American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History, with Casey Michel

Jan 25, 2022

Last October, millions of leaked documents known as the Pandora Papers exposed the shadowy financial structures global power players from politicians to billionaires use to hide money, move markets, and transform countries. Author Casey Michel delves deep into the underbelly of this global scheming in "American Kleptocracy." In this virtual event, Michel and "Doorstep" co-hosts Nikolas Gvosdev and Tatiana Serafin discuss corruption in the United States and its effects around the world.

NIKOLAS GVOSDEV: Good evening, everyone, and welcome to this edition of book talks with The Doorstep podcast. We are very pleased tonight to look at an issue that we often hear about but don't think about how it really reaches out and touches us at the local level. We are in a situation now with the crisis certainly in Ukraine where we are worried about tanks, missiles, and military action, but as we have seen throughout the world, corruption can just as easily be weaponized and be used to bring ill effects to people, and even to the United States.

We are very glad that you're able to join us this evening for our discussion with Casey Michel, author of American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History.

With that, let me turn it over to my co-host, Tatiana Serafin, to get us started by introducing our speaker and getting the conversation rolling.

TATIANA SERAFIN: Thank you, Nick, and welcome, Casey. We are so excited to have you to talk about—and you can see my very, very well-read copy of—American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History.

Casey, your investigative journalism skills I know took you so far because this book has so many details and so much information; but you wrote it during the pandemic, so I want to congratulate you (a) on the publication of this book and (b) on writing this during the pandemic, and really getting at the heart of an issue that we really want to talk about today. This is a quote that you mentioned, Oliver Bullough saying: "Kleptocracy is for the 21st century what fascism and communism were for much of the 20th."

For our audience can you define "kleptocracy," just start us out, so that people understand the massiveness when we are comparing this to communism and fascism?

CASEY MICHEL: Tatiana, thank you so much for that generous introduction. Obviously it is wonderful to be here with you and Nick today.

I do have to preface everything by extending my gratitude to my dear sweet wife, who put up with me writing this book during the pandemic in a small Brooklyn apartment; so, if nothing else, there is a reason that the book is dedicated to her as well.

Tatiana, that really is the crux of why I wrote this book in and of itself. Obviously I am speaking as an American to broadly American audiences and writing for especially American audiences themselves that maybe haven't realized what kinds of developments have taken place in the past few years, certainly in the past few decades, as it pertains to this topic of what I describe and others have begun describing as kleptocracy.

The root of the term itself is relatively explanatory: "klepto" meaning stealing or thieves and then "-cracy" as a suffix there, meaning "rule of." It literally means, "rule of thieves."

When we have used that term in the past, we have used it to describe certain regimes, certain governments, and certain dictatorships as kleptocracies—kleptocratic dictatorships or kleptocratic regimes elsewhere—and we still see that in the parlance of today.

We still see that used to describe certain regimes—certainly regimes like those in Moscow, regimes like those in in places like Tehran, Pyongyang, or Caracas in Venezuela—that have these elements of ruling elites, ruling regimes, their family members, related oligarchs—inner circles that appear to be dedicated to nothing more than pillaging from local populations, looting from state treasuries, from education budgets, health budgets, and infrastructure budgets—hospitals never get built, schools never get built, bridges never get built—that lead to, as we know, the hollowing out of domestic economies and broader destabilization, all of the elements that come with the brutality of modern dictatorships.

But when I am talking about kleptocracy—and obviously I and obviously I write this in the book itself—in the 21st century we are no longer talking about one regime; we are no longer talking about one government, one country, in one place; we are no longer talking about something that exists only in one location. When we are talking about modern kleptocracy we are talking about an international, transnational phenomenon that allows these figures—these dictators, these family members, these oligarchs, these inner circles, those that are pillaging those local populations—to then transfer that money, move that money, hide that money, and launder that money elsewhere.

When we are talking about modern kleptocracy we are talking about a transnational system of illicit, subterranean, and hidden financial networks that uses most especially a series of Western and, as I write in the book, especially American—financial secrecy vehicles, policy tools, and then beyond that American industries and American nationals, that enable the movement of this money to transfer across borders, to hide in other jurisdictions, away from the prying eyes of local populations, journalists, tax authorities, anybody who might want to be able to track that money.

Those funds are not just hidden, they are transformed. As we describe it, they are laundered into all range of assets—we can talk more about that in a minute—happening not in the jurisdiction of origin but in the jurisdiction that welcomes that money, that freely, legally hides that money, and then transforms that money into untraceable assets.

So again, when we are talking about kleptocracy, it is no longer something that happens in one country with one regime. It is now an international system, a transnational system, that incentivizes, entrenches, and protects all of this money, all of this as we estimate trillions of dollars. Again, when we're talking about the global offshore system, we are now talking about something that is $15 or $20 or maybe even $25 trillion dollars, something that is, according to the best estimates, comparable to the gross domestic product of China. This is an invisible superpower that is cycling the globe using and utilizing again these systems of financial secrecy to move, hide, and launder all of this money, and to do so freely and legally in Western jurisdictions, and especially right here in the United States.

TATIANA SERAFIN: I love that you mention the United States because for our audience—think of your questions, audience; we will be taking them in the second half—but I am going to get at this because this was probably the most shocking.

It has been reported in the press over the last few years to not much attention. Pandora Papers, Panama Papers, FinCEN Files maybe sounded as if they were just acronyms for some nice stuff going on: "I want to go to Panama—Pandora."

CASEY MICHEL: That sounds beautiful.

