It was an early sign of the kind of country Putin was building: kleptocratic, authoritarian, centralised, ruthless, and deeply stupid.

But the real beginning of the story was a decade earlier, when President Boris Yeltsin, attempting to build a different kind of Russia, one which followed international norms, signed the Energy Charter Treaty, an agreement designed to protect foreign investors’ stakes in national oil and gas industries.

The primary shareholders of Yukos were Russian but, like any competent global oligarch, they structured their ownership via multiple offshore entities so – when their company was taken away – they sued. And now, they have won in a process that is a memorial to the 1990s, and the odd alternate reality when globalisation was widely considered a good thing.

Obviously, Russia won’t abide by the judgement on its own territory, but the Yukos shareholders will continue their battles for various assets owned by Russia, such as this plot of land in London and these vodka brand names. “Real justice requires successful enforcement, so we will now focus all our efforts on enforcing against Russian state assets worldwide until every penny of the $65+ billion awards has been paid,” said Tim Osborne, who heads the shareholders’ company, which is called GML.

In that effort, however, he may well have competition. There is 210 billion euros of Russian state money frozen in the European Union, mostly in Belgium, and the EU is inching closer to using it to help Ukraine. The universe in which Russia happily deposited its assets in Western countries now feels like an alternative reality – one that historians will spend a lot of time dissecting.

Making criminals pay

International arbitration is a tricky game to play, however, or so the owners of P&ID may be feeling. In a complex (and, let’s be honest, rather imaginative) attempt to swipe a lot of Nigeria’s money, this small offshore company obtained a gas processing contract in 2010. Neither side did anything to fulfil the contract, then P&ID sued Nigeria and won a giant compensation award, the size of which has been growing larger still with the interest owed.

It is a case rife with allegations of corruption, professional misconduct and more, and mercifully the  initial judgement in favour of P&ID was overturned. Last week, a court ruled that P&ID will have to pay the vast legal costs in sterling, rather than in naira, which will help Nigeria to avoid missing out on the advantageous exchange rate.

To say P&ID’s British lawyers have questions to answer is to understate how serious the allegations against them are, but regulators have so far done nothing. That is a very bad reflection on Britain’s ongoing facilitation of kleptocracy, and the state of its regulators.

Britain, in common with many other countries, has a very fragmented system of anti-money laundering regulation, so it is potentially good news that the government has proposed to combine many of the existing 23 regulators into “a small number” of bodies. Hopefully, this will mean the regulators are better funded, more motivated, and more willing to anger potentially powerful vested interests by actually investigating financial crime. “It is crucial that existing regulators do not take their foot off the pedal while we await legislation which could risk things getting a lot worse before getting better,” said Sue Hawley, of Spotlight on Corruption.

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“The Justice Department’s National Security Division [filed] a civil forfeiture complaint against approximately 127,271 Bitcoin, currently worth approximately $15 billion,” the DoJ announced last week. Now that really is a big deal (it’s not far off the total BP paid to settle charges over the Deepwater Horizon oil spill in the Gulf of Mexico). There can only ever be 21 million bitcoins in existence, so this seizure accounts for more than one in 200 of them.

The seizure was part of a case against Chen Zhi, a Cambodian businessman charged with being behind some of the most appalling forced-labour fraud compounds in Southeast Asia. Every aspect of the alleged scheme, from its targeting of vulnerable people in Western countries, to its reliance on trafficked labourers, is foul on its own but cumulatively, it’s beyond dreadful.

The money laundering techniques were complex and multi-jurisdictional, and the profits were spent on the usual expensive trash: “watches, yachts, private jets, vacation homes, high-end collectables, and rare artwork, including a Picasso painting purchased through an auction house in New York City”.

And of course there were shell companies in the British Virgin Islands and properties in London, because there are always shell companies in the British Virgin Islands and properties in London: a £12 million mansion near Primrose Hill; a £100 million office building in the City; plus various flats in the Centre Point building, and others in Nine Elms, a newly-built neighbourhood where many of the off-plan apartments went to cash purchasers from the Far East. 

