The End of Putin’s Era? Former Russian PM’s War Analysis

CHRISTIANE AMANPOUR: Now, Russia’s unprovoked war is making many western democracies rethink their alliance on Putin’s natural resources, especially energy. But expert Frank Vogl says that when it comes to financial corruption Russia is the tip of the iceberg. His new book is called “The Enablers: How the West Supports Kleptocrats and Corruption – Endangering our Democracy.” And he walks Michel Martin through the urgent need to radically reform global financial systems.

(BEGIN VIDEO CLIP)

MICHEL MARTIN, CONTRIBUTOR: Thanks, Christiane. Frank Vogl, thank you so much for joining us.

FRANK, VOGL, AUTHOR, “THE ENABLERS” AND TRANSPARENCY INTERNATIONAL CO- FOUNDER: Thank you for having me.

MARTIN: You know, in the wake of the Russian invasion of Ukraine, a lot of people have been writing about and reporting on the problem of the Russian oligarchs, people who derive their fortunes from proximity to the Russian president and in turn, you know, funnel money to him, hide money for him and are agents of his agenda. But your work stands out because you take it a step further. You say this isn’t a Russia problem, this is a worldwide problem. How big of a problem is this?

VOGL: It’s an enormous problem that directly challenges our security and our democracy. We are talking about elicit financial flows. That’s dirty money. Money stolen from citizens of maybe $2 trillion a year that goes from all manner of dictatorships and the cronies of dictators, into investments in the West. Maybe 600 billion of that comes just to the United States. And if we want to understand that, that is more than the sales every year of Walmart, the world’s biggest retailer. So, in money terms, it’s enormous. In political terms, in terms of our democracy and security, that’s where the problem really lies, and that is absolutely of enormous concern to everybody.

MARTIN: The title of your latest book is “The Enablers: How the West Supports Kleptocrats and Corruption – Endangering our Democracy. So, I want to focus on that. You say this is not just a worldwide problem, affecting countries far beyond Russia. And, you know, individuals who are basically stealing the wealth of their country for their own purposes, but the West is actually enabling this. How so? How does it work?

VOGL: At a big picture level, western governments have been far too tolerant of the corruption in the kleptocracies, in the autocracies of the world. Often, we have been more interested in selling commercial goods and economic ties, and putting anticorruption really on one side. The result is that the co-conspirators of Vladimir Putin to just use the Russian example, these are the oligarchs, they really are beholden to him. He could put them in jail tomorrow if he liked. Rather they do him favors, he does them favors, and they have entrenched themselves incredibly in western countries. And we have permitted it. So, we have a certain complicity at a general level. And then, you get down to the money itself. When you steal as much money as Putin and his cronies, these oligarchs steal, you don’t want to keep that money in Russia, just in case Putin moves his power and the next government comes in and wants to confiscate the cash. So, you want to disburse that money into solid and secret investments around the world. And to do that, you need lawyers, you need bankers, financial accountants, you need art dealers, you need property agents based on Wall Street, in Miami, in London, in Zurich, in the world financial centers. These are the enablers. These are the people who aid and abet the money laundering schemes that now finally, finally western governments are starting to look at really seriously.

MARTIN: I’m wondering, what is your take on why western governments were so slow to act or even acknowledge that this was happening? Obviously, there are certain cities, right, hot realistic markets where this is visible. I mean, you see people basically hoarding real estate, maybe they occupy these properties two weeks out of the year, and people who live in these places say, wait a minute, you know, first grade teachers don’t have a place to live, but somehow you got whole apartment blocks which are sitting empty because, you know, people have kind of bought up and bid up the price of all of these properties. So, why have western governments been so slow to even acknowledge that this is happening, even if some governments, you know, make a point of giving speeches every now and again, denying, you know, decrying corruption, decrying, you know, the extreme inequality in these countries, but this money is sitting under their noses, right? So, why have they been so slow to react to it?

