Coda’s ZEG storytelling festival in Tbilisi has come to an end, and I am both overloaded with information and exhausted by drinking too much wine. My take-home message was that oligarchy is spreading ever wider, and that we need to take its threat to democracy far more seriously than anyone is doing at the moment.

I shared a stage with Ed Caesar, author and journalist from The New Yorker- magazine, who has written some great pieces on oligarchs (as well as much else), with Paul Caruana Galizia, who made this excellent podcast on Londongrad, and with Hans Gutbrod, whose piece on Georgia’s own Bidzina Ivanishvili is very much worth reading. And if you like surreal, ethereal documentaries, I highly recommend Salome Jashi’s ‘Taming the Garden’, which tackles oligarchy and its implications through the story of Georgian trees. 

The joy of the festival is in the incidental meetings, of which few were more joyful for me than sitting next to Joseph Stiglitz at dinner and getting to hear his views on inequality, oligarchy, and the age of Trump. Where else would I ever get to do that? 

Moral of the story: you too should find time to come to Tbilisi next year for ZEG. If you do, you can also make a side-trip to the market to stock up on one of the world’s best condiments.

SHOW US THE MONEY

Victoria Cleland, the Bank of England’s Chief Cashier, has announced that worried Brits are hoarding cash. “At a time of uncertainty, at a time of crisis people do move to cash. They want to make sure they have literally got something under the mattress,” she said at a conference in London.

This, she said, helps to explain why the value of all the banknotes in circulation keeps going up – indeed, it hit a new all-time high of 85.872 billion pounds this year – despite the fact that people use less cash all the time. The Bank of England has previously estimated that between 20 and 24 percent of banknotes at any one time are being used in transactions, and the rest are unaccounted for (or, according to Cleland, hoarded). 

So, if we do the sums and we accept Cleland’s logic, we can say that around 1,000 pounds worth of banknotes is being hoarded by every single person in the UK, up from around 920 pounds last year. I have to say that, with all due respect to Cleland, I am very dubious about that figure, not least because someone is getting a double share to make up for the fact that I don’t have even a fraction of that.

The most recent survey I can find, which is from 2022, suggests I am not alone. The average Brit had just 113.82 pounds at home back then, and it’s hard to see why that total would have increased ninefold in the last three years.

This is not a UK-specific situation. The last survey conducted for the Federal Reserve shows that the average American had $373 either in their wallet or at home in 2024, down $70 from the year before. So cash hoarding in the US is going down, but the value of banknotes in circulation keeps going up –  indeed, it hit a new all-time high of $2.835 trillion in the most recent data release, which is around $7,000 for every person in the United States. So either Brits and Americans alike are spectacularly under-reporting how much cash they’re keeping at home, or someone else is using all that cash for something else.

Considering that barely a week goes by without news of major money laundering gangs being busted with bags full of banknotes, I personally would like it if central bank officials put a little bit of thought into asking whether the extremely healthy demand for their products is not in fact coming from organised criminals. And if it is, whether central banks ought to do something about that.

Five years ago, the House of Commons’ Public Accounts Committee scolded the Bank of England for not caring about where its banknotes go. “The Bank needs to get a better handle on the national currency it controls,” its chair, MP Meg Hillier, said. It still does.

TRACKING ‘ENDANGERED’ MILLIONAIRES

Regular readers will know how much I admire the ability of Henley & Partners, the world’s foremost passport vendor, to turn almost any piece of news into an advertisement for buying a new passport and/or visa.

In recent times, the alarm is being sounded by changes to British tax policy which, basically, make it more expensive for very rich people to live and to die in the UK. And Henley responded in the way that it always does – “provisional estimates for 2024 are even more concerning, with a massive net outflow of 9,500 millionaires projected for this year alone,” it reported last year about the “wealth exodus”. All was not lost, however. If only the UK would scrap taxes on capital gains and inheritance and privatise its healthcare system, millionaires might be persuaded to stay.

The ‘research’ was picked up very widely, with few media outlets questioning its methodology, its publisher’s motivations, how representative its purported database of 150,000 people was of the millions of millionaires in the world, or indeed how exactly anyone knows where they’re all going. The Tax Justice Network has now delved into the report, and its findings are worth a read, not least the headline conclusion that there was no exodus. The correct policy response, it argues, would therefore not be tax cuts at all but higher taxes on wealth.

So, what should we think? Are millionaires leaving the sinking ship, or are they clinging on to help rebuild? Should we lower taxes or raise them? The obvious solution is surely to use satellite tags so millionaires can be tracked like wildebeest as they migrate from the watering holes of Chamonix to the rich, grazing pastures of Mayfair via the rutting grounds of St Barts. Only then can we know for sure if they’re being chased into extinction.

CALLING OUT MONACO

The European Union’s regularly updated “list of high-risk jurisdictions presenting strategic deficiencies in their national anti-money laundering and countering the financing of terrorism (AML/CFT) regimes” has done something worthwhile for the first time I can remember by singling out Monaco.

Normally, the list is made up of a random selection of irrelevant places and third-order tax havens. And there’s plenty of the usual on display: why anyone would worry that Côte d'Ivoire, Namibia and Nepal, for example, are supposedly big centres for financial crime, I have no idea. And normally, the list will avoid pointing a finger at any country that is closely allied or aligned with any EU member, which means the U.S. and U.K. never get singled out even though they’re clearly far more problematic than, say, Algeria.

This time, however, the list does single out Monaco. The principality is a major problem, with deep ties to deeply unsavoury people and a fast-developing financial scandal.

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

The post The cash hoarders, migrating millionaires, and Monaco mischief appeared first on Coda Story.

There are two options for criminals in a democracy who don’t want to go to jail. The first is to launch a large-scale campaign to legalise whatever crime it is that you want to commit. This is hard, slow, laborious and, in most cases, impossible. The second is to not get caught. This is not necessarily easy either, but it’s a lot easier when law enforcement agencies are small, embattled and under-funded.

The 300,000 or so financial institutions subject to regulations in the United States have to report any suspicions they have about transactions, as well as reports of large cash payments, to the Financial Crimes Enforcement Network, or FinCEN. The idea is that their reports will alert investigators to crimes while they’re going on, and help the goodies catch the baddies.

DEFUNDING THE COPS

Sadly, however, FinCEN’s computer system is so clunky it’s like, as a former prosecutor once said, trying to plug AI into a Betamax. Investigators often have to create their own programmes to trawl a database that gains more than 25 million entries every year, or else just pick through them in the hope of finding something interesting. It effectively means that this vast and priceless resource is hardly ever used.

And now FinCEN’s budget looks like it will be slashed even further. “The pittance allocated to FinCEN in the current budget has been reduced even further,” wrote compliance expert Jim Richards, with a link to the 1,200-page supplement to the White House’s proposed 2026 budget with details about the cut. The reduction would take spending back to 2023 levels, which is worrying for anyone keen on seeing criminals stopped. And that’s even before you take into account the effect of workforce disillusionment at regulators such as the Securities and Exchange Commission, resulting from the cuts imposed by DOGE.

“I experienced some dark times during my SEC career, including the 2008-09 financial crisis and the Enron and Madoff scandals,” wrote Martin Kimel in a passionate column in Barron’s. “ But morale at the Commission is the worst I have ever seen, by far. No job is secure. Nobody knows what will become of the agency or its independence.” So, he added, “when the SEC offered early retirement and an incentive payment for people to voluntarily resign, I and hundreds of others reluctantly accepted.”

If you lose experienced personnel, and you lack the resources to invest in the latest technology, you will always lose ground against entrepreneurial and skilled financial criminals. That is the inevitable consequence of what is happening in the United States, which will be devastating for the victims of fraudsters, crooks, hackers and more.

THE UK PRECEDENT

There is, however, a cycle to this kind of thing. Governments that are determined to unleash the private sector always cut enforcement of regulations, but then they become embarrassed by the inevitable revelations of corruption, sleaze and incompetence that result. This is what happened in Britain, where years of news headlines about London being the favourite playground of oligarchs finally led to government action.

