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How to avoid being ‘unexplained’

Written by Robert Barrington on Wednesday, 19 September 2018

Robert Barrington, Executive Director of Transparency International UK, delivered a speech recently at the annual Cambridge Symposium on Economic Crime.  The conference theme was ‘Unexplained Wealth – whose business?’ – an indication that the debate has moved a long way since TI first spoke on the then little-known subject of Unexplained Wealth Orders (UWOs) at the same event five years ago.  Below is a summary of his speech on ‘Explaining unexplained wealth’.

Reputation laundering is the more respectable twin sibling of money laundering: when you have made your money look legal, you want to make yourself and your family look like respectable global citizens, innovative business leaders and enlightened philanthropists.

The new global focus on unexplained wealth therefore goes hand in hand with reputation laundering.  If you can clean yourself up on Google and convince people that your country’s corrupt autocrats are guardians of democracy, suddenly it looks like you have got a lot less to explain.  Reputation laundering helps you not to be ‘unexplained’.

Like money laundering, this happens in a number of global centres, and so the UK is not alone – although like money laundering, we have a particularly sophisticated industry to help it happen.

In effect, explaining unexplained wealth is a new industry in the UK and other major centres.  Typical explanations are

  • The wealth comes from a legitimate business, legitimately obtained
  • This is money that I made before coming to power
  • The money belongs to someone else who does not need to explain their wealth – a family member, a shell company, a business associate: an explanation that is significantly helped by being able to hide the true identities of the beneficial owners of shell companies and other secretive structures.

These are difficult arguments to unpick given the lack of transparency both in countries of origin, and in places like the UK’s Overseas Territories and Crown Dependencies which actively promote themselves as jurisdictions where you can hide your identity.  For example, in a country with a highly corrupt government like Russia where there is also a largely state-controlled media, independent journalists and civil society are harassed, locked up and killed: do you assume that any wealthy oligarch is complicit with or supporting the government’s corruption; that any large wealth has been accumulated as a result of corruption; that the cleaner individuals have been allowed to keep their wealth by participating in a corrupt system; etc.?

Generally closeness to a corrupt government is a good starting point, as well as any actual evidence or allegations of you, your business and your family being corrupt.  But even before getting into those more complex cases, let’s not forget there is a lot of low hanging fruit: Transparency International has provided the UK authorities with a list of 150 UK properties worth £4.4 billion, compiled using information that is in the public domain, some or all of which could be the target of UWOs.

Just as hiding the source of your wealth is important, so is hiding allegations, your closeness to those who are corrupt, and ideally the fact that your cronies in positions of power are corrupt.  We recently published research on this, ‘In Whose Interest?’, which looked at how British parliamentarians are co-opted by corrupt foreign governments wanting to make themselves look good.  One case study was Azerbaijan, which ranks as 122 out of 180 countries on the Corruption Perceptions Index.  Our research discovered that there were 111 known visits by 71 different parliamentarians and their staff to Azerbaijan from 2007 to 2017, 84 per cent of which were paid for by the Government of Azerbaijan or other institutions and organisations connected to the regime; while 26 per cent of visits by parliamentarians were for unspecified purposes or as a ‘guest’ of Azeri state institutions.

When you want to clean up your image, there are a few services that are particularly helpful, and in which London excels.  A group of professional enablers are to hand.  The Bell Pottinger case in South Africa demonstrated how useful PR agencies can be (though here we must give a note of commendation to the trade body which instantly condemned the company’s behaviour once it became public).  Your PR agencies are backed up by law firms and accountants, and increasingly security firms who can do ‘reverse due diligence’ to find and hide any skeletons in the wardrobe. If required, there are lawyers readily to hand to intimidate or threaten to sue those who ask too many questions – including at times Transparency International.

And once you have protected the reputation of your country by schmoozing parliamentarians, got professionals to clean up your image, and suppressed those who raise their eyebrows, you can integrate into the global elite.  Again, the UK will offer you lots of opportunities: private schools and universities for your children, which exercise little or no AML checks; donations to museums and universities which can attach your name to a good cause; running your life out of a property in the right location, and generally moving in the right circles; maybe even buying iconic businesses or sports clubs.

Turning a blind eye is perhaps a very British form of corruption: deniable complicity rather than out and out theft.  Once the money has been laundered, all our museums, universities, private schools, politicians and listing authorities need to do is pretend they never knew.  But the result is the same: money sucked out of countries that badly need it, corrupt elites embedded in power, and consolidation of Britain’s global reputation for hypocrisy.

What can be done about this?  Reputation laundering is not against the law, unlike money laundering – although those – like schools and sellers of property and football clubs – who receive the laundered money are benefitting from the proceeds of corruption.  Here are five suggestions:

1. UWOs need proper enforcement -TI’s list of 150 properties worth £4.4 billion is a good starting point.  And let’s not forget that it is helpful if you can do your explaining behind closed doors, which means that – with appropriate safeguards – UWO cases and hearings need to be a whole lot more transparent.

2. Professional enablers are a recurring concern in money laundering and reputation laundering.  They need to self-regulate more effectively, or there needs to be external regulation.

3. Parliamentary standards: there is a pressing need for both of Parliament’s Commissioners for Standards to look thoroughly into Parliamentary conduct, including a review of the Codes of Conduct and the arrangements through which they are enforced. Asset registers are also needed – the UK Parliament, unlike many others, sets a bad example on this by only requiring declaration of income and not assets.

4. Accurate public registers: it has been a good first step for the UK to have a public register of beneficial ownership; now Companies House – and coming soon, the Overseas Territories – need to make sure the information is accurate.

5. Introduce criminal sanctions for turning a blind eye, just like the Bribery Act did.  The proposed new offence of failure to prevent economic crime could be a powerful deterrent and tool for detection.


Read 259 times Last modified on Wednesday, 19 September 2018 15:36

Robert Barrington

Robert is TI-UK's Executive Director. You can view his full bio here, and tweet him @TIukED.

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