On one level, I am fully onboard with the widespread rejoicing that has followed the decision, and anything that annoys ex-Maltese prime minister Joseph Muscat is clearly an unalloyed good. I’m also not persuaded by the argument from passport vendors Henley & Partners (who helped design the programme) that this decision was an infringement of national sovereignty. A Maltese passport gives its holder rights to live, work, and travel anywhere in the European Union, so European authorities should have a say, not least considering some of the questionable people who’ve obtained, or rather bought, citizenship in the past.

However, at the risk of being one of those people, I want to point out that this is not the knockout victory that it looks like. 

It’s a basic principle of the offshore world that I called “Moneyland” in a previous book that if rich people perceive something as onerous – taxes, transparency, democratic oversight, legal accountability, alimony -- they’ll find a way to get out of it. I have little to no sympathy for any of this, with the one partial exception of citizenship. 

It is undeniably unfair that someone like me – born in Britain, with one Canadian parent – has access to two super useful passports, whereas someone born in, say, Palestine, Nigeria or Bangladesh is stuck queuing for visas from countries that charge a fortune for the application, and may not provide them anyway.

The golden passport schemes of countries like St Kitts and Nevis, Turkey and, er, Nauru all sprang up in response to demand from people rich enough to travel the world but inconvenienced by borders (or by law enforcement), and that demand isn’t going away just because formal schemes like that in Malta are abolished. Instead, it will become informal.

So, I would like European authorities to now pay attention to places like Italy, Romania and Poland, which award citizenship to people with an ancestral link to the country, or to people from places that were once within the borders of the country. In Romania’s case, that includes parts of modern-day Bulgaria, Moldova, Hungary and Ukraine. How scrupulous are they being about the authenticity of the documents being provided? How sure can we be that cash isn’t changing hands? I hear an awful lot of rumours. 

Malta’s problem may have been that it made the commercial aspect too obvious, and the lessons its politicians will learn is that they should just put the word out that proving Maltese descent will be easy if you pay enough money to the right people. Also, Vienna still sells passports to people who make exceptional contributions to Austria, why isn’t the European Commission going after them?

A FREE PASS FOR THE PIG BUTCHERS?

The latest iteration of anti-corruption measures in the United States seems to go like this: Prolonged discussion in Washington, with extensive stakeholder consideration; an injunction from a judge in Texas at the request of some random business which doesn’t like having to do paperwork; the federal government deciding to give up on regulation. 

We saw this earlier this year with a judge blocking the implementation of the Corporate Transparency Act, and may be seeing it again with attempts to regulate all-cash property purchases being stymied. We now await word from the administration to see if they’ll give up on this too.

In some ways, this is good. Anti-money-laundering regulations can be extremely intrusive and often lack democratic oversight, so a bit more discussion can help legitimacy. But in other ways this is bad, not least in how it plays into a growing perception that the United States is retreating from any efforts to enforce rules around financial crime. It’s even been told off by the U.K. about violating a global anti-bribery treaty, which must have raised some eyebrows.

I hope though that the U.S. authorities will stay the course with their designation of Cambodia’s Huione Group as being of “primary money laundering concern”. As successive studies by Elliptic have shown, Huione is the largest illicit marketplace of all time, and central to much of the cyber-enabled wave of fraud given the nasty name of “pig butchering”. According to Elliptic, Huione group companies have taken in at least $98 billion in crypto assets to date, and anything that prevents them from operating freely is good.

HITTING RUSSIA WHERE IT HURTS

When Donald Trump did not include Russia in his big chart of which countries would face tariffs, it looked pretty odd, particularly given the fury with which he went after penguins and seals. However, the economic turmoil unleashed by “liberation day” does appear to be hitting Russia hard nonetheless, since lower oil prices threaten to undermine its state budget.

It’s a good time therefore to read this excellent article by Tom Keatinge about Western sanctions on Russia’s oil industry, how Moscow has responded to them, and what should now be done. With its shadow fleet of aged tankers insured – if at all – by under-capitalised companies, Russia has found new customers, above all in India and China, and managed to keep earning the petrodollars it needs to keep its war going. Now, it not only continues to pose a strategic threat to the West, but also a very significant environmental threat as well.

