This is going to be a big year for the Financial Action Task Force, the world’s standard-setter on money laundering regulations, under its new president Giles Thomson. Quite apart from the standard folderol of plenary meetings, reports and publications, it is due to send a mission to assess the United States.

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.

The post Can a Task Force set up to punish the little guy, take on Trump? appeared first on Coda Story.

That Iran's Supreme Leader, Ayatollah Ali Khamenei, should disappear, or be disappeared, from the scene was not a novel notion. 

Throughout my nearly five years in Tehran at the turn of this century, speculation about his health and longevity was a near-constant background hum. He was reported, or rumoured, to be mortally stricken by prostate cancer, his constitution already weakened by an assassination attempt in 1981 that left his right arm largely useless. Who would succeed him was far from clear, and the object of further speculation. 

As he lived on into more recent times, reaching the same age of 86 attained by his predecessor – the Islamic Republic's founding father Ayatollah Ruhollah Khomeini – the prospect of his demise became a more immediate issue, though the question of succession remained equally shrouded in uncertainty. As Supreme Leader, Ayatollah Khamenei was the commanding voice behind the ruthless crackdown that took the lives of tens of thousands of citizens early this year in the latest and greatest of many escalating protests, at which the slogan "Marg Bar Diktator!" — Death to the Dictator! — became an increasingly prominent slogan. 

Their wish was confirmed to be true at 5 a.m. local time on Sunday morning by Iranian broadcasters. The previous morning, Khamenei’s compound in Tehran was demolished as the Israeli-American onslaught got under way while the Ayatollah was heading a meeting of the Defence Council. That ensured that top military figures were also killed, including the commander of the Revolutionary Guards, Mohammad Pakpour, the Army Chief of Staff Abdolrahim Musavi, and Khamenei's top military adviser, Ali Shamkhani, who had been wounded but survived the attack in June last year. 

The Iranian leadership appears to have been caught by surprise, as it was last year when the opening Israeli strike, which culled many top military leaders as well as nuclear scientists, was launched between two rounds of indirect negotiations between Iran and the U.S. Oman, which was mediating the talks, was furious then, denouncing Israel as the real destabilising factor in the region. 

Perhaps the Iranian leaders — and the Omani mediators — thought that such a dirty trick could only be pulled once. But it has happened again, with no evidence that the talks in Geneva had broken down. The chief Omani negotiator, Badr Albusaidi, was livid. Only hours before the strike, he was in Washington for meetings “to explain that a peace agreement between the U.S. and Iran is now within reach. No nuclear weapons. Not ever. Zero stockpiling. Comprehensive verification. Peacefully and permanently. Let’s support the negotiators in closing the deal.”

After learning of the attack, he expressed his outrage in another tweet: “I am dismayed. Active and serious negotiations have yet again been undermined. Neither the interests of the United States nor the cause of global peace are well served by this. And I pray for the innocents who will suffer. I urge the United States not to get sucked in further. This is not your war.”

But Donald Trump and the U.S. were already thoroughly sucked in, and it was indeed their war, or at least his. According to the Israelis, the date had been decided jointly weeks before, after months of planning. Which meant that the Geneva negotiations, focused on the nuclear issue, were simply deceptive camouflage designed to give time for the U.S. to complete the marshalling of its biggest naval and air buildup in the region since the 2003 invasion of Iraq. 

Trump and the Israeli prime minister Benjamin Netanyahu soon made it clear that the campaign now had little to do with the niceties of Iran's nuclear programme: the agenda was regime change in Tehran, and a surprise attack to decapitate the regime was an essential element. 

With Iran's air defences largely taken out in last year's 12 days of war, it was like shooting fish in a barrel. Hundreds of air, missile and drone strikes were carried out on missile launchers, military bases and other targets around the country, with inevitable "collateral damage", including a girl's primary school in the southern town of Minab where scores of children were reported killed.