VOGL: Two reasons. The first reason, the oligarchs and their money and not just the Russians, we’re talking about the same sort of tycoons from many countries, Nigeria, Brazil, South Africa, Egypt, and, of course, all of the former Soviet Union countries. They have been very, very good at ingratiating themselves in the networks, the political networks that we should all be concerned about. Victor Vekselberg, one of the oligarchs, very close to Putin, attended Donald Trump’s inauguration. Vladimir Potanin, perhaps the richest man in Russia was on the board of Guggenheim Museum, and gave a very nice grant to the Kennedy Center for a Russian lounge, which they now suddenly renamed to the Circle Lounge. They have used charity. They have used public relations firms to whitewash their reputations. They have done a great job there. But in addition, perhaps more importantly, the enablers who I talked about, these lawyers and bankers, real estate people, they’re very, very politically networked as well. They have lobbied very successfully to keep the rules and the laws that govern this kind of activity to a minimum. And so, we have laws today that do not allow the U.S. government to fully discover even where the assets of most of these oligarchs actually are because there is no law that says that a real estate company has to do due diligence on its clients when it gets money from a holding company that supposedly wants to buy a property. They don’t even know who the real owner is, and nobody asks because the cash is so attractive. Cash has won time and time again, and we have put our democracy and security at huge risk as a result.

MARTIN: How is this a problem for western countries that haven’t established democratic tradition? Because you say that it is. You say this is a problem for the West. This has a corrosive effect on the West, how so?

VOGL: Two ways. First of all, it’s the direct intervention of the kleptocrats in trying to undermine our elections. If you think, for example, of Mr. Prigozhin, he is one of Putin’s buddies. He finances a group called the Wagner Group, which is a very, very nasty military group. But he also financed the intelligence operations that the Russians launched in 2016 during the elections to undermine our elections. And he was at it again in 2018. That kind of direct intervention — and by the way, it happened in the German elections just last year as well. It may have happened in the Brexit votes in Britain as well. That kind of intervention by the oligarchs at the orders of Putin, directly hits our democracy. But there is a much broader issue. Countries — let’s take Central America as an example. The amount of corruption in the governments of El Salvador, Guatemala, Honduras is so great. And violence always accompanies grand corruption, especially on that scale, that we’re seeing the citizens of those countries in desperation, fleeing to try to emigrate into the United States. We are seeing the same in sub-Saharan Africa as Africans are trying to immigrate into Western Europe. The pressures of corruption at home in many of these countries, plus violence, and they go together, are resulting in this massive migration pressure. And that directly also affects our security, our democracy, our economies, and our politics in many, many ways. So, there are those direct connections and then those indirect financial connections.

MARTIN: We know that journalists have been targeted around the world. Many people assume it’s because they are reporting on sort of political malfeasance sort of perhaps that they’re in a conflict zone. But you say it’s really investigating corruption that puts them at risk.

VOGL: Enormously. There are a very large number of journalists in Turkey, in Egypt, in prison today, quite apart from China and Russia. And they’re there because they have been investigating and exposing the corruption in their governments. We’ve seen exactly the same in a country like Azerbaijan where, in my book, I just happen to mention the names of a number of journalists who have died in prison. These were all investigative reporters. But in addition to that, if you just take the U.K., the libel laws in the U.K. have been used by the oligarchs to basically prevent an enormous amount of discussion in public, in the media, about what they own and how they operate, and how they have front men, including members of the House of Lords to basically look as if these oligarchs are actually harmless. But in fact, they’re quite the opposite. And every time they are mentioned in a newspaper as perhaps doing something illegitimate or perhaps even tarnishing their reputation slightly, they’ll go into court with their high-priced lawyers, and slap on a libel action and get an injunction, and they’ve been very successful at that.

MARTIN: You make the compelling case that civil society has to be supported, but that seems like a long-term process. You know, is there anything that these countries, that particularly the United States and the U.K., the E.U., Switzerland, for example, are there steps they could be taking right now? Because you’ve seen some sort of high-profile gestures, like, you know, planes that certain people’s yachts have been seized. But that’s the tip of the iceberg. What steps need to be taken and are there steps that could be taken right now?