TATIANA SERAFIN: That sounds like a music system.

But really what are we talking about? The country most complicit, you write, in helping individuals hide their finances, according to the Tax Justice Network, is the United States. The United States creates, for example, millions of offshore companies, you write in your book, more than the top 40 offshore havens around the world.

I think for our American audience we need to realize how the United States has enabled this kleptocratic transnational system that you are describing. In your book you start detailing the beginnings in the 1970s in Delaware. You start in Delaware.

CASEY MICHEL: Absolutely. It's funny. One of the reviews of my book actually asked for more information about the history of the State of Delaware, more information about Delaware. I don't think I have ever had a request quite like that in the past.

Tatiana, just to back up a second. I think audiences are broadly familiar, if not with the granular detail, with the idea of offshore, offshoring, the offshore economy, etc. They may not have any idea of the breadth of it—again, we are talking about something that is equivalent to about 10 percent of global GDP, which would be an outright superpower unto itself.

But when we talk about offshoring we still tend to have this image of—again, as I write in the book—these traditional offshore havens, these traditional financial secrecy jurisdictions—places like, as you just mentioned, Panama, maybe Bermuda, maybe the Bahamas, the Cayman Islands, British Virgin Islands (BVIs), etc.—smaller jurisdictions that exist literally offshore, whether it is in the Caribbean, the Mediterranean, or the South Pacific. For years and years that was a perfectly fine model to have.

The problem is that that terminology is now outdated—or at least the implications of it are now outdated—for exactly the reason that you just laid out, because the United States of America, if for no other reason, the simple scale of size—to say nothing of the specific policies, industries, and beyond that American as we call them "enablers" profiting from this—is simply so much bigger than any of the Panamas or the Caymans or the BVIs or the Bermudas of the past.

I do want to couch this by saying—and again, I'm speaking as an American, I'm writing as an American journalist about the United States of America for especially American audiences that maybe don't realize this transformation has taken place—this broader transformation of the United States, bringing these offshoring services back onshore, bringing them back to the United States, in a certain sense is not an atypical transformation. It's something that we have seen similarly take place in, for instance, the United Kingdom, Canada, or Australia. Over the past two to three decades, the creation of certain policies that incentivize and entrench and protect these offshoring systems and bring them back onshore we have seen take place in other Western jurisdictions that we do not traditionally associate with offshoring. The issue is the United States is just bigger than the rest of them.

Beyond that, though, there is a different legal architecture, private property protections, and certain industries, especially the legal industry in the United States of America, creating and entrenching the kinds of systems that allow and incentivize all of this illicit, dirty, suspect wealth to come into the United States.

Tatiana, to your question about Delaware, yes, much of this transformation didn't take place overnight. This didn't happen just in the past few years. It didn't happen even in just the past decade. As I write about in the book, you really have to go back to the 1970s, especially the 1980s and early 1990s, when we had broadly geopolitically the end of the Cold War and the fall of the Soviet Union amidst broader decolonization and post-colonial regimes emerging elsewhere, and within that transformation you had these absolute geysers of suspect, illicit, brand-new wealth emerge and erupt, all of which was looking for a place to be kept secret and secure given the broader destabilization or instability of some of these regions and some of these regimes, and into the breach steps, of all places, Delaware, this tiny American state.

Speaking as an American, I don't really have any associations with Delaware. It was one of the original colonies and the first signatory to the Constitution, but beyond that I couldn't tell you much about the state or at least associations with the state. But that was actually an advantage for the State of Delaware because in the United States what we have is a federal polity, a federal country, and in the United States it is the states that have the sovereign oversight to create the kinds of financial secrecy tools that are required for modern kleptocratic networks to develop. Again, these are things like shell companies, anonymous trusts, and, as we have seen in recent years, other vehicles like anonymous foundations.

But what legislators in Delaware realized is that, because the State of Delaware had all of these sovereign rights to oversee the creation of things like anonymous shell companies, and beyond that it also had a distinct history of pro-corporate reforms and pro-corporate legal architecture, they no longer had to focus only on American clients and American consumers. What they could do in the 1980s and the 1990s was search out international clients, those emerging from places like Russia and Ukraine, those emerging in sub-Saharan Africa, and those emerging in Southeast Asia or South America, and effectively sell these really kind of magical black boxes to anyone who was looking to hide their money and to do so perfectly legally and incredibly quickly.

Again, if you have 15 minutes and you have a hundred dollars, you could have one of these anonymous Delaware shell companies just to yourself. They are perfectly easy. My editor did ask me at one point: "You're not writing the playbook for some of these kleptocrats to follow, right?"

I said, "Well, I hope not. I hope they don't need me, because it is insanely easy."

Tatiana, to make a long story short, Delaware led the charge. It was followed swiftly by a range of other states—Nevada and Wyoming on the shell company side, South Dakota on the anonymous trust side. Again, these are relatively small states. They don't have a lot of other natural resources or economic bases to look to. Instead, what they began providing were these anonymous financial secrecy vehicles for rising dictators, rising oligarchs, their family members, and their inner circles that were looking to get their money out of those source countries and hide it right here in the United States of America.

NIKOLAS GVOSDEV: One thing I am struck by as you describe this is Americans traditionally said: "Kleptocracy is something that happens 'over there.' It's in those other countries. We don't have kleptocracy in the United States."

What it sounds like is that we have essentially justified it by saying: "We're just selling services. What the people do with our services is not our concern. We're selling services, and who can object? We're bringing capital into our states, we're bringing real estate purchases." Certainly you see this in South Florida and you see it in New York with, as you said, these trusts that then buy real estate and other things.