Three years ago, the British authorities imposed a special levy on financial institutions to fund the bodies that fight crime, and last month it published a report on the first year of spending. More than 40 million pounds has been invested in new technology to tackle Suspicious Activity Reports (so no more Betamax in London), and almost 400 people have been hired to do the work, including some of them finally beginning to try to drain the swamp that is the U.K.’s corporate registry. This is good news. 

It is inevitable that, just like in the U.K., the United States will eventually become so appalled by the rampant criminality that will result from the cuts to FinCEN, the SEC and other bodies, that politicians will start building a decent system to stop it. I just wish everyone would get on with it, so millions of people don’t have to lose out first.

THE EU GETS INTO GEAR?

You can accuse the European Union of many things, but you can’t say that it acts hastily. Several months after the last progress update from the Anti-Money-Laundering Agency (AMLA), it has appointed its four permanent board members. They represent an interesting cross-section of European expertise. 

There’s Simonas Krėpšta who, at the Bank of Lithuania, has overseen the country’s booming fintech sector and, therefore, has a good insight into the country’s booming money laundering sector, which has seen quite a lot of firms get fined, including arguably Europe’s most valuable startup Revolut. 

Then there’s Derville Rowland of the Central Bank of Ireland, who will bring inside knowledge of Europe’s most aggressive tax haven. And Rikke-Louise Ørum Petersen, who joined Denmark’s Financial Supervisory Authority in 2015, just when the money laundering spree by Danske Bank was about to explode into public view. Finally, there’s Juan Manuel Vega Serrano, who was previously head of the Financial Action Task Force, which gives him plenty of experience of working at an ineffective, slow-moving, superficially apolitical, supranational anti-money laundering organisation. 

All told, I’d say this is a pretty perfect group of people for the job. The European Union works slowly, but it works thoroughly. Of course, AMLA won’t actually be doing anything until 2028, and it probably won’t do much after that either. But you can’t have everything.

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

The post Creating a culture of corruption appeared first on Coda Story.

A former head of one of the key departments in the Logistics Forces of Ukraine's Armed Forces is suspected of illicit enrichment worth Hr 12 million ($290,000) and illegal possession of weapons, the State Investigation Bureau (DBR) and the National Agency on Corruption Prevention announced on June 9.

Ukraine's military has seen several corruption scandals since the start of Russia's full-scale war, related to illicit enrichment, money laundering, bribery, and misconduct of the command.

The agencies did not disclose the suspect's name, who faces up to 10 years in prison if convicted.

During 2023-2024, the ex-head of the department purchased 14 land plots in Kyiv Oblast, an apartment, a Toyota Tundra, a Skoda Octavia, a Hyundai Tucson, and domestic government bonds issued by Ukraine's Finance Ministry, according to the National Agency on Corruption Prevention.

Meanwhile, the suspect and his family had no financial means to purchase these assets, the agency's statement reads.

While searching the suspect's house, law enforcement officers also found weapons and ammunition stored illegally.

The preventative measures for the suspect are now being considered.

Ukraine's Logistics Forces, established in 2018, are in charge of providing supplies and technical maintenance for the Ukrainian troops on the front line. This branch of the armed forces is also responsible for adapting the Ukrainian army to NATO standards, particularly in the field of logistics.

Exclusive: Ukraine could face 500+ Russian drones a night as Kremlin builds new launch sites

Russia will soon be able to deploy more than 500 long-range drones a night to attack Ukraine as it ramps up production and builds new launch sites for them, a source in Ukraine’s military intelligence (HUR) has told the Kyiv Independent. According to the source, Russia’s production rate for one

The Kyiv IndependentKollen Post

The Corporate Transparency Act was passed by Congress at the very end of Donald Trump’s first term, with bipartisan support and an important mission to protect national security, expose wrongdoing and complicate the committing of financial crime by forcing companies to declare the names of their owners. 

This was at the time not a controversial piece of legislation, not least because American politicians – as part of the Financial Action Task Force – have been pressuring other countries to pass similar laws since the late twentieth century. But it has proved messy to implement. FinCEN, the United States’ financial crimes enforcement network, only finished making the necessary rules to file what it calls “beneficial ownership information” last year – just in time for judges in Alabama and Texas to declare them illegal, and then for the second Trump administration to basically ditch them altogether by saying they don’t apply to 99.9 percent of corporations that are registered in the U.S.

The consultation period over this decision to ditch the filing requirement is now over. (So, if you feel strongly but didn’t get round to writing in, I’m sorry to say you’ve missed your chance.) It is now possible to browse through the several-dozen submissions from concerned citizens and organisations, which is an enlightening experience.

MAKING COMPANIES OPAQUE AGAIN

In the pro-rules camp, you can find comments from law enforcement agencies, anti-corruption organisations, environmental campaigners, credit unions and others who are concerned that the Trump administration’s decision to maintain the previous lax standards is damaging and unwise.

“Without this data,” stated the National District Attorneys’ Association, in a fairly typical submission, “prosecutors are left blind when investigating shell companies used by fentanyl and human traffickers, cybercriminals, and corrupt foreign actors.” These, they added, “are not abstract concerns –these are real threats to American families and communities.”

In the other camp are the small business owners, or associations representing them, who are delighted that the requirements to file their details with FinCEN are now history, and want all beneficial ownership information already filed to be deleted. 

“For many of us, the original BOI requirements felt like an unfair assumption of guilt, treating hard working entrepreneurs as potential criminals rather than the backbone of our economy,” wrote Stephen McKissen, the owner of a video production company in Denver, Colorado. Removing the requirement, he argued, “for US companies and US persons to report BOI lifts a significant weight off our shoulders.” 

Ever since the world’s first piece of anti-money laundering legislation was passed in 1970, businesses have complained about the compliance burdens it imposed upon them. Criminals hide by pretending to be legitimate businesspeople, and the only way they can be exposed is by imposing rules on everyone, thus obliging honest folk to undergo paperwork and inconvenience, which is not popular with the honest folk (or, I suppose, the dishonest ones).

It's crucial to the way the legislation is implemented therefore to minimise that inconvenience, to make sure it does not cause so much irritation that it becomes a political issue. This appears to be where the U.S. efforts ran aground. I had a look at the FinCEN portal through which company ownership is registered and which the small businesses were complaining about. It didn’t look too bad to me, but if the registration process is anything like the comment-reading process, I can see why people are annoyed about having to do it.

Every single comment on the proposed rule changes has the same headline, so it’s impossible to tell which are interesting and which are utterly banal, without opening a new page, then opening a new attachment. When you return to the main page, the list of them rearranges itself unexpectedly, so it’s hard to know which ones you’ve already read. It is in short a very poorly designed piece of software, and you’d think a country that created Google, Apple, Facebook and the rest might have been able to find some better programmers.

Back, though, to America’s notoriously lax shell company legislation. It is the result of it being devolved to state level, so that some states – Delaware and Nevada are stand-out examples – end up competing with each other to attract more incorporation, thus sparking a race to the bottom. 

Perhaps there’s nothing that could have been done to make American business owners appreciate the need to file information about beneficial ownership, but the lesson for bureaucrats is that you have to make compliance easy. Having to file information at both state and federal level was never going to be popular, particularly if the web portal involved was also clunky and annoying. 

However, what’s left of the Corporate Transparency Act will nicely align with the White House’s wider agenda, since it now only applies to foreign companies that have registered to do business in the United States. If criminals currently using offshore-incorporated corporations want to avoid having to report their identity to the authorities, they’ll now need to set up a domestic shell company, which will I suppose be a small win for USA Inc.  

It’s too early to say whether Trump’s tariffs and threats will bring businesses and manufacturing back to America, but he is at least making onshore shell companies great again.

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

The post How Trump is bringing shell companies back onshore appeared first on Coda Story.

The family of late Andriy Portnov, a former top aide to ex-President Viktor Yanukovych, acquired more than $2 million worth of real estate in Dubai during Russia's full-scale invasion of Ukraine, an investigative report by Schemes, a project by Radio Free Europe/Radio Liberty, has revealed on June 2.