“Yet despite these risks and Russia’s disregard for conventions and norms related to safety on the high seas, the West’s unwillingness to act decisively in the face of the Kremlin’s flouting of international maritime conventions means that Russia is able to operate with impunity,” Keatinge writes. His injunction is to “Remember the Original Mission”, and that applies to all sanctions. 

Western countries imposed restrictions on hundreds of individuals and companies in the months after Russia’s full-scale invasion of Ukraine with the aim of crippling the Kremlin’s war effort. This clearly hasn’t worked. I would like to see a discussion – with the same urgency as the initial sanctions were discussed – about what to do next. Ukrainians are dying every day, and the mission is to save their lives. We need to remember it.

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

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But this is not the impression you receive from interviews with individual billionaires, such as Egypt’s Nassef Sawiris. He told the FT that while he would always be in Britain’s debt for having given him a home when he was threatened by the Muslim Brotherhood, he was now leaving for Italy because British taxes had become too onerous. It’s a stance that reminds me of this unimprovable scene from “The Simpsons Movie”. Sawiris too is a rich man who wants to give something back – just not the money.

A ROMAN TAX HOLIDAY

“I don’t know any person in my circle,” Sawiris says, “who is not moving this April, or next April if [their children] have a school year or something like that.” 

His net worth has increased from $3.7 billion in 2016 to $9.6 billion now, which means he has a lot of worldwide income. Fortunately his new residency in Italy means he won’t have to pay tax on any of it. People who are resident in Italy only pay tax on income they earn in the country, with taxes on income earned elsewhere being replaced by a flat payment of 200,000 euros. If your tax bill is likely to be substantially higher, it’s an attractive option. Attractive enough to persuade some senior bankers from the City of London to move to Milan.

 It is a “non-dom” system copied from a centuries-old British approach that is finally being abolished at the end of this month, hence the panicked reports about an “exodus” of the ultra wealthy from Britain. 

Tax policy tends to go in waves, with governments offering tax breaks to rich people, then abolishing them – as Spain has recently done -- when the ensuing influx drives up house prices and becomes electorally unsustainable. All this new money pouring into Italy will presumably have the same effect, and the same consequences. So there’s a definite advantage for a government that does not have to worry about elections, like that of Abu Dhabi, which has – in the words of Sawiris, who has residency in the emirate as well as in Italy -- “English law without English weather”.

That isn’t entirely true. Yes, the Abu Dhabi Global Market is governed by English common law, with a wonderful selection of foreign judges, but it is a system that is only accessible to people who can afford it. For others who live in the emirate – including the 132,000 people estimated in 2021 to be living in conditions of slavery, one of the highest rates in the world – English common law very much does not apply. Perhaps the place could be better described as allowing the rich to enjoy English rights without English responsibilities, and you can see why that might be a popular prospect.

But why should the United Arab Emirates get all the fun, with dollar millionaires flocking to its sands? Vying for the attention of the wealthy, Donald Trump launched a “gold card” visa, to facilitate the entry of the only immigrants he approves of – wealthy ones. A gold card offers residency and an accelerated path to citizenship for about $5 million. Commerce Secretary Howard Lutnick claims he sold 1,000 of them in short order, apparently raising $5 billion in a single day even though there is no official application process in place. Incidentally, buyers of Trump’s gold card visas will, as in Italy, reportedly only have to pay tax on their U.S. earnings, not their international income.

But experts are sceptical. For starters, the U.S. president can’t just create new immigration routes. That’s Congress’s job. Trump will also struggle to provide the tax breaks available in countries such as Italy (and which used to attract people to the U.K). And the United States is very much not offering the kind of stability that Abu Dhabi is right now.

“Ever since the US election and especially since the inauguration and flood of executive orders, I have seen a dramatic uptick in the number of wealthy American families who have retained me to secure second residences/citizenships,” said David Lesperance, a global tax and immigration expert. He wrote an analysis of the gold card and concluded that the only major group of wealthy people likely to use it would be American citizens who could renounce their citizenship then apply for a card as a way out of future tax liability. Even that would depend on legislation getting through Congress. “The Trump card is dead on arrival because there is no viable market,” he told me.