Then people say: "Well, what's the harm? Americans are benefiting, American jobs are being created, consultants are being hired, media people get hired to improve the appearances of some of these figures," and so on and so forth.

To someone in the audience saying, "Okay, so they stole from someone in their country. Why is that of concern to me here? Why should I care if a Ukrainian or a Russian or a Chinese or a South African oligarch loots his or her own country because, after all, money is green?"

CASEY MICHEL: Exactly. Nick, that's great, in many ways the trillion-dollar question.

As I was writing the book, as I was certainly familiarizing myself with the policy developments, some of the stories, and the broader incentive structure for why this system developed in the first place, in a certain sense there is nothing surprising about it.

As we pull back to the 1980s, obviously there is a broader deregulatory ethos taking place that looks to create financial flows as easily as possible with as few questions as possible that are asked. Obviously at the end of the day, dirty money, clean money, it's all just financing, it's all just money, and if it's going into constructs, if it's going into jobs creation, if it's going into local economies, then who are we to look this kind of kleptocratic gift horse in the mouth?

There is really nothing surprising about it at the end of the day, or that it would be the smaller states that again have this overriding economic incentive because they don't have oil and gas extracts and they don't have broader manufacturing bases to really begin finalizing and formulizing these kinds of shell companies.

In another sense what I am writing about we have known about for years as well. I am very much standing on the shoulders of other journalists, other researchers, and other civil society organizations. I kind of reframed it, looking specifically at the United States, but I am thinking of other journalists—folks like Oliver Bullough, folks like Tom Burgis, even Catherine Belton, who wrote a wonderful book on the rise of Putin just a few years ago. We're looking at similar dynamics.

It's not surprising that these developments took place. What we have seen for years and years was exactly that: these questions of "we know this is happening, maybe we don't have all the details, we don't have all the ideas of some of these figures and some of these specific networks, but at the end of the day what does it matter to folks in south Florida; what does it matter to folks in New York or California or, for that matter, in Sydney or London?"

Obviously in 2016 we saw the Panama Papers finally burst forth and really begin revealing just how gargantuan this issue truly is, and some of the political figures and regimes that were connected to this—whether it was Putin in Moscow, the regime in Azerbaijan, those in Kazakhstan, those in Venezuela, and those in countries like Equatorial Guinea—that we finally began to really have an idea of how these webs developed and where that money had been going.

But even after that, certainly in the United States, there was kind of a shrug. Again, we know that these networks are developing and we know that this is happening, but what does it matter to the folks on the street?

It really wasn't until just last year, when we had the Pandora Papers come out, and again this is another release of significant details of these offshoring networks, that finally it drove home—and, Tatiana, maybe this is where we can begin talking about how this really affects those in Main Street America—and revealed how the United States especially had made this transformation.

This was things like American lawyers setting up these shell companies, crafting pro-offshoring policies, how they were able to work with any clients that they want, move their money, hide their money, and launder their money, really revealed some of the American services, and then, beyond that, some of the American best nations and jurisdictions.

Right around the same time there was a series of investigations that were coming out into a specific Ukrainian oligarch, a gentleman named Ihor Kolomoisky, who I write about in the book. Obviously the book has far more details, but what we know about that specific network—again, this is all just last year, this is all relatively recent—is that Kolomoisky, this Ukrainian oligarch, is kind of this traditional typology. He is originally in steel and gas; he ended up running the country's biggest retail bank; and then, beyond that, allegedly overseeing the country's biggest Ponzi scheme of $5.5 billion.

What he ended up doing with it was moving that money not into Manhattan high-rises, the South Florida real estate landscape, or places in Southern California. He ended up going, of all places, to Cleveland, Ohio. He ended up pouring hundreds and hundreds of millions of dollars of unaccounted foreign money, anonymous money, into small towns, steel towns, factory towns, and manufacturing plants across the American Midwest, across the Rust Belt, across the American heartland.

So again, to get back to your question, Nick, what does it matter to the folks on the ground? Well, what we have now begun seeing is that small-town America, Main Street America, is now a target for all of this illicit wealth pouring in.

But beyond that, it is not just that the money is coming in. What we now know from this one network, the Kolomoisky network—only one network among many, many, many more that we have no idea about—what ended up happening is that that money didn't come in for investment, it didn't come in for job creation, instead, it was part of this broader money-laundering carousel, where the money would come in on paper and would go out just as easily. No jobs are created, no revitalization comes, there is no investment.

What ended up happening is that those assets—those commercial real estate buildings, those steel plants, and those manufacturing plants—ended up beginning to crumble, sagging into effective oblivion. These are the economic crown jewels of so many different American regions—the steel plants, the manufacturing plants—whose best days were behind them. They thought they were getting all this brand-new revitalization coming in. It never happened.

What we have seen since is jobs that have been lost, physical damage not just to the plants themselves but to the American steelworkers and factory workers on the ground. These economic crown jewels that just needed a little bit of reinvestment have effectively imploded. Those jobs are not coming back. Those facilities are not coming back.

Again, this is blue-collar, small-town America. It is no longer just the major metropoles that have seen some of this money come in. Now we are only beginning to really see the kinds of physical costs, the kinds of devastation that are coming to small-town—and again, this is right here in the United States where this is taking place, but this is also happening in Canada, in Australia, in the United Kingdom, etc., etc.