According to property records leaked from Dubai's Land Department and state-owned utilities, verified in collaboration with the Organized Crime and Corruption Reporting Project (OCCRP) and Le Monde, six properties were purchased in 2022–2023 by Portnov's civil partner, Anastasiia Valiaieva, and his daughter, Liliia Portnova. As of mid-2025, five of the properties remain under their ownership.

The first known purchase was made by Portnova in October 2022, when she bought a 69-square-meter apartment in Sobha Hartland One Park Avenue for around $320,000.

Property acquisitions reportedly accelerated in mid-2023, with Portnova and Valiaieva investing in multiple new developments, including Sobha Hartland Waves Opulence and Creek Vista Heights, spending between $132,000 and $600,000 per unit.

One property — an apartment in Sobha Hartland Waves Opulence valued at over $600,000 — is still under construction and slated for completion in September 2025. Another, in Creek Vista Heights, worth more than $550,000, is expected to be completed in 2026.

Despite owning these high-end assets, Schemes found no public records indicating current business activity for either woman. Valiaieva previously owned a company called Vasilisa Group, formerly known as Portnov Group and linked to Portnov himself, but he ceased to be listed as its owner in 2020.

Journalists were also able to confirm that Valiaieva has held Russian citizenship since 2014 and that Portnova is a Swiss national.

In April 2024, Portnov transferred ownership of a luxury estate outside Kyiv to his children through a notarized deed of gift. The document, obtained by Schemes, shows that the transaction was conducted by Valiaieva on behalf of their children.

A Ukrainian notary certified the deed, while a lawyer who previously represented Portnov in court, Marina Parinova, acted on his behalf using a power of attorney notarized in Madrid.

Neither Portnova nor Valiaieva responded to requests for comment from Schemes, nor did attorneys previously associated with Portnov.

The revelations come around two weeks after Portnov was shot dead in Madrid on May 21.

Ukrainian military intelligence confirmed his death to the Kyiv Independent. Spanish media outlets said Portnov was shot at five times, with at least three bullets striking his head and torso. No arrests have been made.

Portnov, 51, was a central figure in the Yanukovych administration from 2010 to 2014 and was sanctioned by the United States in 2021 over allegations of corruption and judicial manipulation. After fleeing Ukraine following the 2014 EuroMaidan Revolution, he resided in Russia and Austria, returning to Ukraine in 2019. He fled again in June 2022 after Russia's full-scale invasion began.

Known as one of the most litigious ex-officials in Ukraine, Portnov sued several media outlets, including the Kyiv Independent, over reports labeling him "pro-Russian." He won a defamation case in a Kyiv court in 2024.

His influence extended into the media as well: he briefly headed the pro-Russian TV channel NewsOne in 2018. A 2020 UkraineWorld report accused Portnov of using online bots to discredit the EuroMaidan Revolution and Ukraine's pro-European reforms.

Hated, tainted, and covertly pro-Russian — Andriy Portnov, the top Ukrainian ex-official shot dead in Spain

Editor’s Note: In 2023, Andriy Portnov filed a lawsuit against Olga Rudenko, the chief editor of the Kyiv Independent, over an article in which he was referenced as being “pro-Russian.” A Kyiv court ruled in Portnov’s favor in September 2024. In April 2025, an appeal court upheld the ruling. Rudenko

The Kyiv IndependentOleg Sukhov

Since Donald Trump returned to the White House in January, some 31 percent of “revenue agents” (the people tasked with conducting tax audits) have lost their jobs. This is supposed to save the government money, but it’s a bit like trying to reduce the cost of crime by sacking police officers. 

“This administration is clearly running the risk of losing hundreds of billions of dollars -- in fact, likely over $1 trillion -- through its destruction of the IRS. “At a time when deficits are high and rising, that seems a baffling policy choice,” said Larry Summers, noted economist, former treasury secretary, and former president of Harvard University.

The policy is indeed baffling if its aim is to collect taxes; it’s not baffling at all, though, if the intention is to help rich people dodge them.

An early announcement from Trump’s Department of Justice was to pause enforcement of the Foreign Corrupt Practices Act, which has been central to global efforts against bribery since the 1970s. Trump has long argued that prosecuting American businesses for bribing foreign officials makes it harder for U.S. companies to compete. A new DoJ memo shows that it has now thought about what it wants to do, and how to do it in a way that prioritises American interests.

There have long been suspicions that U.S. authorities reserve their biggest fines for non-US companies (a French bank getting fined almost $9 billion, for example), and suggesting that prosecutions will be “America first” is unlikely to help with that perception. “Enforcement of the Foreign Corrupt Practices Act ("FCPA") will now be focused on conduct that harms U.S. interests and affects the competitiveness of U.S. businesses, further suggesting that future FCPA enforcement will be focused on non-U.S. companies,” noted lawyers from White&Case in this assessment.

There is already widespread global concern that the Trump administration will exploit the U.S. dollar’s dominant position in finance to force foreigners to do what it wants. Suggestions that corruption laws are not equally enforced will only further that suspicion. The fewer foreigners who rely on dollars, the less impact US sanctions will have, so it would be good if officials would consider that before implementing their policies.

MINDING THE TAX GAP

Readers old enough to remember the financial crisis of 2007-8 will also remember the wave of popular anger against tax-dodgers that followed it. American prosecutors investigated Swiss banks (good times!); protesters occupied branches of Starbucks (fun!); almost all countries agreed to exchange information with each other about their citizens’ tax affairs to uncover cheats (massive!).

According to the EU Tax Observatory, this information exchange has been a triumph, and cut wealthy people’s misuse of offshore trickery by two-thirds. I have always been a little suspicious of these declarations of victory, however, despite them coming from such a good source, and find grounds for my doubts in this new report from the UK’s National Audit Office.

British tax authorities every year estimate a tax gap – the difference between what the country’s exchequer should receive, and what it actually gets – and politicians regularly talk about reducing it. If the Trump administration seems uninterested in clamping down on tax evasion, and financial chicanery in general, the British government has pledged additional resources for technology and investigators to try to understand what’s happening and whether its tax gap estimate is close to being accurate, so we may learn more about this in future years. Fingers crossed.  

But the NAO report suggests that the way it’s calculated may be a bit questionable. According to the standard estimate, wealthy individuals pay around 1.9 billion pounds less than they should. But, according to a different estimate (“compliance yield”), the tax authorities have successfully brought in an extra 3 billion pounds from wealthy people that would not have been collected without their efforts.

It is a little hard to understand how it is possible to increase tax compliance by 1.1 billion more pounds than the entire deficit that wealthy people are supposedly underpaying. It’s like losing two pounds down the back of an armchair, reaching beneath the cushion and finding three. Except with billions. Something else is very definitely going on. “The large increase in compliance yield raises the possibility that underlying levels of non-compliance among the wealthy population were much greater than previously thought,” notes the NAO.

I am, I admit, someone who fixates on offshore skulduggery, but I can’t help noticing the report states that a mere five percent of the UK tax authorities’ investigative efforts were looking into “offshore non-compliance”. Tax advisers are clever, well-paid people, and they’ll know very well about the best places to hide their clients’ money, and there’s even a suggestion for them in the report: if your client holds wealth in properties abroad, or owns shares in her own name rather than through an institution, her home government will never know about her income she earns from them. Happy days.

A POSTER CITY FOR ILLICIT FINANCE

And speaking of offshore skullduggery. The city of Mariupol has long been central to the war in Ukraine. Enveloped early by Russian forces, its defenders held out for months in an epic battle in the ruins of the Azovstal steel plant, before surrendering in May 2022. Moscow has since made it the poster city for the supposedly prosperous future available in a Russia-ruled Ukraine, but a new report makes clear how hollow such claims are.

“Powerful Moscow-based networks are controlling much of the reconstruction programme. Well-connected companies are benefiting from Russian spending that involves the widespread use of illicit finance and corrupt practices,” note its authors, David Lewis and Olivia Allison. They have specific policy recommendations, of which I think the most important ones relate to my old bugbear of sanctions, which should be better targeted and more strategically deployed. Russia’s crimes in Ukraine include the looting and economic exploitation of cities like Mariupol. 

