perspective

Why the West is failing to fight corruption

Oliver Bullough

I have a friend who’s a partner in a British medical practice, which is to say they run a private business that is entirely reliant on government spending. When they started, they’d devote lots of time to preparing a response to every new initiative from the ministry of health. But they learned, by dint of repeated and irritating experience, that these initiatives would as often as not be changed, cancelled or postponed on the eve of their supposed implementation.

THE GRAND OLD DUKE OF WASHINGTON

This friend’s experience made me wonder about the lessons that US allies will be learning from the last few presidential terms when it comes to financial crime. Donald Trump marched them all up to the top of one hill in 2016-20, then Joe Biden marched them up another in 2020-24, and now Trump wants them to head off somewhere else entirely. What’s the lesson? Well, obviously, it’s “do the minimum, do it late, and it’s all a waste of time anyway.”

And this is bad, because – partly owing to U.S. diplomatic clout, and partly owing to the global role of the dollar – tackling financial crime or tax evasion without leadership from Washington DC has always proved hard/impossible. And now Trump has sacked 17 inspectors general from key federal agencies, that is independent, non-partisan watchdogs whose job it is to weed out government corruption, fraud and mismanagement. Instead, that effort is being led by Trump cronies and oligarchs like Elon Musk seeking to score political points. It’s going to take a long time before anyone thinks it’s worth listening to the U.S. about combating corruption, no matter who’s in charge.

BUT WHAT ABOUT BRUSSELS?

Is this an opportunity for the European Union to step up and provide alternative leadership? Well, apparently, EU countries are considering buying gas from Russia again as part of a settlement to end the war in Ukraine, so the short answer is “oh my God, no.” This is like a heroin addict who’s kicked the habit deciding to start shooting smack again to improve relations with his drug dealer.

It is, however, February which is when the EU publishes its not-at-all-anticipated biannual “list of non-cooperative jurisdictions for tax purposes.” (It also publishes a list in October.) Twice every year, I hope Brussels will have decided to change its longstanding policy and start naming and shaming places that genuinely undermine global work to stop tax evasion. This time around it’s particularly important since Donald Trump has withdrawn the U.S. from participation in a new global tax treaty and undone all the work towards making multinational corporations accountable. Perhaps Brussels could start with tax havens Ireland and Luxembourg?

But, no doubt, the officials responsible for this shameful exercise will do what they do twice a year, every year – name and shame a short list of tiny, irrelevant or diplomatically feeble jurisdictions in an unlovely combination of bullying and virtue signalling. Last time, they criticised Guam, but they did not criticise Delaware; Anguilla, but not the UK; Vanuatu, but not Switzerland. 

I think it’s time I learned from my doctor friend and started ignoring these government missives but I can’t help being an optimist.

AND LONDON?

Speaking of false optimism. How’s the U.K. doing on these issues? The government, keen to raise more revenue, has pushed regulators to encourage growth. The last time a government did this, we ended up with rivers full of sewage and oligarchs buying up London. An early sign of what it might mean this time around came from the Solicitors’ Regulation Authority, which keeps an eye on most of Britain’s lawyers.

The SRA was asked to judge whether a law firm called Discreet Law had acted improperly in suing Bellingcat’s Eliot Higgins for defamation after he said on social media that mercenary boss Yevgeny Prigozhin was, in fact, a mercenary boss. Prigozhin – who died in a plane crash in 2023, just weeks after attempting to march on Moscow – admitted his connection to the notorious Wagner Group and the case was thrown out.  

To most outside observers, the case was about as abusive as it gets – it had no merit, it was going after an individual rather than organisations, and it was filed in the notoriously plaintiff-friendly UK rather than another jurisdiction. But, according to the SRA, Discreet Law did nothing wrong, which sends a truly appalling message.

“Without a real deterrent to lawfare, deep-pocketed individuals, oligarchs, crooks and kleptocrats from around the world will continue to use our courts to suppress accountability. This foul play will continue to flourish. And Britain will remain a go-to destination for lawfare,” said Labour MP Lloyd Hatton. I sincerely hope that, in their push for economic growth at all costs, Hatton’s Labour colleagues won’t abandon the progress that has been made in trying to rein in London professionals’ desire to be butlers to the world’s kleptocrats.

DEBANKING CHARITIES

While mercenary oligarchs like Prigozhin rarely have trouble finding people in London to protect their interests or launder their money, a report released last week by the Muslim Charities Forum shows that life is harder if you don’t lead a private militia. 

Ever since the 1990s, governments have subcontracted to banks the job of keeping money launderers out of the financial system; and ever since the 2000s, banks have done the same for terrorists. To make sure banks do this job, governments occasionally impose huge fines on them and, as a result, banks are keen to comply.

The trouble is that finding all of the world’s money launderers and terrorists is practically impossible, so banks err on the side of caution. They prefer to kick 100,000 innocent people off of their accounts, than let one person slide through and risk a nine-figure fine. (Unless, of course, the launderer or terrorist in question is really rich). That, at any rate, is what the Muslim Charities Forum found.

Some 68 percent of Muslim charities said they had difficulty opening bank accounts; 42 percent suffered a complete withdrawal of banking services; another 42 percent had been forced to delay humanitarian projects because of delays in transferring funds; and 44 percent said the delays had harmed their relationships with partners.

The specific problems faced by Muslim charities date back to decisions made by the Financial Action Task Force (FATF) directly after the attacks of September 11, 2001, to demand banks pay more attention to non-governmental organisations working in or for Muslim countries. The actual words were “organisations having the status of a charitable or relief organisation… targeted at a particular community,” but everyone knew what they meant. This was despite the fact that there was no evidence that charities were more likely to fund terrorism than businesses, individuals or countries.

There is desperate need for humanitarian aid in many parts of the Islamic world – not least Gaza and Lebanon, but also Syria, Afghanistan, Yemen and elsewhere – and getting in the way of people that want to help for no good reason is not just harmful, it’s also stupid, because it will alienate people we really want to be our friends.

“Evidence suggests that structural Islamophobia plays a role in these financial challenges, as Muslim-led charities are often unfairly targeted by banks for perceived risks without concrete evidence of wrongdoing,” the Muslim Charities Forum said. “Internal frustrations are high, with charity staff spending excessive time resolving financial issues instead of focusing on core humanitarian work.”

Of the many things that the FATF should reform, this excessive and unreasonable focus on Muslim charities is for me at the top of the list. But it’s easier to go after low-hanging fruit.

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

Header illustration by Teona Tsintsadze/Getty Images.