TATIANA SERAFIN: I think your trajectory really follows how it spread from Delaware and then Nevada becoming another haven where you can create an offshore company in three seconds and then surprisingly, and I think this came out last year—well, I was certainly surprised—South Dakota, Wyoming, states that you might not normally even think about as offshore tax havens, are hiding assets.

I want to address your point, Nick. Yes it's money, but it's about America saying: "We are a democracy. We are all about transparency. We are all about freedom of the press. We are all about information." We're an information society. We want to know who is behind everything. I as a journalist want to look up—and I speak to your experience covering billionaires for Forbes magazine—I would look at some of the names of these shell companies and these fake directors and I couldn't figure out where the money was flowing.

It's hard, speaking as a journalist to another journalist. If you are studying a person and you are trying to figure out what they own and you don't know where it's coming from, where it's going, and who is behind that, I think in a democratic, transparent society with freedom of the press as its First Amendment right—I think, Nick, that is the difficulty in you saying, "Oh, but it's money, we're all making money." In America should this be happening?

You say in your book that it is legal and some people do use it for legitimate purposes. There is a question in the chat: "Don't Americans use it?" Yes.

We are talking here tonight about the illicit uses, about the kleptocratic uses.

CASEY MICHEL: Tatiana, a couple of quick responses to the person who asked that in the chat.

To your point, yes absolutely there are legitimate uses for this. I think maybe the most well-known example is a few decades ago, a half century at this point, the Walt Disney Company went down to Florida, wanted to purchase all the land in order to build Walt Disney World down there, and realized that they might set off some red flags and get some folks interested in price gouging. What they ended up doing was using some anonymous vehicles in order to secretly purchase all of these disparate plots of land, and then they were able to build Walt Disney World on top of that. In a certain sense, without that anonymity we wouldn't have the Magic Kingdom that is down there.

But there are all of these other illicit uses, illicit examples, we have already seen over and over and over again.

Tatiana, you are exactly right. It is no longer just the shell companies. Again, just last year with the Pandora Papers we saw that South Dakota has become one of the newest offshore havens in the world. The top-line estimate of offshored wealth in South Dakota alone is $900 billion, with no oversight, no idea of where that money is coming in from, who is using it, what it is being used for; and then, beyond that, obviously seeing the way that South Dakota legislators have incentivized the kind of legal architecture to pull in all of that money. You have white-collar lawyers, you have white-collar accountants, and white-collar financial managers who are profiting from all of those inflows and have every interest in seeing that money continue.

Tatiana, you also mentioned that the United States does pose as and does claim to be the leader in the democratic space, a leader in the anti-corruption space, a leader in the financially above-board space.

Again, as I write in the book, there are elements of that legacy and that leadership, at least in Washington, DC. The United States was the first country to criminalize bribing foreign officials, it was the first country to specifically identify money laundering as a crime, the first country to dedicate a task force out of the Department of Justice to specifically go after the fruits of modern kleptocracy.

But what we have been talking about today is that these things don't take place just in Washington, DC. We have this tension that exists in the United States, this federal/state tension, which allows states like Delaware, South Dakota, Nevada, Wyoming, and others to transform into offshore havens on their own while the federal government freely allows it and doesn't do anything about it because they don't have the kind of policies at play, they don't have the policies implemented, that would allow the federal government to oversee this, or to at least require some kind of transparency.

I don't know if we have the time to go into some of the details of the policy developments, but I did see one of the questioners ask about the banking sector. I want to touch on that for a moment.

The banking sector is actually one of the few clear success stories in this space. Again, it is a relative success story. It doesn't have nearly the funding or personnel to oversee all of the basic anti-money-laundering policies in the banking sector.

One of the most revealing elements of putting this book together was going back to the 1980s and 1990s. It was really the Wild West in the American banking sector. Anybody who had any money could just drag it in with duffel bags into an American bank and open an account and use that, or they could create a shell bank in other jurisdictions that existed only on paper, and American banks would be happy to work with them.

It wasn't until the attacks of September 11 and the revelations of how Islamist terrorists used and utilized American financial secrecy networks to bankroll, to fund, the attacks themselves that American legislators—in the Patriot Act, of all things—finally implemented even just basic oversight, basic anti-money-laundering requirements and regulations in the banking sector that really went a significant way to clean up that sector itself.

Banks now have to have internal anti-money-laundering policies. tThey can no longer work with the proceeds of foreign corruption. If they have a suspicion about a client, they have to file a Suspicious Activity Report. The record-keeping alone is light years from where it was before those reformations came in. And even beyond that, the Patriot Act required the same things of other American industries, industries like American real estate, American private equity and hedge funds, and American luxury goods providers, all of these other industries that had been profiting from the inflows of all of this illicit wealth.

This might spoil a little bit of the book, but there is a catch to that, in that a few months after the Patriot Act was actually passed, the Treasury Department issued a series of exemptions from those new anti-money-laundering requirements for real estate, private equity, hedge funds, and luxury goods. The Treasury Department said—and again I understand the logic of this—they were issuing these exemptions in order to "study the issue." They didn't want to throw the baby out with the bathwater and smother these industries with regulations. Again you see the line of logic to this: they just wanted to study the issue.

The Treasury Department said these would be temporary exemptions. It has been two decades and these exemptions are still in place. I don't know how they define "temporary"—that's certainly not how I would do it—but it's no surprise that after these new regulations were implemented in the American banking sector, it just so happened that American real estate, American private equity, hedge funds, luxury goods, the art market, auction houses—all this range of other industries suddenly began ballooning as sources of free, legal, and easy hiding and laundering of all of this illicit wealth racing into the United States of America, to say nothing of the continued free allowance of forming these anonymous financial secrecy vehicles in American states—Delaware, Nevada, Wyoming, etc.—that continued for years, and years and years, and only really in the last really 12 to 15 months have things begun to change right here in the United States.