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

The post Making America corrupt again? appeared first on Coda Story.

I visited the Commonwealth of the Northern Mariana Islands a couple of years ago, intrigued by its curious bad luck in repeatedly being struck by massive gaming and money laundering scandals, like this one and this one. In case you’re not au fait with the CNMI, it’s a US territory north of Guam, which is best known as the place the Enola Gay and the Bockscar departed from on their way to drop atomic bombs on Hiroshima and Nagasaki.

It's also the current home of Jim Kingman, a Texan lawyer who was invited to the commonwealth in 2023 to act as special prosecutor in a baroque corruption scandal featuring former ex-Governor Ralph Torres, who had been acquitted along party lines in impeachment proceedings in the islands’ senate the year before.

A LESSON FROM SAIPAN

And for Kingman, it’s been basically downhill from there. His attempts to investigate, subpoena or prosecute have been frustrated at every turn by a local elite that’s decided it doesn’t really want him to make any progress. “Where are the feds? Where is the oversight? Where are the ethics committees? Where is the bar? What are we even doing out here?” he asked in a fed-up Facebook post, a year into the corruption trial, with almost no progress made.

With the change in government in Washington, DC, Kingman is clearly concerned about the future of his mission on the islands, and has given an interview to a local journalist who also described the sheer extent of obstruction that Kingman has faced. It’s a bitter read, but it has a defiant tone, a commitment to fighting corruption, that leaves an optimistic aftertaste.

“One promise that I can make is that I won’t quit,” Kingman said. “I can’t promise the desired results in a process I don’t have control over. There is a fundamental change that needs to happen to set up a more sustainable government and that will have to come from the people here. The forces that I have been facing have made it clear that these changes will not be received from an outsider.”

Kingman is just doing his job as a lawyer, but the reason I single him out is that he’s looking pretty unusual among American lawyers at the moment. Faced with hostile politicians, Kingman is choosing to fight. Far better paid, better networked and more powerful lawyers than him are choosing to take a different route and roll over when threatened. 

I’m glad Kingman is sticking to his principles, and wish him luck. If anyone hasn’t read about what Pakistani lawyers did over a decade ago to preserve judicial independence in the face of an interfering autocrat, I highly recommend this piece. Faced with far tougher circumstances than those confronting New York’s white-shoe firms, Pakistan’s lawyers and judges took their struggle to the streets and found that most people are sympathetic to the idea of an independent judiciary that can act as a constraint on a dictatorial, power-hungry executive.

SLOW PROGRESS

Of course, lawyers can take to the streets. But the authorities’ chronic neglect of offices that investigate and prosecute corruption and financial crime has critically hampered their effectiveness. 

The U.K. non-profit “Spotlight on Corruption” has produced a really useful dashboard to track how the British authorities have fared in their efforts against financial crime. Long story short – it’s been pretty bad. If anyone needed proof that underfunding investigative agencies for years and years was an ineffective way to tackle complex criminality, then here it is.

And more evidence has been provided by Transparency International UK’s Ben Cowdock who has produced a fascinating summary of the progress the British authorities are making in reforming its corporate registry. Long story short – it’s not going very quickly. 

With an assessment by the Financial Action Task Force (FATF) on the horizon, the “pressure is on to get Companies House reform right,” Cowdock notes. The FATF sets international standards for tackling money laundering and runs mutual assessments of its members on a regular timetable, and the UK is due to be assessed in December 2027. Before that, however, in February 2026, will be the assessment of the United States and there could be fireworks.

MADE EVEN SLOWER

Donald Trump has just pardoned a corporation for the first time. He decided to cancel the judgement against the founders of a crypto trading company that was fined $100 million last year. Authorities said the fine reflected the expectation that the digital assets industry “takes seriously its responsibilities in the regulated financial industry and its duties to develop and adhere to a culture of compliance.” But Trump appears to have given up on enforcing corporate transparency, which is a central pillar of the FATF’s approach to tackling illicit finance.

“What the getaway car is to a bank heist, the anonymous company often is to a fraud scheme,” said Transparency International U.S. in this useful factsheet of cases in which American shell companies have enabled fraud and financial crime. The Trump administration’s response to this has been to not only do nothing, but to stop what was already being done. There has not yet been a time when the American government has so egregiously flouted the FATF’s core principles. And the U.S. was central to crafting FATF back in the late 1980s, so we are drifting into uncharted and rocky waters. It's hard to imagine the FATF approving of what’s happening, and harder to imagine this White House reacting well to being criticised, so you’d hope the FATF is preparing for the fallout. 

If it is, however, it’s not showing any sign of being ready for battle. Its most recent publication is almost aggressively dull. And the latest public pronouncement from its president suggests that, while she might have some thoughts about the arrangement of the deckchairs, she’s not got much to say about the iceberg up ahead.

I am personally not a huge fan of the FATF, which has been very good at producing documents and very bad at stopping money laundering. In fact, I sometimes wonder if money laundering experts aren’t the modern day equivalent of the self-perpetuating lawyers lampooned by Charles Dickens in “Bleak House”. “The one great principle of the English law is,” Dickens wrote, “to make business for itself.” Still, we might find we’ll miss the FATF if it’s gone. 

AND FINALLY, WHAT IS A KLEPTOCRACY?

I was in Oxford last Thursday to chair an event for Professor John Heathershaw and Tom Mayne, two of the authors of Indulging Kleptocracy, a book about how British professionals have helped foreign thieves and crooks to steal, keep, protect and spend their fortunes. The week before I was in Washington and had lunch with Jodi Vittori, professor at Georgetown University, and author of this recent piece in Foreign Policy headlined “Is America a kleptocracy?”.

These are noted experts on kleptocracy, with lots of very interesting things to say, but they have different definitions of what the word means. In the U.K., Heathershaw and Mayne use it to describe the multinational networks that allow corrupt officials to steal money from places like Nigeria or Kazakhstan, launder it offshore, and spend it in London, the French Riviera or Miami. In the United States, however, Vittori and Casey Michel use it to describe a system of government (like a corrupt version of autocracy, democracy or any other -cracy).

I think these two definitions are the sign of something quite interesting. The United States has so much diversity in terms of how wealth is treated between individual states that crooks and thieves are able to build a kleptocracy within just one country. And the task just became easier, with a specialized team at the Justice Department investigating kleptocrats’ deals and assets now deemed unnecessary by the Trump administration. Not entirely surprisingly, the team’s investigations had irritated some of Trump’s closest advisors and allies.

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

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Last week I attended a crypto conference in Washington, D.C., and can report back that things are changing fast. New regulations look certain to come through in a hurry and – judging by the heinous quantity of lawyers in the venue – a lot of people are very serious about making a lot of money from them. This is, in my opinion, not good.

Crypto people complained bitterly under the Biden administration that regulators were treating them unfairly, by restricting their ability to do business. Many observers pointed out that crypto people were being regulated exactly the same way as everyone else, and that the reason they were struggling was that their product only makes money if it can break the rules, but the crypto people didn’t agree and responded by spending over $119 million on political donations before the 2024 elections.

MONEY WELL SPENT

The lobbying has paid off. Victorious (and well-funded) Republicans have responded to the crypto industry with a degree of enthusiasm that is positively overwhelming. Supposedly dead under the Biden administration, crypto has been brought back to rude health. “I'm so excited for all of us,” said House Majority Whip Tom Emmer. “This has been a long road to get here. We are on the precipice of actually making this happen. And guess what? That's only the beginning.”

He said Congressmen and senators were determined to get a bill onto President Trump’s desk by August that would regulate the stablecoin industry, thus providing the kind of legal certainty that would allow these “digital dollars” to explode even more dramatically than they already have. A lot of this will be overseen by the Office for the Comptroller of the Currency, which has already moved to scrap the cautious approach of the old days (i.e. last year).

“I’m creating a bright future for banks in America to use digital assets. Financial inclusion is the civil rights issue of our generation,” Rodney Hood, Acting Comptroller of the Currency, told a side session at the conference. “I have removed the sword of Damocles that was hanging over the head of the financial services industry.”