HOW NOT TO RETURN STOLEN MONEY

I’ve written before about the difficulties that Texan lawyer Jim Kingman has faced in trying to prosecute corruption cases in the Commonwealth of the Northern Mariana Islands (CNMI), a far flung US territory with a penchant for baroque money laundering schemes. but this week there’s good news.

“I really hope this puts to bed the idea that people of the CNMI do not care about corruption, do not care about how public money is spent,” said Kingman, “because they do, and the attentiveness demonstrated by this jury shows they do regardless of the outcome.”

 There’s less happy news from Belgium, however, despite the positive announcement that it had seized two hundred million corruptly-obtained dollars. The cash was the fruit of bribes paid to Gulnara Karimova, daughter of the former president of Uzbekistan, to approve telecoms schemes. It is always hard to find a way to return such cash to its rightful owners, because you don’t want it just to be stolen by senior officials again, but Belgium seems to have chosen a particularly bad way to do it.

“There is a significant risk that the Uzbek authorities will use the repatriated funds to serve the personal interests of the ruling elite and their associates. Despite some reforms under President Shavkat Mirziyoyev, state corruption, nepotism, conflicts of interest, favouritism and rent seeking remain systemic and widespread,” note the Uzbek Forum for Human Rights and Central Asia Due Diligence in a joint statement.

Considering the very large amount of seized Russian funds currently held in Belgium, it is important that Brussels ups its game before any of that is confiscated, and potentially “returned” to the very people who stole it in the first place.
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Kleptocrats love buying property, partly because it’s a good way to get rid of a lot of money at once, but mainly because it tends to be both a good investment and gives one a nice place to live. So kudos to the authors of this report for showing which countries aren’t doing enough to keep the kleptocrats out. 

“Real estate has long been known as the go-to avenue for criminals and the corrupt for laundering their ill-gotten gains. Seeking security for their investments, they often target the world’s most attractive markets to place their dirty money,” the report states.

Many countries can be a bit lax about cracking down on these purchases, because they see them as useful investment into their economies. In fact, they have a bad habit of offering golden visas alongside the property to further incentivise purchases, although some countries – including, earlier this month, Spain – have begun to realise these are not the convenient source of free money they were presented as, precipitating as they do housing shortages and rising rents.

TI divided its analysis into two halves, highlighting not just flaws in the anti-money laundering architecture, but also in the availability of data. If journalists, analysts or activists can’t see who owns what, then no one can tell if kleptocrats have been allowed to sneak through the net. It’s worth reading in full, particularly because of the way it shows that these two halves of the problem feed off each other, for good and ill. 

South Africa, Singapore and France get singled out for praise, with the worst performers – Australia, the United States and South Korea – losing out because they were marked down dramatically on the weakness of their anti-money-laundering protections. When it came to the opacity of ownership information, the worst offenders were Japan, India and the United Arab Emirates (surprise! Okay, not at all a surprise).

I hope that this report informs national and international discussions about fighting kleptocracy. But I also hope someone points out that TI needs a better acronym before OREO becomes entrenched. My suggestion for a new name, after literally minutes of intense thought, would be Lax Ownership Of Property Hurts Ordinary Law-Abiding Entities (LOOPHOLE). 

Although I concede that “entities” isn’t a great word at the end there. Neither is “lax” at the beginning, to be honest. 

WITH ‘FRIENDS’ LIKE THESE

While on the subject of acronyms, thank you to a reader for alerting me to the existence of the “Mobilizing and Enhancing Georgia’s Options for Building Accountability,
Resilience, and Independence” bill, which has been put forward by a bipartisan group of US congresspeople. I am a sucker for a daft acronym, and suspect this is the first time a Georgian word has featured in a proposed piece of American legislation. “Megobari” being, of course, Georgian for “friend”.