TATIANA SERAFIN: Let's go to the last 12 to 15 months. Why do you think? Is it related to a certain regime change?

Here's how I feel, reading your book. I was like: Problem—oh, fix it, problem solved; and then, oh, no. It's like that dam you're trying to put your finger in and then another thing sprouts, because even with the banking regulations—Oh, you have to fill out this Suspicious Activity Report, but you can fill it out and then

CASEY MICHEL: Continue working.

TATIANA SERAFIN: it's done and you feel good about yourself.—"I filled it out."

There is no enforcement. Regulation without enforcement is meaningless. Has the enforcement aspect of all this changed in the last 12 to 15 months or are we still just talking?

CASEY MICHEL: The short answer is that the enforcement issue—insofar as we have seen increased funding, increased oversight, and the expansion of the kind of regulatory bodies that are required to combat these illicit financial networks and broader transnational money laundering—we haven't seen nearly the expansion that is required. We haven't seen nearly the funding or the personnel uptick and the implementation that is required.

The short answer to your question, Tatiana, is: No, unfortunately we haven't seen that yet. But I want to caveat that by pulling back a second and saying really the last 12 to 15 months have been absolutely unprecedented—at least over the last two decades, 25 years or so—in the United States of America as it pertains to at least realizing the threat of the issue, the magnitude of the issue, and then beyond that the kinds of policies that will be required to combat this.

I do want to just drop in, Tatiana, that you are exactly right. It does seem like it's two steps forward, one step back, one step to the side, and then maybe three steps forward, four steps back. It has been this very herky-jerky movement forward over the last two or three decades. The best analogy I have heard is that dirty money is like the gas in a balloon—you push on one side, and it is just going to move to the other; and if you are not pushing on both, you won't actually end up popping the balloon itself.

I'm sure I could take up the last 30 minutes talking about what we have seen in just the past year alone. The short answer to your question, Tatiana, is that: Yes, much of this lies at the feet of the previous president, who we had as the previous president, obviously President Trump himself, and the relationship of President Trump especially to—and again the book details this—one of the key industries profiting from the inflows of illicit wealth, that being American real estate, especially luxury real estate, and the kinds of figures, the kinds of forces, regimes, and political actors that took clear advantage of the ability to pour all manner of unchecked, untraceable, anonymous wealth into in this case Trump properties, that had effects on American policy that we will be continuing to learn about for years and years to come. That is in addition to everything else that we have seen pertaining to national security concerns, things like broader Russian interference efforts obviously in 2016, the usage and utility of these offshoring networks, these financial secrecy networks, to specifically target broader underpinnings of American democracy.

Again, there have been all these relative disparate elements—that really began building, especially in the United States over the past three, four, or five years—that once we had a new administration in place, we had the kind of audience in the White House, in the administration, the began implementing the kinds of playbooks that had been pushed for years and years.

Just over the past year alone, since January of 2021, on the very first day of January 2021, the United States of America finally, for the very first time in history, passed legislation that will ban the formation of anonymous shell companies in the United States. This was passed over President Trump's veto. He could have been the president to ban anonymous shell companies, but he elected not to. Again, when we are talking about American shell companies, this is the bedrock of American financial secrecy, as I write about in American Kleptocracy, and finally Congress passed legislation to ban it.

We will see what the actual language of that is. We are still working out the details, still working out the kinks. Obviously we are going to be looking for especially exemptions in this space, whether it pertains to the number of employees, whether it pertains to how easily these companies are set up, who is actually going to be monitoring this, who is going to be checking—because again we know, Tatiana, as you mentioned, we have issues of enforcement—but that simple fact alone, that finally Congress took the very basic step of banning anonymous shell companies, was huge.

That was followed obviously by the Biden administration coming in. A few months later, the Biden administration elevated corruption, especially international corruption, transnational corruption, to a national security threat, formally elevating it, formally placing it on par with things like nuclear weapons and terrorism.

Fast-forward a few months after that—actually it was just a few months ago—the Biden administration published for the very first time the United States of America's very first anti-corruption strategy. This didn't get a lot of play—the news is dominated by so many other things, not least of which is COVID-19 and the economy—but this was really a watershed document that I do want to pause on for a moment.

This is a 38-page document. It even took those of us working in the broader anti-corruption/counter-kleptocracy space really by surprise by how full-throated and detailed it was. It didn't hesitate to call out American industries. It didn't hesitate to call out the United States of America itself as one of, if not the, key actors allowing, incentivizing, and encouraging modern international corruption. It didn't hesitate to specifically identify American industries—real estate, art and auction houses, private equity, and luxury goods.

I have a quote here from the report itself. This is the White House talking about specific American industries, specific American professionals, who are "often sought by criminal organizations to facilitate their illicit activities." This is casting quite the aspersions on a whole range of American enabling professionals. Again, these are the real estate agents, lawyers, accountants, escrow agents, private equity managers, etc., etc.

You had Treasury Secretary Janet Yellen come out and say that there is a good argument "that the United States is now the best place to hide and launder ill-gotten gains." It's really remarkable.

And I know one of the commenters just mentioned that this is all taking place under a president who is from the State of Delaware. I don't want to defend any of President Biden's record as it pertains to his 36 years in the Senate—we still have all kinds of questions about his role in entrenching Delaware's positioning in this—but the fact that it is the president from Delaware who is doing this. The analogy is that it was President Nixon going to China—it took a specific kind of figure in order to bridge that gap and begin implementing those kinds of policies themselves.