The Iranians did their best to live up to their dire warnings of deadly reprisals against Israel, and against American bases and allies on the Arab side of the Gulf and elsewhere. Missiles hailed down on airports and other installations in Kuwait, Bahrain, the UAE, Saudi Arabia and even Oman, despite its active mediation. While some U.S. bases may have been hit, so too were many civilian sites such as Dubai's iconic Burj al Arab hotel. Explosions too are being heard in Beirut, after Hezbollah fired rockets and drones at northern Israel to "avenge" Khamenei's death and the Israel Defense Forces struck back.

Air traffic was halted throughout a region rich in international hubs, sowing chaos worldwide. Iran's declaration that the strategic Strait of Hormuz was closed to shipping forced cargo shippers to suspend the voyages that transport some 20% of the world's oil and a lot of liquid gas, causing tremors through international markets. Once again, a decision taken by a tiny circle of men in Washington, Jerusalem and Tehran instantly rewired daily life, reminding us who actually gets to pull the global emergency brake.

What all this would do to Iran's relations with the Arab side of the Gulf was one of many open questions. While Oman was actively mediating, the other Arab oil states had been pressing the Americans not to allow a campaign that would predictably destabilise the region, and declaring their airspace not available for any hostilities. But any sympathy for Tehran quickly evaporated when the missiles started flying in: the Gulf Arab states closed ranks.

Trump and the Israelis made it clear that this was not one quick spectacular strike, but an ongoing campaign that would last days, perhaps even weeks. Presumably at the end, Iran would find its missile capabilities "obliterated," in Trump's favourite term, along with any nuclear activities. 

Once the bombs stop falling, Trump and Netanyahu urged, the Iranians should come out of their basements and take over a government that would be theirs for the taking. A historic opportunity that would likely not recur for generations, Iranians were told. 

But it is hard to imagine such regime change being wrought remotely from the skies. The regime lost little time in filling the leadership vacuum, setting up a three-man ruling council in line with the constitution, composed of the President, Masood Pezeshkian, the head of the Judiciary, Gholamhossein Mohseni-Ejei, and Ayatollah Alireza Arafi from the Council of Guardians. All regime loyalists, and the latter two noted hard-liners. So business as usual as far as they are concerned. But the fact is that the assassination of the Supreme Leader and the attendant bludgeoning of the regime's capabilities will inevitably usher in a new and unpredictable phase in Iran's turbulent history.

On the streets, reactions were fractured: jubilation in areas that had long chanted “Death to the dictator”, state-promote mourning in others, but also fear and a grim resignation, an understanding that power vacuums are often filled with fresh repression or civil war.

A smooth transition to a peaceful democracy is about the least likely scenario among the many possibilities. So too is an imminent return of the monarchy, with a comeback by Israeli-backed Reza Pahlavi, son of the Shah ousted by the 1979 revolution. So far there has been no sign visible to the outside world of a split in the ranks of the defenses built up by the Islamic Republic, which still has regular military forces numbering around 400,000, Revolutionary Guards of up to 190,000, and its auxiliary militia enforcers, the Basij, who may be able to mobilise around a million at street level. 

There must be much anger among regime loyalists, which may fall on the heads of any opposition protestors who imagine they can move in and take over the reins of government from the bombed-out wreckage of the Islamic Republic. The U.S. military is not likely to be able to remain engaged in the detail of defanging the regime once the main thrust of the campaign is done. But Israel likely will. Its equivalent of the CIA, the Mossad, has spent years building up formidable intelligence at street level, and will be doing its utmost to continue hamstringing the regime from within and fomenting opposition.Among the many unanswerable questions is whether all this will lead simply to chaos and fragmentation, which is probably Israel's preferred outcome, or to a more compliant regime willing to compromise with the U.S. in order to get crippling economic sanctions lifted. As Trump concedes the war might last weeks, who knows what Iran will eventually emerge from the smoke and the rubble?

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