Georgia has been suffering from political turbulence for some time, with the Georgian Dream political party – backed by the country’s richest man, the Russophile oligarch Bidzina Ivanishvili -- cementing control over the country. Transparency International’s Georgian branch has been publishing a list of high-level officials who hold what it considers to be questionable wealth. There are worrying signs that Western companies are happily enabling what’s happening in the South Caucasus. Georgia used to be a rare success story when it came to combating corruption, as well as a staunch Western ally in a difficult part of the world.

We would be fools to let it slip back to its bad old ways, without at least trying to arrest the slide a little, so I hope the Megobari bill makes some progress. “This bill provides Georgian Dream officials with a choice to abandon the would-be dictator Ivanishvili or face sanctions,” said Congressman Joe Wilson, Republican of South Carolina. With the “MEGOBARI” Act now being approved, it marks at least legislative support for Georgia’s EU-leaning democratic aspirations.

WHO NEEDS ENEMIES?

And sticking with acronyms, the House and Senate bills put forward to (under-)regulate the stablecoin industry, and which Donald Trump wants rushed through by August, have the acronyms STABLE and GENIUS, which is witty if you like that kind of thing. 

Back in the latter days of Trump’s first term, Representative Brendan Boyle (Democrat of Pennsylvania) introduced the STABLE GENIUS bill, to try to force the president to undergo a mental acuity test. There’s probably some deep lesson in the fact that an acronym that was intended to mock Trump in his first term is being used to flatter him in his second. But frankly it’s all too depressing to contemplate, so let’s move on.

Though onto a topic that’s also depressing. Here’s an interesting column about how Russian oligarchs are apparently back in the market for New York real estate. It’s been a tough few years for rich Russians, since sanctions have forced them to stay away from their traditional playgrounds in London, Manhattan and the south of France.

But, according to real estate brokers in New York at least, they’re back. “We’re seeing a lot of Russian nationals,” a broker said. “I’ve had five Russians look at properties in the $10 million to $20 million range in the past few weeks -- condos and townhouses.” Over the last couple of years, the broker confirmed, “oligarchs couldn’t buy anything in the U.S., and Putin put pressure on Russians not to buy here or in Europe.”

I’m a little bit suspicious of the claim that Russians are once more hunting for NYC real estate, since I think it would be a foolish oligarch who trusted a large amount of money to there being any stability in U.S. policy towards Russia. But if it is the case, it does highlight some of the issues raised by the OREO (ugh!) index, particularly in the light of the Trump White House’s decisions to scrap much of the anti-corruption architecture. 

That said, I wouldn’t expect much dirty money to be coming from Russians at the moment. Russian buyers have been drying up in Turkey and the UAE, which suggest the Russian economy is not generating the kind of cash that leads to property splurges, not least with U.S. tariffs leading to potentially lower oil prices. In my view, real estate brokers might do better to look more towards the old faithful klepto-gushers of South America and China.

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I’d like to think, because of the work I do, that I’d be immune to the gravitational pull of money, but I’d probably be lying. On the rare occasions when I’ve met someone wealthy — and they’ve been multimillionaires, rather than centibillionaires, and thus nowhere close to the lower reaches of the Forbes list — I can’t help noticing that slight tug as my brain says: “Just think of what could be achievable if I could persuade this person to invest in one of my pet projects.”

Which is all to say that, although I’d hope I could resist the lure of the vast mass of Saudi money if I was confronted by it, in reality, I’m not sure I wouldn’t throw myself in and start doing lengths like Scrooge McDuck. That’s certainly what everyone else seems to be doing. So, it’s time to check in once more on Neom, the blandly-named but horrific new city that Saudi Crown Prince Mohammed bin Salman has decided to build in the desert because he can:

• “Con Air” director Simon West is set to film a historic drama, “Antara,” in Neom.
  
• Sindalah has partnered with prestigious JLS Yachts as Neom’s first superyacht destination gears up for opening. “With 86 berths for yachts up to 50 meters and additional serviced offshore buoys for superyachts up to 180 meters, the Sindalah marina will become a new hub for the global yachting calendar,” the press release reads.
  