Millions of people lack bank accounts in the United States, and they are overwhelmingly the poorest members of society. Governments have failed to do enough to make sure everyone has access to financial services. And if crypto really could help vulnerable people access banking, then I’d be all for it, but I fear – certainly on the evidence of what I saw last week – it won’t.

Perhaps the most alarming discussion was that concerning World Liberty Financial, the Trump family’s own crypto firm. Donald Trump Jr., beamed in by videolink, appeared to be seated on what looked like a white throne. He loomed over the stage like a permatanned deity in an inadequately-buttoned shirt. He explained that he’d only realised the power of crypto after his father had come out as a Republican and the family had all been cancelled. “You put that little R next to your name,” he said, explaining the need for crypto. “And I sort of realized very quickly just how much discrimination there is in the ordinary financial markets.”

The other three founders of the firm, which was created last year, all took to the stage in person. Zachary Witkoff – the son of President Trump’s special envoy tasked with helping to negotiate a ceasefire in Ukraine – spells blockchain wrong on his LinkedIn bio, and got the dress code wrong by wearing a suit and neglecting to grow a beard. Zachary Folkman, who once ran a company called ‘Date Hotter Girls’, wore a bomber jacket and facial hair, which matched the mood more precisely. Chase Herro was the most hirsute and casual of the lot, in joggers and a white baseball cap, and he explained that they would be targeting ordinary Americans, with the aim of getting them to use crypto to buy ham sandwiches from a bodega, as well as aiming to transform the cross-border payments system with their own stablecoin – USD1. 

The idea that these four nepo man-babies would be given the keys to any kind of financial institution was alarming, but the prospect of them doing so under permissive new regulations and an administration headed by one of their dads, was terrifying. “So one of our biggest goals is to kind of bring everybody back together and realize that this is a free market and, like, let the free market dictate who survives and who doesn't, and who thrives and who doesn't,” said Herro. Trump’s sons, incidentally, have also just invested heavily in a bitcoin mining company. 

WELCOME BACK, ALL IS FORGIVEN

The pace at the conference was frenetic, and every other session seemed to have Congressmen and/or senators explaining how cryptocurrencies would do their bit to make America prosperous and grand. Even three Democrats held a side session called “keeping crypto non-partisan”. No one was listening, though, partly because all the lawyers were talking to each other in the hallway but mainly because the Republican chairs of the Senate and the House banking committees were on the main stage at the same time explaining how America would remain the world’s crypto capital. 

Crypto is Trump’s project now, and no one cares what the Democrats have to say. If you want to see how much the industry has embraced the president’s talking points, check out this comically politicized advert from the blockchain company Solana, home of the $Trump memecoin. Even on X, the backlash was so fierce that Solana had to delete it.

What does this mean for the rest of the world though? American politicians seem to have decided that cryptocurrencies – and, particularly, dollar-denominated stablecoins – are good for America, that they bring business to the country, and help find customers for the Treasury’s debt. Anything that gets in the way of crypto therefore is bad for America. With great power comes great opportunity, as Peter Parker’s Uncle Ben might have said if only he’d had more donations from a pro-crypto SuperPAC.

Bo Hines, the hatchet-faced head of Trump’s council of crypto advisers, said his message to any crypto people working offshore was: “welcome home”. 

As for Tom Emmer, even the prosecution of the founders of Tornado Cash – the software that, prosecutors say, allowed criminals including North Korean hackers to hide $1 billion of stolen wealth – was governmental overreach. “We need all that innovation, all those risk takers and creators in this country, that's what is the definition of success. From that you'll get that economic growth,” Emmer said.

There is a terrible irony that cryptocurrencies – an idea much of whose popularity stemmed from the public anger sparked by the deregulation and greed that caused the great financial crisis of 2007-2008 – are becoming a new nexus for deregulation and greed. And I worry about what the backlash will bring when this too collapses. And I worry about all the bad behaviour that will be enabled before the collapse happens.

As Corey Frayer, who served in the Securities and Exchange Commission under Joe Biden, once said: “Crypto is a machine where fraud and money laundering go in one side, and political donations come out the other end.” 

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

The post A crypto government for a crypto nation appeared first on Coda Story.

A striking characteristic of Russian officials has long been how they combine passionate opposition to all the West professes to stand for with a marked willingness to invest, live, educate their children, party, and litigate in the West. And that brings us to Dmitry Ovsyannikov (there’ll be more on the elaborate spelling of his name in a bit), who was appointed governor of the city of Sevastopol by Vladimir Putin in 2016.

Sevastopol is the largest city on the Crimean peninsula, and was stolen from Ukraine by Putin in 2014 on the grounds that it had once belonged to Russia. “It was only when Crimea ended up as part of a different country,” Putin told the State Duma over a decade ago as justification for the annexation of Crimea, part 1 of the full-scale invasion of Ukraine in 2022, “that Russia realised that it was not simply robbed, it was plundered.” Most Western countries do not accept this logic, and have tried to punish people involved, which is why Ovsyannikov was sanctioned by the European Union, the United States, and the United Kingdom.

WESTWARD BOUND

Ovsyannikov left Crimea in 2019 for a position in Moscow, but his political career came to an abrupt end after a scandal at a regional airport. He then did that thing Russian officials do and headed to Britain. In 2023, he moved into his brother’s house in London, where his wife and children were already living and attending private school.

Private schools, however, have to be paid for, and prosecutors say that arranging those payments was tantamount to circumventing the UK’s sanctions, so he was charged along with his wife and brother, and this month they went on trial. The alleged wrongdoing is fairly small-scale, but it’s an important test case. We have a few weeks to wait for an outcome, but there are some interesting points to draw out from it already.

The first is about spelling. If you’re trying to avoid notice as a Russian (or a representative of any other nation which uses a different alphabet to ours), it’s an entry-level stratagem to play around with transliteration. It’s noticeable that in the court documents, he uses a different version of his name -- Dmitrii Ovsiannikov – to that favoured by the Kremlin in the good old days, which is a switch between two common transliteration systems. His brother, meanwhile, spells his surname Owsjanikow, which uses yet another. I’m hoping there’s a third sibling, who’s gone all pre-revolutionary with Ovsiannikoff.

The second is about his citizenship. Ovsyannikov left Russia for Turkey in August 2022, which many Russians did after Putin invaded Ukraine, though admittedly most of them had not been senior officials in the occupying administration. He then applied for a British passport, which he obtained early the next year. 

Apparently Ovsyannikov’s father was born in Bradford, in the north of England, in 1950. How did a Yorkshire lad hook up with a Soviet lady at the height of the Cold War? Did their eyes meet over a discussion of production quotas? If there are any authors of “socialist realist romance” among my readers, this could be your time to shine. Ovsyannikov himself is 48, so he must have been born in 1976 or 1977. 

The third and most important thing about his case is whether he should still have been subject to sanctions at all. The U.K. may have continued to sanction Ovsyannikov, but in 2023 he challenged his EU designation and was removed from the bloc’s sanctions list on the grounds that he was no longer in a position of power or responsibility in Russia. Some may think that’s a weak reason, but I am inclined to think sanctions lists should be adapted if people have ceased the offending behaviour. Sanctions are a foreign policy tool, not a law enforcement instrument, and if the aim of the policy has been achieved, they should be cancelled. 

There are lots of oligarchs and officials who would be willing to do quite a lot to get off the sanctions list, much of which would severely inconvenience Putin. It may feel icky, but I think our governments should be open to such deals. The point of all this is to undermine the Kremlin after all.

AND IT’S STILL ALL ABOUT THE BENJAMINS

This is not to deny that it does indeed feel icky to see sanctioned individuals try and evade those sanctions to buy Mercedes SUVs, as Ovsyannikov did. He used his brother as a proxy to buy the car. It reminded me of company owners who nominate proxies offshore to hide the real ownership structure. Since 2016, companies in the U.K. have been obliged to name a “person of significant control”. The idea of the law was to stop people hiding behind opaque shell companies to commit financial crime, but is anyone enforcing it?