(Nine Elms is also, incidentally, home to the new U.S. embassy and a few years ago I did a talk for staffers interested in financial crime and one asked why, if there was so much money being laundered in London, none of it was visible. I drew his attention to the view from the window.)

The U.S. government earlier this year said it will place any bitcoin it seizes into a strategic reserve. I suppose a crypto reserve sort of makes as much sense as a gold reserve, at least until people lose interest in crypto and/or the power goes off. But there is a problem with the basic idea here: these bitcoins don’t belong to the United States. Assuming that the criminal complaints are proven, then this money is the fruit of crimes committed against millions of victims, and should be returned to them, whether in the form of bitcoin or whatever, not stashed away in Washington.

Some commentators have said cryptocurrencies help fight financial crime. In a blog, Elliptic, a blockchain analytics company, argued that “blockchain technology enables comprehensive visibility into financial flows, empowering all ecosystem participants to play a crucial role in identifying and reducing illicit funds.” But I don’t think that’s the message I take from this. 

If the two biggest asset seizures of all time have come one after the other in the form of bitcoin, I think the important question to ask is “why do criminals have so much of their wealth in cryptocurrencies?” If crypto is helping baddies to hide their money more than it’s helping goodies to find it, then it’s more of a problem than it is a solution.

The Pitcairn crypto plan

Thanks to an Australian reader for tipping me off to an odd situation in the Pitcairn Islands, the only British Overseas Territory (BOT) in the Pacific, and the smallest territory in the world by population. Pitcairn has fewer than 50 inhabitants and is extraordinarily remote so unlike most BOTs – the Cayman Islands, the BVI, Gibraltar, Anguilla, etc – it has never developed an offshore financial services industry.

Anyway, it seems that in January 2020, Justin Sun – the Chinese-born billionaire head of the crypto giant TRON; prime minister of Liberland; first Kittitian in Space; former Grenadian ambassador extraordinary and plenipotentiary to the World Trade Organisation; eater of a $6.24 million banana; and early investor in Donald Trump’s crypto company – explored the possibility of turning Pitcairn into a crypto haven. According to the minutes of the meeting with the island’s council, three of Sun’s representatives were there on a friend-making mission: “TRON is looking to partner with a BOT to work together to craft regulations etc to help make crypto currency more mainstream.” 

There was “a lot of community interest” among the locals for carving up this unexpected cash cow, but fate intervened in the form of a killjoy governor, who represents the U.K. in these parts. “TRON will not be permitted to establish bitcoin/crypto currency”.

According to one academic’s assessment of things, “a company with such a variable track record was never going to be afforded a foothold in the territory.” And, generally speaking, that should have been the end of the matter, leaving us with nothing more than a ghostly alternative timeline in which Pitcairn is a crypto hub (or, perhaps, a 21^st century version of Nauru) and its few-dozen residents are multi-billionaires.

None of this has been confirmed by Tron, so I only have the Pitcairn administration’s documents to go on but it appears that the company did not in fact go away quietly. Instead, in order to “garner favour”, it began to provide solar panels to Pitcairn residents. An attempt by the governor to stop this collapsed, given that everyone really wanted them, and by July 2023, the council’s meeting minutes noted: “we all have solar units donated from TRON on our roofs”.

My Australian interlocutor informs me that Pitcairn residents are unsurprisingly now super-enthusiastic about Tron for having provided them with free electricity, though loath to publicise it. This year Tron advertised for a Project Director (Pitcairn Islands Development) to lead “a humanitarian infrastructure development project aimed at improving the medical and accommodation conditions of 35 indigenous fishermen residing on Pitcairn Island", and is now looking for a “Legal Counsel (Pitcairn Islands Development)”. 

Something’s happening here and I don’t know what it is, but if I worked for the British government I’d be trying to figure it out. Justin Sun’s stated philosophy is underpinned by the libertarian creed of “no forced obligations, no taxes, and no mandates”. It would be a challenging development if, now that he’s provided Pitcairn with free power, he managed to bring the islanders around to that point of view. 

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Governments have sought to control money distribution ever since there have been governments. There are entire Anglo-Saxon kings (shout out to King Æthelweard) whose names we know only because of coins dug up centuries later by metal detectorists.