• A tunnel contract is up for grabs at Neom’s port city, Oxagon: “The tunnel will link the offshore elements of Neom’s floating port city Oxagon in the Red Sea with the Neom Connector – a high speed railway that will connect Oxagon with its linear city, the Line.”
  
• Neom is touted as a potential host for the 2034 World Cup.
  
• The NEOM McLaren Formula E Team has unveiled a motorsport livery designed using generative artificial intelligence.
  
• South Korean robot maker takes part in supermassive Saudi development Neom.
  
• Neom, the $500bn megacity, which organizers claim will be 33 times the size of New York City, is due to include a 105-mile straight-line city.

I could go on, but you get the point. A lot is happening, and it is all bewildering. There is a film production hub, a new harbor for superyachts, a high-speed railway, a new port city, a sports venue and a new city that will run for 100 miles in a straight line. A couple of months ago, I was in the Marshall Islands, which is a series of atolls in the Pacific Ocean, where the capital city — Majuro — is long and thin, making it extremely time-consuming to get anywhere and thus incredibly impractical. The Marshallese had no choice about its shape, however, because the island is the rim of a submerged volcano, rarely more than 656 feet wide at any point, and Majuro could only be built where the land was. The Saudis, however, are choosing to build a city in a way that is guaranteed to ensure the longest possible journey times, for no apparent reason. I could understand someone designing it in Minecraft, but why are real-life engineers willing to participate in such an absurd idea?

And that’s just the start of it. Why are engineers building a skiing venue, which will host the Asian Winter Games, at a time when — thanks to climate change — even the Swiss are struggling for lack of snow? Why have other engineers decided to build a waterfront for a region of Jeddah that has no waterfront? Why are soccer players who used to wear rainbow armbands willing to play in a country where homosexuality is illegal?

• “I think people know what my views and values were before I left and still do now. And I think having someone with those views and values in Saudi Arabia is only a positive thing. I can’t promise anything, but what I can do is sit here and say I have my values and beliefs,” English player Jordan Henderson said.

That seems like a quote that sums up nicely why people, from golfers to mixed martial artists,  choose to work in Saudi Arabia — it’s all about the gravitational pull of colossal amounts of money.

• "A lot of people who said, ‘We will not work in Russia because of Putin,’ are now working in Saudi Arabia,” said Austrian architect Wolf Prix, who helped to design the linear city and is, at least, consistent in his willingness to accept money, since he has also designed an opera house in Russian-occupied Crimea. “I'm not glorifying anyone who acts in an authoritarian way…Once and for all: Architecture is art and art knows no sanctions or borders,” he has said.

It’s a noble-sounding philosophy, but it’s not exactly Paul Simon performing with Ladysmith Black Mambazo, is it?

There are many good reasons to support the urgent creation of renewable energy systems, and not least among them is the need to stop giving money to tyrants who happen to sit on vast fossil fuel reserves. Last year’s profits for Saudi Aramco — $161.1 billion — were the largest ever reported by any company.

If the Saudi royal family was no richer than any other government, then perhaps any artists who “know no sanctions or borders” might choose to side with the three people who have been sentenced to death in Saudi Arabia because they objected to Neom being built, rather than with the government building it. Their names are Shadly Ahmad Mahmoud Abou Taqiqa al-Huwaiti, Ibrahim Salih Ahmad Abou Khalil al-Huwaiti and Atallah Moussa Mohammed al-Huwaiti.

• “Despite being charged with terrorism, they were reportedly arrested for resisting forced evictions in the name of the NEOM project and the construction of a 170km linear city called The Line,” a specially convened group of U.N. experts said. “We urge all companies involved, including foreign investors, to ensure that they are not causing or contributing to, and are not directly linked to serious human rights abuses,” they added.

TAXES

This is potentially exciting: The Financial Accounting Standards Board, which lays out how accountancy rules work in the U.S., has decided that American companies should publicly declare not only how much they pay in taxes but where they pay it, rather than providing that information solely to the tax authorities.

The measures have been under discussion for seven years, with many companies opposed to the idea of revealing any more than they already do, but pressure from investors appears to have finally got a slightly watered down version of the standards over the line.