Apparently not, since lawyer Dan Neidle has been able to publish a map with the location of 65,000 foreign companies that own U.K. entities, none of which are declaring who is in control of their operations. You can search on the map yourself. There are five companies in the Falkland Islands, for example, and there’s even one in American Samoa: are these remote jurisdictions making late bids to become offshore tax havens?

Just as I was thinking about the efforts of Companies House to rein in fraud, I was still thinking about the use of cash money by launderers from last week. I was reading this article, and I was struck by the claim that the US aerospace sector is due to export $125 billion this year, making it the country’s second most successful exporting industry. 

In 2023, the Bureau of Engraving and Printing produced 1,326,976,000 $100 bills. That’s not all profit, because each bill costs 9.4 cents to print, and there’s some dispute about quite how many of those go abroad, but serious estimates range from 80 percent to 70 percent. Once you’ve done the sums, you end up with profits from $100-bill exports in 2023 of somewhere between $92.8 and $106.1 billion.

We don’t have the figures for 2024 yet, but the Federal Reserve said it would be ordering between $155.8 and $160.6 billion worth of $100 bills, which would yield profits of somewhere between $109.0 and $128.4 billion. 

Look at that number again: at the top end of the range, that would nudge aerospace into third place, and establish the $100-bill-printing industry as America’s second most successful exporter. Even at the bottom end, it would be fourth, ahead of brand name pharmaceutical manufacturing ($103.3 billion), and quite a lot bigger than natural gas liquid processing ($62.9 billion). Who says the public sector can’t contribute to the economy?

Before someone writes in: yes, I know that banknotes are technically loans made to a government, rather than products sold by the government. But it’s more fun this way, so I’m going with it.

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For the first time since comparable records began, there are fewer companies on the UK’s corporate registry. It’s a sign that anti-fraud reforms are beginning to show the first signs of a provisional impact. Companies House, as Britain’s corporate registry is known, has historically been dreadful – a “fraud fiesta”, in the words of the Dark Money Files podcast. Registering British companies was for years cheap, easy, and completely unverified, meaning they were the money launderers’ getaway vehicles of choice. 

A WELCOME FALL

After Russia’s full-scale invasion of Ukraine, and subsequent public concern about kleptocratic wealth infiltrating the UK, the government pledged to improve Companies House, including by giving it powers to check information, and obliging corporate directors to provide proof of identification. These are baby steps, but they’re already having results: “the companies register shrank during the period October to December 2024, for the first time since quarterly reporting began in the period April to June 2012”.

There were 5,408,707 companies on the register at the end of 2024, which was 19,879 fewer than at the end of September. That was a decline of 0.37 percent, so not a huge deal, though that did not deter some people. “COMPANY NUMBERS CRASH IN BUDGET FALLOUT,” shrieked the tiresome rightwing blog Guido Fawkes, which attempted to claim the falling numbers were because recent tax rises were scaring entrepreneurs away from starting businesses.

There is a strange belief among supposedly pro-business people that the easier it is to create a company, the more economic growth you will get. This is true, up to a point. But after that point, companies are so easy to obtain that they’re registered for the purposes of fraud, money laundering and corruption rather than honest enterprise, which will obviously impede rather than encourage business. 

So it is good that Companies House is finally trying to keep the more obvious malefactors from hiding their identities behind what anti-money laundering expert Graham Barrow calls burner companies. “None of these companies that were got rid of,” he told me, “were contributing anything.” 

Barrow runs a compliance firm called RiskAlert247, which trawls Companies House data in the quest for fraudulent firms with a programme called “Spider Sense”, which spots signs of dodgy behaviour. A mere five-minute demonstration was enough to convince me that the number of companies registered on Companies House has a long way to fall before it starts to reflect the actual quantity of legitimate firms in the country. There are hundreds of thousands of tax-dodging and fraud-enabling vehicles still on the registry although hopefully when new powers are brought in, they too will be winnowed out.

In the meantime, if you’d like a laugh, or simply to see how bad things were before the government got round to acting, look up “JOHN SMITH 3A LIMITED” – registered address 1 Any Road, Area, Anytown, United Kingdom, ZB2 2ZZ – on Companies House, and click on the “people” tab.

ANOTHER WELCOME FALL

The value of all the euro banknotes in circulation peaked in June 2022 at €1.60 trillion, and has been trending infinitesimally downwards ever since. In January this year, it was recorded at €1.57 trillion. This is as it should be: fewer people use cash for payments, therefore people take fewer banknotes out of banks, and so there are fewer banknotes in circulation.

What’s odd, however, is that – for decades – the opposite has been happening all over the Western world. The usage of cash has been in steep decline, but demand for banknotes has remained consistently strong. Although euro printing has begun to decline, it is only a recent phenomenon. The total of euro banknotes out there is still a lot higher than the trillion euros that were in circulation a decade ago. Central bankers call it a paradox, which is their way of saying they have no idea what’s going on.

While the value of euro notes in circulation has fallen, however slightly, the value of British pounds in circulation hit £90.5 billion in the first week of March, up more than three billion from last year, which was also an all-time high. And the value of cash dollars in circulation hit an all-time high of $2.36 trillion in January, which is twice as much as there was in January 2015, and that in turn was twice the total of January 2005. 

Ruth Judson seems to be the Federal Reserve analyst tasked with trying to work out who’s using all the dollars the Bureau of Engraving and Printing keeps churning out. Her latest paper estimates that more than half of them are circulating outside the United States. 

BUT IT’S STILL ALL ABOUT THE BENJAMINS

To me, the most interesting observation Judson makes is that demand for smaller denominations is declining, so the growth is overwhelmingly coming from people wanting more and more $100 bills. My personal theory is that, as money laundering rules have become more stringent, more criminals have turned to storing and moving their wealth in cash, and they naturally prefer to do that in large denominations, because you can get more value in a smaller space. It’s the criminal economy, stupid.

But why are they choosing to use $100 bills, rather than the even more valuable €200 or €100 banknotes? That is a bit of a mystery. Or a paradox, if you will.

Considering the destruction that the White House has wreaked on U.S. anti-corruption work, I should be pleased to see the announcement of tougher anti-money laundering measures. But I’m sorry to say I’m not. The Treasury Department has decided that money service businesses along the Mexican border must now report any currency transaction over $200 in a supposed action against cartels. This is catastrophically misguided. 

At the moment, all currency transactions over $10,000 have to be reported, and that is already producing a colossal deluge of paperwork. In 2023, Fincen received almost 21 million Currency Transaction Reports. Just imagine how many they’ll get now the threshold is $200, and the policy won’t even work at stopping the cartels.

According to the U.S. government’s own figures, Mexican cartels make $19-29 billion a year. They are NOT transferring these profits back home $200 a time via corner stores in Maverick County, Texas. Obviously. Even at the lower end of the estimate, that would involve more than quarter of a million money transfers every day, or more than 37,000 from each of the counties that the Treasury Department is imposing new measures on. 

If they actually wanted to stop the cartels, they should look instead into who’s taking all those $100 bills off their hands, since by their own estimates $25 billion is smuggled across the southern border in cash each year.

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

The post It’s the criminal economy, stupid appeared first on Coda Story.

It’s been a big few weeks for crypto. El Salvador, the world’s biggest state-level crypto enthusiast, has apparently reverse ferreted on its agreement with the International Monetary Fund to stop buying bitcoin. Meanwhile Tether, the world’s biggest stablecoin and favourite of the most tech-savvy money launderers, seems to have finally decided to enforce Western sanctions and block a Russian cryptocurrency exchange from accessing tens of millions of dollars in USDT holdings. And U.S. crypto folks are beginning to worry that perhaps Donald Trump was exaggerating/lying when he said, back in July, “I will immediately order the Treasury Department and other federal agencies to cease and desist”.