To make a long story short, these are the kinds of developments we have seen just in the last 12 months. We have all kinds of questions about enforcement, about funding, and about follow-through and then beyond that exemptions, because we know how the story went 20 years ago. But the fact that we are now here—anonymous shell companies are banned, the president is elevating corruption to a national security threat, and specifically identifying the kinds of policies, loopholes, and industries that are required to change moving forward—is a really remarkable thing, and it has been a remarkable run just in the last year alone.

TATIANA SERAFIN: We are seeing some comments in the chat, and I encourage those of you on the call to please do put your questions in the chat. I am monitoring it, as are Casey and Nick, and we are trying to respond.

We have one here. You started to talk about what we can do. We have a question here from Alexander Zavalov: "What provisions do you think other governments, maybe in cooperation with the United States, can do to reduce kleptocracy?" Is there anything that can be done on a transnational level? I am extending your question, Alexander.

CASEY MICHEL: One comment that comes to mind is that, in conversations with American officials and in conversations with American policymakers, one thing that foreign or non-American counterparts can do I would recommend moving forward—not that this hasn't happened already, and certainly we have had plenty of conversations with foreign nationals where they said this has taken place—is simply reminding American officials and American policymakers that the United States of America has been creating and sympathizing in allowing the inflow of so much illicit wealth.

Again, speaking as an American, speaking for American audiences, and writing a book about the United States, still so many Americans have no idea that this transformation has taken place, that things like American real estate, American private equity, and American luxury goods have become the destination for so much of this illicit wealth. So, if nothing else, simply reminding American counterparts that they may be due a bit more humility as it pertains to policies and concerns about international corruption.

As I just mentioned, things in Washington are clearly changing. I actually forgot to mention on the legislative side we had the formation of the Counter-Kleptocracy Caucus just last summer, which has been launching bill after bill after bill pertaining to loopholes, exemptions, and new policies moving forward in the United States of America and, remarkably, doing so on a bipartisan basis. I am not going to say that the anti-money laundering space is the last bastion of bipartisanship in the United States, but it certainly feels that way from time to time, and I suppose certainly the longer that can remain the case we are the better for it. We need all the help that we can get in this space.

I would say one thing to look forward to on the foreign counterpart side is don't be surprised if, in the not-too-distant future, American policymakers, American investigators, and American authorities are increasingly interested in tracking and tracing the sources of and the networks behind foreign corruption, because again what we have seen out of Washington is this momentous and magnitude-different interest in combatting, countering, and unearthing transnational corrupt financial networks, these kinds of kleptocratic networks we have seen develop over the past few years.

To repeat myself from the comment a moment ago, it really has been a tidal change in Washington in just the last year alone, so don't be surprised if there is increasing interest from American interlocutors and American partners in this space in conversations moving forward.

Hopefully that answered the question.

TATIANA SERAFIN: We have a bunch coming in.

One from James Cottrell is interesting. He is at an international fraud asset recovery conference this week. What message should he relay to this multinational stakeholder group?

CASEY MICHEL: I'm sorry I'm not at that conference. It sounds wonderful. Hopefully I will be able to make it to the next one, James. I suppose in a certain sense exactly that: Don't be surprised if there is more.

Well, let me back up a second. I would say that there is far more fertile ground now for those who work in the asset recovery space to find sympathetic partners and sympathetic ears in Washington—and not Washington alone, also in London, Ottawa, Canberra, and in national governments across the broader West that are beginning to realize—and again, this hasn't been just an American transformation. This has been a broader Western and a broader democratic transformation taking place in these countries, in these jurisdictions that are nominally broadly clean and that are nominally broadly anti-corrupt, but they have nonetheless transformed into key partners and key nodes in these transnational financial networks.

I do think that there is absolutely going to be increased interest in asset recovery and there is going to be increased funding in and personnel surrounding asset recovery.

I think at the end of the day it is worth remembering that asset recovery is not a panacea and is not the solution to end all solutions—it has to be part of a far broader package of reforms and solutions themselves—but, as we have seen, asset recovery is absolutely a key prong of this broader playbook.

I will say that I don't know that there is greater domestic support in these source countries—the Ukraines, the Kazakhstans, and the Venezuelas of the world—but it is difficult to think of a greater pillar of support or outpouring of support after certain assets are seized that had been linked to these oligarchic figures or the regime or their family members.

There are a few things that are especially exciting and gratifying for those populations on the ground. One is specific targeted sanctions against some of these kleptocratic figures, but the other is absolutely asset seizures. We don't have to talk about all the questions about "how do you actually return those assets"—that's a conversation for another time—but don't be surprised if that space opens up and continues opening up in the future.

NIKOLAS GVOSDEV: Listening to this discussion got me thinking a bit about not only the change of administration but perhaps also the change of perspective.

Just to draw the parallel with 9/11, prior to 9/11 the U.S. national security community saw terrorism as a law enforcement problem that should be handled by the Federal Bureau of Investigation and the Department of Justice, and then there was the realization that this is a national security issue.

When you are talking about these networks I can see the national security connections because it's all fun and games if it's about a kleptocrat who wants to buy—how many yachts can he waterski behind?—but these same networks do allow for determined adversaries to influence, to kind of worm their way into the U.S. system.

You talked a bit about recovery of assets. I know that a big thing that the Biden administration has identified is that democracies have to show that they are better at meeting the needs of their people.

