I like writing about the huge consequences of tiny details: a compromise made at a G7 meeting in 1989 by people who didn’t know what they were doing that now defines all anti-money laundering work; an opportunist deal among London bankers in the mid-1950s which created the globalized financial system; things like that (read my books if you want more.)

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.”

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

The post Why we must make elections cheap again appeared first on Coda Story.

There’s a story I often tell when I talk about my new book: a couple of years ago, an adviser to a senior politician here in the UK asked me for some suggestions for policy proposals for tackling financial crime. I told him I’d like more resources for law enforcement agencies. His reply: “that’s not going to get us many headlines, is it?”

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.

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

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