BUKELE’S BITCOIN BET

But first to El Salvador. News of the death of its bitcoin project appears to be exaggerated, with the country buying yet more of the cryptocurrency just days after agreeing a $1.4billion deal with the IMF that seeks to “confine government engagement in Bitcoin-related economic activities.” On X, El Salvador’s president, Nayib Bukele posted: “No, it’s not stopping. If it didn’t stop when the world ostracized us and most ‘bitcoiners’ abandoned us, it won’t stop now, and it won’t stop in the future.”​​

El Salvador has many problems – not least excessively high levels of debt and a sluggish economy – to which Bukele has presented Bitcoin as the answer, including by making it legal tender in 2021 and obliging merchants to accept it for payments. Under pressure from the IMF (which says Bitcoin’s “widespread adoption could threaten macroeconomic stability and raise fiscal risks”, without elaborating), the El Salvador government has cancelled those reforms. But Bukele’s latest tweets suggest he’s not given up on his plans.

I don’t think anyone outside the IMF is nostalgic for the days when the lender used to bully the countries of Central and South America. But I doubt the IMF will take Bukele’s taunting quietly, so we’ve presumably not heard the last of this.

Personally, given my interest in financial crime, I think Bitcoin is a bit of a sideshow. It’s clunky, it’s expensive to use, and it’s wildly volatile – all of which mean it’s great for speculation, but not much good as a money laundering tool. Tether, on the other hand, now that is something to keep an eye on.

TOO LITTLE TOO LATE?

“What El Salvador has achieved, thanks to President Bukele, is truly incredible and will be narrated in history books,” posted Tether’s CEO, the emollient Paolo Ardoino, after Bukele said he would keep buying bitcoin. Tether issues the world’s biggest stablecoin, which is a cryptocurrency that’s worth the same as a dollar, but doesn’t suffer from any of the restrictions imposed by the kind of squares who comply with anti-money laundering rules at banks. Tether, incidentally, relocated its headquarters to El Salvador in January, so technically Bukele’s government is responsible for regulating it (lol).

Unlike Bitcoin, Tether is cheap, easy to use and non-volatile, which is why it’s become a funding vehicle of choice for Hamas, Hezbollah, the gangsters of the Mekong region, Russian money launderers, North Korea apparently, and almost any other baddies you can mention. Also unlike Bitcoin, Tether is a centralised operation, meaning it can freeze its currency if it wants to. The fact that it so rarely did was either a mark of its commitment to financial inclusion, or a sign that it didn’t care about enabling rampant fraud. But it looks like it may be trying to clean up its act.

Because bombshell news: almost three years after the U.S. sanctioned Garantex, a Russian cryptocurrency exchange, Tether finally got around to freezing its digital wallets. Before we get too delighted about the stablecoin’s decision to cooperate (the EU having also sanctioned Garantex last month), this was the result of the US Secret Service – in cooperation with Germany and Finland – working to cripple the exchange’s infrastructure. Tether presumably had little choice but to do what it did. 

In the meantime, sophisticated obfuscatory skills have allowed Garantex to move $60 billion worth of crypto since the US imposed sanctions. Still, there will be many annoyed Russians who will now be on the lookout for an alternative exchange. “We have bad news,” as Garantex announced on Telegram, “Tether has entered the war against the Russian crypto market… Please note that all USDT held in Russian wallets is now under threat. As always, we are the first, but not the last.”

THE CRYPTOCRATS’ LAMENT

If Russians who use crypto are struggling with sanctions, American crypto investors are increasingly annoyed by the suspicion that still shrouds the industry. “None of the federal banking agencies have actually overturned any of the anti-crypto guidance,” said Caitlin Long, CEO of crypto-friendly Custodia Bank. “It is still presumed unsafe and unsound for a bank to touch a digital asset.”

Donald Trump won substantial backing from crypto folks in last year’s election, thanks to his promises to cancel what they felt was excessive regulation of their activities. “We can't live in a world where somebody starts a company that's a completely legal thing, and then they literally get sanctioned and embargoed by the United States government,” said Marc Andreessen on the Joe Rogan podcast in November. Remarkably self-pitying, considering Andreessen’s a tech billionaire,

He and his fellows complain about widespread debanking – by which they mean that banks are closing the accounts of crypto companies and/or their owners, because of concerns about money laundering – and the fact there is no appeal process against such decisions. Crypto industry leaders insist the practice is really driven by banks’ determination to smother a competing technology in the cradle, and has unfairly targeted right-wingers. Trump promised to end the practice, but in truth this is a complex issue, and Long’s comments suggest they’re losing patience with his failure to master it.

The Senate Banking Committee held a hearing on debanking last month, which featured three representatives of the crypto industry. But the witness who impressed me most was the Brookings Institution’s Aaron Klein who made it clear that the real victims of debanking are not crypto bros, but the kind of people without the money to effectively lobby President Trump.

“Approximately one in ten Black, Hispanic, and Native American households lack a bank account, about five times higher than for whites. Being unbanked is even more likely among those with a disability, with an unbanked rate above 11 percent,” said an excellent 15-page primer he submitted as evidence, which is well worth reading (it can be downloaded at the bottom of this page.)

The core of the issue is that banks face onerous regulations, worry about being fined, and therefore can’t see the value in providing accounts to clients who are more likely to cost them money than earn it. Yes, some of those clients work in crypto, but most are poor immigrants just trying to get ahead. (Check out quite how many of the FinCEN enforcement notices relate to convenience stores that cash cheques, rather than multi-billion-dollar money laundering schemes, and you’ll see what I mean.)

There is no easy fix to this, but the roots of the problem lie in the global rules against money laundering set by the Financial Action Task Force, which is currently holding a consultation on the issue. Should you have a lot of time on your hands, and an exceptionally high boredom threshold, you can read it. Perhaps you could send in an opinion too. Everyone has known about the problem for decades, and no one has ever been bothered to do anything about it before, but perhaps this time they will. Or perhaps they won’t. 

What we’re still waiting to learn is how the Trump administration intends to regulate crypto, or if it intends to regulate at all, given the investigations being dropped, last week’s crypto industry summit at the White House, and the mooted creation of a national cryptocurrency reserve.

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

The post Cryptocrats fear regulation will stymie a new crypto era appeared first on Coda Story.

An early definition of kleptocracy, given by Singaporean journalist-turned-politician Sinnathamby Rajaratnam in a speech in 1968, was that it is a "a society of the corrupt, for the corrupt, by the corrupt". It’s a neat formulation, with its echo of Abraham Lincoln’s most famous line from the Gettysburg Address. And I’m curious about how exactly a society can change from Lincoln’s dream to Rajaratnam’s nightmare.

The first bit to go is the last part of the phrase – “by the corrupt” – because winning elections is the easiest thing for crooks to achieve in a society with well-established institutions. It’s the other stuff that gives the crooks trouble. Once corrupt people are in government, the middle part of the phrase – “for the corrupt” – does not necessarily follow. If the institutions remain run by honest people, kleptocracy not only may not take root, but the corrupt politicians may be pushed out of office by the next election.

HOW KLEPTOCRACY TAKES ROOT

So something I’ve been keeping an eye on since Donald Trump’s inauguration is how the Securities and Exchange Commission  treats Justin Sun. In case you don’t remember him, Sun is a Chinese crypto billionaire who spent $6.2 million on a banana, then ate it.

In March 2023, the SEC charged Sun and eight celebrities (including Lindsay Lohan, which I was disappointed by, being a fan of both Mean Girls and The Parent Trap) with fraudulently promoting crypto tokens. “Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation,” said Gurbir Grewal, head of the SEC’s enforcement division at the time. “This is the very conduct that the federal securities laws were designed to protect against.”

Six of the celebrities agreed to pay up to settle the charges at the first opportunity, another did a few months later. But Sun was in no hurry, which may have been a sensible policy. Last week, lawyers for Sun and the SEC wrote to the Manhattan judge overseeing the case asking that it be put on hold, saying they’ll come back with a status report in two months’ time. Now, this may all be procedural and above board, but it also may not be.

By September 2024, Trump began to talk about a new crypto company he was launching called World Liberty Financial. It had the admittedly clever tagline: “Be DeFiant” (DeFi of course meaning decentralized finance, the term for digital peer-to-peer transactions). But Trump’s venture struggled to hit its fund-raising target until it found a cornerstone investor: Justin Sun, who put in $75 million.