But what are we seeing in this coming year? We are seeing a son of Qaddafi in Libya and a son of Marcos in the Philippines going to run for office, and it raises the question of how they are bankrolling their activities. They laid low, but the Swiss bank accounts and shell companies, with then their penetration into the United States, and then of course their ability to buy or rent or lease people here, especially even up to in Washington, would put all of this together.

You mentioned that for the first time the Biden administration raised this to the level of a national security threat. When you get someone saying, "We don't want to pass these laws in South Dakota because we benefit," but saying it's a national security threat—do you think that will change the conversation?

CASEY MICHEL: I certainly think in the American example especially—and again, part of a broader global phenomenon in Canada, Australia, the United Kingdom, etc.—especially for American legislators the national security angle is one of, if not the, key elements of not only the discourse around why we should care about offshoring and financial secrecy networks, but one of the key motivators for pushing all of the successful policy implementations we have seen already.

Nick, as you just mentioned, obviously the national security concerns 20 years ago played a significant role in obviously the response to things like the September 11 attacks, but it has had very clear increasing salience in the United States of America as it pertains to getting legislators on both sides of the aisle onboard with some of these reforms.

I know you just mentioned South Dakota as an example a moment ago. I have said this before and I say this in the book, it is very clear that it is not going to be the Delawares and the South Dakotas and the Wyomings that are going to be leading these reforms. These state legislatures, these state governments, have become effectively captured by these financial services industries.

South Dakota, for instance, has a dedicated task force overseen by the South Dakota governor that brings together South Dakota legislators and those that are in South Dakota—particularly the trust industry again, these anonymous trust vehicles, these anonymous financial secrecy vehicles—for the trust industry to specifically recommend changes and elements that could be strengthened to protect all of that financial secrecy in South Dakota.

The solution is going to come—fortunately or unfortunately, depending on your perspective—from the federal government. The states have shown themselves as clearly actors that are incapable of changing their own trajectories and directions.

But yes, at the end of the day, if nothing else, all the reasons and rationale aside, the national security angle is going to carry significant water for American policymakers, and frankly for American audiences as well, as it pertains to pushing these reforms moving forward.

Not to say that there aren't any number of other reasons—broader democratic considerations, broader concerns about things like wealth inequality, obviously as we mentioned earlier, concerns about just basic investments and basic economic opportunities in small-town Main Street America but I don't want to downplay the potential for national security as the kind of cudgel moving forward.

I know we only have maybe ten or fifteen minutes remaining, but I do want to pause on that just a moment. As we are talking right now, Europe is facing the potential for the very first significant land war that we have seen since World War II, in nearly a century, 80 years' time. We may very well likely see in the coming weeks one of the greatest security concerns the world has seen in a century, so much of that tied directly to the kinds of financial secrecy networks that oligarchic forces, that dictatorial forces, in places like Moscow, in places like Kyiv, across the broader post-Soviet region, have been partaking in and have been using to loot their populations, move that money elsewhere, move that money into the United States of America, and in so doing not only hide their finances, not only use those finances to entrench their regimes, but do so in order to—as you just mentioned, Nick—access policymakers, access corrupt politicians elsewhere to do their bidding, and then beyond that lead to broader destabilization in the region.

I may have a story coming out actually later this week that concerns questions about the North Atlantic Treaty Organization (NATO) expansion, U.S. militarism, and the faults of the United States of America in encouraging or incentivizing this pending Russian invasion of Ukraine.

I do think there are kernels of truth—certainly most of the blame lies in Moscow at this point—but there is very clear culpability as it pertains to the financial side, the offshoring side, the kleptocratic side, when it comes to the United States of America, when it comes to the broader West, because this is where the Ukrainian and Russian oligarchs, their family members, and those regimes have been moving, hiding, and parking their money away from those populations in Russia and Ukraine that again have seen their hospitals not built, their schools not built, and their basic infrastructure needs not met. There is a very clear throughline from the world of offshoring and transnational illicit finance and the West's culpability therein to what we are seeing right now vis-à-vis Russia and Ukraine.

TATIANA SERAFIN: We are not going to be able to get to all of the questions in the chat. This is such a great conversation, and I could talk more about Ukraine.

I don't even know where to start here with the questions. I can maybe combine a few are talking about: What can we do now? What can we do next? Have regulators been overwhelmed by just the volume of things happening? We have questions coming in: Is it just too overwhelming? We know it's happening. We know this is happening, now we get it, we know this is happening, but can we even deal with it if we don't feel it? How can we bring this home? What can we do?

CASEY MICHEL: Tatiana, that's obviously a great question.

I think what you just mentioned, we do recognize the issue now, at least in the United States—there are still questions about things like British and Canadian partners and where they are—but certainly in the United States it is very clear, especially over the last year, that the United States gets it, that Washington understands, that certainly the administration as well as Congress have finally recognized the central role of the United States in fostering these networks.

Now the question is: Okay, what the hell do we do about it? Yes, we have passed legislation banning anonymous shell companies—that's great—but we still haven't done anything about anonymous trusts, we haven't done anything about the role of American lawyers, we haven't done anything about the role of American accountants or the role of American real estate agents. There are so many dominoes that still have to fall.

Again, the White House's anti-corruption strategy document I mentioned just a moment go does talk about these industries and it talks about the proposals for these policies, but what those policies actually look like still remains to be seen.

And then, beyond that, what we do know from the example of the banking sector is that even though it can and should be considered a broad success story, when it comes to actually financing and when it comes to actually beefing up and staffing up the personnel to oversee this, we are still not there even 20 years after that legislation.