VOGL: Yes. Number one, as I have mentioned, we have to increase investigations, we have to increase prosecutions, and we have to resource the Justice Departments and the FBIs across the West so that they really can succeed there. We need to put some of these oligarchs on trial. Second of all, we need to go after the enablers, and we have to be really tough on these bankers and lawyers and consultants and property dealers and art dealers who are working with the oligarchs to use laundered cash to buy assets in our country. Those people need to be prosecuted. Third, we need to really look at who owns assets. We need laws. And the U.S. is moving in this direction, so is Europe but far too slowly, that are called beneficial ownership laws that reveal who really owns those properties that you mentioned earlier, who really owns the yachts, who really owns the assets. But as — that’s not enough. We need, at the same time, a much stronger foreign policy that supports civil society, that fights human rights, that supports investigative journalists across the world. Just this week, another prominent Russian journalist was thrown into prison for speaking out. We see it week in, week out. We cannot allow the death of Jamal Khashoggi in Saudi Arabia to be forgotten. We cannot allow the death of Boris Nemtsov who was the predecessor as it were in Russia of Alexei Navalny who’s now in prison who fought so valiantly against corruption. Nemtsov was assassinated 200 yards from the Kremlin in 2016. We need to support civil society as strongly as we can. And if I may just say so, you know, about my optimism, when I meet civil society activists in so many countries who are risking their life and their freedom every day in order to try to make their governments transparent and accountable, be it from Ukraine, be it from Belarus, be it from so many others countries, that encourages me. We need to get our western governments to do far more to support them. And if we have the domestic policies that I mentioned and at the same time, the foreign policies that I mentioned, I think we can seriously ramp up the global fight against corruption.

MARTIN: Before I let you go, Mr. Vogl, you know, western governments were quick to react, at least I can say in the United States, when — in the wake of 9/11, there was a very deep interest in the financial networks supporting Islamic terrorist groups like Al-Qaeda and then, subsequently ISIS. And, you know, money controls were put into place. You know, you had to, you know, open a bank account. You know, even one for your kids. You had to make all sorts of declarations. And I’m just sort of wondering why if these governments were so quick to react when the question was Islamic terrorism, why are they so slow to react when it comes to these kinds of money flows that you say contribute to violence and contribute to instability all over the world?

VOGL: The Patriot Act, which came one month after 9/11, which was the first real law to make compliance by banks and particularly about knowing their customer, doing due diligence on the money inflows, because of the terrorist threat, is very, very important. It was a landmark action. And it’s made many oligarchs and others think twice about using — directly using U.S. banks. Very often they will put their money into a bank in Cypress and then, from there, they’ll move to the British Virgin Islands or somewhere else. And eventually, get it into the American banking system rather than going direct because our rules are tougher than those of every other country when it comes to banking compliance. But nevertheless, some of our biggest banks have been caught red handed in engaging in huge foreign bribery and money laundering. And what has happened? They have been found, but the top executives, the absolute top executives of those banks have never been criminally prosecuted and none of them in the United States has ever actually lost their job because of these criminal money laundering activities. And that shows the tolerance that our society has had about white-collar crime and financial crime, and that has to change. And we underestimate the scale of this problem at our — at great cost. And I believe that — let me give you one example, the Financial Crime Network Department of the Treasury, known as FinCEN, is the one that receives all of the suspicious notifications from the banks. It gets hundreds of thousands of them, and it’s got a total staff at the moment of just over 300 people. In the new budget, President Biden is suggesting an increase in its funds so it goes up to 420 people, that’s not nearly enough because that is the nerve center of trying to track the oligarch money and the dirty money coming into America. We need far more resources there. So, what happens? These suspicious notifications go to FinCEN, half of them don’t get properly looked at, and the money flows into our economy. And who’s happy about that? The bankers, the lawyers, the real estate agents, all of those enablers that I mentioned to you. We need to radically change that system. And I am very hopeful that bipartisan proposals in the Congress today, and I stress bipartisan proposals, to really address some of these big issues are now going to move forward.

MARTIN: Frank Vogl, thank you so much for talking with us.

VOGL: It’s been a pleasure. Thank you.