It would be nice to think this was because rulers were concerned about spreading prosperity by ensuring a reliable currency, and I’m sure that’s partly true. But the underlying reason has always been that coining/printing money is incredibly profitable. In very crude (and slightly misleading) terms: printing a $100 bill costs around 10 cents; it sells for $100; so that’s $99.90 in profit for the government right there.

Anyway, this was always one of the (if not the only?) interesting things about cryptocurrencies like Bitcoin: by taking the power to issue money away from countries, governments would lose the ability to profit from our need for a means of distribution and exchange, and citizens would gain it for themselves. So it’s not surprising that governments want to stop that happening.

Last week, Uganda became the latest country to launch a Central Bank Digital Currency (CBDC), which will use the same kind of blockchain technology that underpins Bitcoin to create a mobile-first version of the country’s shilling, and thus attempt to negate the appeal of crypto. Perhaps more importantly India, which leads the world in crypto adoption according to some measures, plans to do the same. 

“This will only make it easier to transact. It will also reduce paper consumption and will be faster to transact than the banking system. But it will also have traceability,” said the Indian Commerce and Industry Minister.

For most people in Western countries, the replacement of cash money by CBDCs would make very little difference because the vast majority of transactions are done electronically already; but for criminals, it would be disastrous. Accustomed to being able to use cash in huge quantities to hide their transactions, cartels, traffickers and others would have to invent new ways to find anonymity. (Inevitably, they’ll find it, but it will be more expensive, thus making their crimes less profitable.)

The European Central Bank is moving forward with its own plans to introduce a digital euro, and Piero Cipollone, a member of the ECB’s executive board, gave this fascinating interview last week about what that would look like (I think what he’s describing looks really good, for what it’s worth). A key insight is that, as electronic payment methods have spread, Europeans have become ever-more reliant on foreigners for processing transactions. “It … makes us vulnerable: we depend on others for our money and this can be weaponised against us. Ten years ago we weren’t facing this problem, because cash was king,” he said.

He called the payment processors that dominate transactions “international”, but in reality they’re American. Which brings us to a really interesting exception to the general global movement towards CBDCs: in the U.S., President Donald Trump has ruled the idea out completely, because it would “threaten the stability of the financial system, individual privacy, and the sovereignty of the United States”.

I think concerns about CBDCs’ impact on privacy are very overstated, considering most of us are already giving away ample data about our financial lives to banks, Apple, Paypal, and whomever, for them to do with what they wish, and it is particularly odd that the White House is stopping the Federal Reserve from issuing a digital dollar on privacy grounds while encouraging private companies to do so in the form of stablecoins like Tether’s USDT.

“The difference between a CBDC and a stablecoin like USDT is simple,” said Tether CEO Paolo Ardoino last week. “One belongs to the people. The other belongs to the state.”

That is obviously nonsense. Leaving aside the facile distinction between “people” and “state”, the idea that a digital dollar run by a democratically-overseen Central Bank like the Federal Reserve would somehow be less of the people than one run by a private company based in a foreign country whose president boasts of being a dictator (as El Salvador’s Nayib Bukele has done) is so idiotic it makes my brain hurt.

As so often with Donald Trump’s White House, this is all about the money and who gets it. The profits from issuing currency are called seigniorage, an old French term meaning that which belongs to the seignior or lord. By getting the Fed out of the CBDC business, and instead encouraging private companies to issue stablecoins, the White House is just redirecting seigniorage from the budget towards political allies, such as Trump’s own children. To be honest, I’m sure good old King Æthelweard did the same thing back in ninth century England, but you would have hoped that, 1,200 years later, we might have moved on a bit.

How much money are we talking about? Well, at the end of the month we’ll learn how much Tether made in profit in the third quarter. My money is on it exceeding its already record-breaking $4.9 billion haul from Q2. Its smaller rival Circle meanwhile is predicted to make revenues of more than $6 billion a year by 2028. Any Americans reading this: if the Federal Reserve had issued a CBDC instead of letting private companies do it, that money would be yours for spending on public services. Instead it’s being routed into right-wing media, political donations and the pockets of well-connected billionaires.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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