• “Time and time again investors have made it clear that they need a closer look into the tax practices of the companies in their portfolios,” said Ian Gary, the executive director of FACT. “Now, after years of deliberations and revisions, FASB is finally delivering some of these much-needed reforms for investors and the public.”
  
• “We believe more aggressive management of tax issues could, at times, provide evidence that a company’s management team and board may have a risk tolerance that is greater than we would prefer given our long-term (often 6-8 year) average holding period,” said one investor in comments quoted by the Wall Street Journal.

Country-by-country reporting was first suggested by campaigners two decades ago as a solution to the way multinational companies were able to use accountancy tricks to move profits from high-tax countries and thus dodge the taxes that pay for public services.

• “To truly eliminate profit shifting and stop trillions from being stashed in tax havens, we must make robust, public country by country reporting a requirement for all multinational corporations everywhere,” the Tax Justice Network says.
  
• “At the core of the demand for country-by-country reporting is a contention that globalization is not working for the benefit of everyone. Some nation states and large parts of the world’s population have lost out as the power of the global corporation has risen, including its power to not pay tax in the right place at the right rate and at the right time,” said Richard Murphy, the accountant who first came up with the idea.

Although initially dismissed as an impractical dream, the idea has gradually become reality around the world, and producing a non-public report to be shared with tax authorities is now a requirement of the OECD. In the European Union, rules will apply, from next year, obliging companies to publicly report taxes separately for each member state, as well as for jurisdictions the bloc labels as “non-cooperative.” Other countries are inching toward public reporting of their companies’ taxes as well. Does it work? Well, not yet.

• “Our results collectively suggest that U.S. Multi-national Enterprises continue to engage in tax-motivated income shifting after U.S. CbCR adoption,” one paper finds.

But perhaps, like communism or Brexit, that’s because it hasn’t been tried properly.

SINGAPORE

It’s all going on in Singapore, where a large money laundering ring has been busted and an investigation continues. It’s not exactly a surprise to anyone that dirty money is flowing through Singapore, but I was interested by the details of the passports held by the suspects.

• “Ten foreigners aged between 31 and 44 were arrested, from Cyprus, Cambodia, Dominica, China, Turkey and Vanuatu,” Reuters reports.
  
• “Turkish national Vang Shuiming, 42 …. also has passports from China and Vanuatu,” according to the Straits Times.

• “A 40-year-old Cypriot national … jumped out of the second-floor balcony of his bungalow and was found hiding in a drain,” ABC writes.

What do all of those countries, except China, have in common? They are all places that sell (or have sold) passports under citizenship-by-investment schemes. Such golden passport schemes are controversial, but their proponents argue that countries should be able to award citizenship however they like, that robust due diligence programs ensure criminals are excluded from obtaining identity documents and that such schemes help to correct the unfairness inherent to different passports offering different travel privileges.

And yet, I do not know of a single country that has sold passports, which hasn’t ended up selling them to criminals.

Kristin Surak, an academic from the London School of Economics, has a book coming out this month on this very topic, and if you’re interested, you should read it. Her key conclusion is that, no matter how many such scandals we see, golden passports are not going away.

• “In some Caribbean microstates, citizenship by investment constitutes as much as 30 percent to 50 percent of GDP, making the programs extremely important economic resources for development,” Surak says. “In essence, this is an issue of capitalism, which needs nation-states in order to operate. States are necessary because they back up legal jurisdictions and laws protecting ownership and private property. And states get their power from bounding, claiming, and limiting populations. As long as the intertwined relationship between capitalism and nation-states persists, we will see the demand for golden passports grow.” 

WHAT I’M READING

I’m plowing my way through “The Secret History of the Five Eyes,” which traces the origins of U.K, U.S., Australia, Canada and New Zealand’s intelligence cooperation to the years preceding World War II, then races through various scandals, cock-ups, conspiracies and disasters up to the present day. I’m keen to see how the five Anglophone nations cooperate against money laundering, and this is tangentially relevant, though — to be honest — it feels a bit like this book would need to be about 20 times longer than it is to have a hope of fitting everything in.

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