What is that going to require? What is that going to actually entail? It is going to obviously require from the United States of America parallel efforts out of the Executive Branch and out of the Legislative Branch. It is going to require increased prosecutions of and increased enforcement of these industries, these policies, the ending of all of these loopholes that we have already detailed today.

It's kind of a broad answer to your question, Tatiana.

We do know what the playbook entails. It is the end of these forms of anonymity, it is the end of this ease of allowance of inflows of all manner of illicit, suspect wealth, no questions asked, with all of these American industries profiting thereafter. We have to end those systems and end those loopholes, and we now have a government that recognizes that, but we still have not begun implementing it. We know what we need to do, we are very close to the finish line, but we need to get those policies implemented, and then beyond that we actually have to have follow-through.

Tatiana, that might not have been the most original or creative answer to that, but I think you are exactly right. We now know what the problem is and we know what that follow-through is going to require, because again at the end of the day dirty money is always going to be looking for a home; and if we are not vigilant, if we don't have the kind of policies in place, or if we're not enforcing them, they are just going to come right back in and we are going to have to be dealing with these issues for years and years to come, and our grandkids will be having the same conversations decades from now.

TATIANA SERAFIN: I want to also reiterate that this does hit on a local level. We mentioned in our talk today—and you have other examples in the book—Cleveland and the Motorola plant purchased and left to rot basically, and in some cases where there was no money invested in safety equipment workers were actually hurt. These were American workers, union members, and because there was no trace back to who actually owned the property, nobody was held responsible and accountable.

In addition to this regulation and oversight, there is this accountability. It's not just asset recovery, but also trying to hold the Kolomoiskys of the world accountable for the damage they have done at the local level I think has to be part of the solution.

There are lots of comments in the chat about things that are going wrong and how can we fix it; but I think, as we say a lot, it starts at the local level, it starts by opening your eyes at the local level.

CASEY MICHEL: Tatiana, there are maybe two broader points that, if nothing else, I would love listeners to take from this talk, and obviously the book itself.

One is that corruption is no longer something that just happens "over there." Kleptocracy as we traditionally understood it is no longer something that simply happens in one country, one region, one jurisdiction somewhere far away.

Because of what we have in the 21st century, the kinds of technologies and policies, that corruption comes home. That corruption crosses borders and crosses oceans. It affects those of us right here in the United States of America. So when we are talking about things like Ukrainian, Russian, Chinese, or Venezuelan corruption it is not something that happens in those countries, it is something that is going to find a way into the United States of America, and again because of the policies that we have talked about.

Beyond that, the second point is that when we are talking about modern international money-laundering networks, I do think a lot of us still envision yachts off of Southern California or these beautiful mega-mansions in South Florida or places in Manhattan—and yes, that still exists, that still happens, and that's where a lot of the money still ends up.

But, to your point, Tatiana, now we are talking about places like Cleveland, Ohio, where this Ukrainian oligarch was the biggest landlord in downtown Cleveland, of all places—I still can't get over that—to say nothing of all of his investments in all of these small towns in West Virginia, Kentucky, Illinois, and Texas, all these places we would never imagine.

Again, it is not just that the money is there, it is that that money is moving into and through these facilities that never see the promised revitalization, the promised jobs creation, which end up falling apart and decimating local communities, to say nothing of the actual physical damage, the bones that are broken and the skin that is scalded from steelworkers and factory workers, these traditional blue-collar jobs in small-town America.

It is very much almost a stereotype, but that is exactly what is now happening. It's not just this isolated pocket, this jurisdiction—you know: "This corruption happens over there, or if it comes into the United States, it is in New York, Florida, or California"—it is across the country because that is how the incentive structure exists. There is no reason for these oligarchs, regimes, dictators, these kleptocrats, arms traffickers, narco traffickers, etc., to go anywhere else.

TATIANA SERAFIN: We can't get to all of the questions in the chat. There are questions about narco traffickers, questions about Venezuela, cryptocurrency. We will save all of your questions and maybe be able to answer them on our Twitter handle @doorsteppodcast.

One of the last ones maybe you can take 60 seconds to answer is the idea that money is also flowing into Congress. You mention in the book the Firtash Model. We don't have time to talk about it, but it's this idea that money does flow to lobbyists who then lobby for specific things.

CASEY MICHEL: This might be a subject for a follow-up book. I don't need to explain concerns about financial secrecy and anonymous donations to legislators both at the federal as well as the state level and all of the kinds of allowances and policies therein, but there is no reason to think that this illicit, foreign-generated, oligarchic-generated wealth isn't also flowing to legislators, to political parties, to other American bodies whether in Washington or across states. This is in many ways unfortunately kind of the tip of the iceberg.

I know I wanted to end on a hopeful note, Tatiana, but I don't know if I will be able to shoehorn that in. There is reason for hope, but this is a massive issue that we are only just beginning to deal with in the United States. And yes, financing of officials in the United States is absolutely a concern moving forward.

TATIANA SERAFIN: Thank you again so much, Casey.

Casey Michel, American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History. It's a great book, great read. I encourage all of you here today to read it, tell your friends, talk to us @doorsteppodcast.

We will send your questions over to Casey, and I am sure also his Twitter handle is very active. Follow him on Twitter as well.

Thank you, everyone, for your time today. Thank you, Nick, and thank you, Casey.


CASEY MICHEL: Thanks, Nick, thanks, Tatiana, thanks, everyone.

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