“This guy,” said World Liberty co-founder Zak Folkman at a forum in Hong Kong last month, with a gesture towards Sun, who was sitting beside him, “saw that regardless of the outcome, this project is a monumental move forward for the entire crypto community.” It is not yet clear what if anything, besides fundraising, World Liberty actually does, but at the same event, Folkman – who once set up a company called ‘Date Hotter Girls LLC’ – said its success came despite there being “no special treatment to anybody who purchased the token."

Hmmm, about that. Now, it’s clearly not true that the Trump White House is going easy on crypto just because Sun gave Liberty Financial $75 million. The SEC has already dropped a case against Coinbase, and last summer Trump was already telling a crypto conference that “when we see the attacks on crypto, it's a part of a much larger pattern that's being carried out by the same left-wing fascists who weaponize government against any threat to their power.” 

Since his inauguration, Trump has issued an Executive Order promising to make the United States the “crypto capital of the planet.” Pausing the investigation into Sun could just be part of a general reluctance to enforce regulations or crackdown on crypto. And the cryptocurrency Sun founded was not named as part of the national crypto reserve mooted by Trump.  

But the Sun case didn’t ever really have anything to do with crypto as such anyway, and the SEC was always careful to make clear it was charging him for the way he marketed his token, not for the fact of it. “We’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” said Grewal.

So, from the point of view of people who don’t want the United States to tilt further towards Rajaratnam’s definition of a kleptocracy, it would be nice if the SEC maintained its case against Sun or else made very very very very clear that any decision to drop the case was in no way connected to the fact that he gave the US president’s company a nine-figure sum. It would also be nice if the Trump White House was prepared to promise action against some of the more egregious crypto frauds, but not many people are holding their breaths.

PROTECTING THE PRIVACY OF KLEPTOCRATS

On an unrelated note, it appears that Sun also shares the Trump White House’s, er, particular approach to which kinds of free speech should actually be free. Sun, reportedly, put pressure on a crypto trade publication to take down an article critical of his stunt with the banana. Spending six million dollars on a banana should, apparently, be above reproach. 

Talking of free speech and those who believe themselves to be above reproach: the authorities in the uber wealthy Swiss town of Cologny were not cool about the idea that some journalists might stage walking tours pointing out homes bought with the proceeds of some of the more egregious bits of financial crime enabled by folks nearby.

“The residential area perched above the lake is a popular refuge for certain kleptocrats, potentates and other financial pirates,” the event’s publicity announced, before it got cancelled because the local authorities wouldn’t give permission for it to go ahead. Which is to say: the world may be changing more quickly with each passing minute, but Switzerland isn’t.

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

The post Of the corrupt, for the corrupt, by the corrupt appeared first on Coda Story.

If you’d like to know how I came to write about financial crime, you can watch the keynote speech I gave at the Royal United Services Institute FinSec conference earlier this month. The short version is that I was radicalised by Ukraine. I used to write about other subjects, but the Maidan revolution of 2014, and the subsequent annexation of Crimea, revealed the true dynamics of the world to me in a way nothing had before. 

OLIGARCHS CAN’T HANDLE THE TRUTH

It was partly the revelation of how gross the fallen kleptocrats’ greed had been; it was partly the realisation of how complicit Western enablers had been in the corruption of these kleptocrats; it was partly how Russia’s bought-and-paid-for proxies used blatant lies as cover for its annexation of Ukrainian territory; and it was partly the way that corruption had crushed Ukraine’s ability to respond. Ultimately, it was the combination of all four factors working together that convinced me there was nothing more important to the future of democracy than bringing illicit finance under control.

This is why it was so appalling to see the president of the United States repeating the Kremlin’s lies about Ukraine last week. Corruption of truth plus corruption of morals plus corruption of money equals the destruction of democracy.

Now I’m not going to pretend I have any influence over supporters of Donald Trump. Let's face it, not many of them read this newsletter, and if they did, they wouldn’t listen to me anyway. But it has made me think about what needs to be done in response.

The core of Putin-style politics is what he understands winning an argument to look like. When his opponents are too scared, confused, exhausted, or dead to continue, he thinks he’s won. Sometimes he has: murdering anyone who disagreed with him in Chechnya, shattering an entire city, plus driving out hundreds of thousands of people, did indeed pacify that poor, beautiful place, though it did not work so well as a strategy in Syria.

But here’s why the truth is so troubling to oligarchs, and why Trump unleashed his inner troll when Zelensky said some anodyne but true things, because, no matter how loud you shout, no matter how many people you imprison or murder, two plus two always equals four. And “if that is granted, all else follows.”

SO LET’S CONFRONT THEM WITH THE TRUTH

No matter what the trolls say, actual free speech is not just about letting your opponents say what they like, but about creating structures in which everyone can speak, everyone can be heard, and everyone can agree that the point is to arrive at the truth, not to shout louder. A marketplace of ideas, like any marketplace, can’t function without fair regulations.

And if our rulers refuse to abide by those regulations – like Trump or Putin or, in the U.K., former Prime Minister Boris Johnson – then it is everyone’s duty to call them out. So, it was great to see that Josie Stewart, a British civil servant who lost her job for exposing falsehoods told by Johnson’s government about the withdrawal from Afghanistan in 2021, won a tribunal case for wrongful dismissal.

“We can’t have a system that says stay silent, no matter what you see, and forces dedicated public servants to choose between their conscience and their career,” she said. The usual boring people will claim she was part of the deep state or “the blob,” or whatever, but actually Stewart and people like her are a crucial safeguard against corruption.

Incidentally, in Wales, parliament is debating a new law that would mean politicians could lose their seats if they deliberately lie, which is an interesting idea.

LIKE THE TRUTH ABOUT THE DAMAGE BEING DONE BY MUSK

The good folks at Accountability Lab and Humentum have continued their work to assess the effect of Elon Musk’s decision to destroy USAID (all to save the equivalent of around three and a half days’ worth of the U.S. budget deficit). They have responses from 665 recipients of aid funding, and have broken down how much those organisations will lose and what it means.

The money was spread across many areas, but the largest group affected have been organisations that provided healthcare services, followed by those working in “governance” and “anti-corruption”, with the impact potentially catastrophic even for those who didn’t rely on USAID for all of their money.

Here’s another estimate: after one week of the freeze, almost a million women lost sexual health services; after a month, that figure will hit four million. After 90 days, the supposed length of the freeze, almost 12 million women and girls will be denied life-saving care. That means, if previous trends repeat themselves. 4.2 million women will become pregnant without wanting to, of whom 8,340 will die.

Clinics were one of the few places in rural Afghanistan where women could still work, but now that’s gone. “To be honest, it was one of the worst days of my life,” a midwife in rural Afghanistan told Service95. Imagine what other days an Afghan midwife has likely lived through, and marvel that somehow Elon Musk has managed to make it worse. The knock-on effects in terms of increased misery, increased corruption, and increased terrorism are impossible to calculate, and how any of it benefits the United States is a mystery to me.

WAITING OUT SANCTIONS

While the U.K. is talking tough on sanctions, it is unclear what the Trump administration means to do about the sanctions on Russia and its oligarchs as it continues to negotiate peace. I found this UK Financial Threat Assessment nerdily fascinating. Particularly for its description of some of the mechanisms used by sanctioned Russians to evade restrictions on the movement of their money. Take this choice sentence: “Neo-Bank fails to detect that the regular deposits it receives from Global Bank into the account of Seafarer Z are made by Manager Y, which is funded by Company X, and therefore indirectly by the (sanctioned individual).” 

The British government has promised to keep oligarchs with ties to the Kremlin out of the U.K., where they once bought their most expensive toys, including mansions, newspapers and football clubs. But the oligarchs are sitting tight. For instance, superyachts are expensive toys. And Roman Abramovich hasn’t moved his 162-metre monolith for three years. Mooring fees alone cost more than $200,000 a year. If oligarchs are prepared to go to all that trouble just to keep the crews of their yachts paid, what will they do to buy weapons?

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

The post Why the future of democracy depends on controlling illicit finance appeared first on Coda Story.

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.

The post Why the West is failing to fight corruption appeared first on Coda Story.