How London and the US became safe havens for dirty money
March 3, 2022

Dawn over the City of London © Evening Standard / eyevine

When Liz Truss recently stood up in parliament to announce a “hit list of oligarchs” the UK foreign secretary said that she wanted “a situation where they cannot access their funds, their trade cannot flow, their ships cannot dock and their planes cannot land”. Her speech, along with others from the floor of the House of Commons slamming oligarchs and their associates, was just one prominent example of how Vladimir Putin’s savage attack on Ukraine has brutally brought to the fore the phenomenon known as “Londongrad”.

The warm home the British establishment and its financial system provide for dirty money from the post-Soviet sphere and elsewhere may finally begin to be seen as the embarrassment — and worse — that it constitutes. Take Dmitry Firtash, exposed in 2006 as the part-owner of the company handling Russia’s Ukrainian gas shipments which long gave Moscow a stranglehold over Kyiv. After he spent money lavishly on everything from luxury houses to Cambridge scholarships and political donations, Firtash’s UK social status seemed to have no limits — he was feted by parliamentarians and shook hands with the Duke of Edinburgh — until he was arrested in Austria on an FBI indictment for corruption.

Much excellent reporting in the past decade has revealed how corrupt elites from around the world launder looted money in the west. Yet the focus has been on the looting as much as on the laundering. The hows and whys of rich countries’ transformation into autocrats’ handmaids — or in Oliver Bullough’s powerful metaphor, butlers — have not received the attention they deserve. A number of new books have set out to change that — and their timing, sadly, could not be better, as tightening sanctions on Putin’s cronies becomes a weapon of choice in the west’s pushback against his aggression.

In Butler to the World, Bullough takes the UK to task. Jeeves, the unflappable butler of PG Wodehouse’s Bertie Wooster series, much loved by thousands of British and Anglophile readers, may not be an obvious angle of attack. But Bullough’s aim is sharp: “As written by Wodehouse it’s jolly funny, but [if] you focus on Jeeves’s actions rather than on his smooth-talking, soft-shoed manner, you end up with something extremely dark: a mercenary, a fixer-for-hire.” And that is just what, Bullough explains, Britain has become in its willingness to service all comers as long as they pay enough.

Bullough takes his metaphors seriously, to the point of enrolling in a school for actual butlers (he was kicked out after flower decoration class, once he was rumbled as a money-laundering researcher). Butlering goes far beyond accepting deposits from the world’s corrupt: it extends to procuring (palatial) housing for them, educating their children, honouring them in every way from naming rights at Britain’s world-class universities to royal patronage, as well as catering to all the minor needs the super-rich might need.

All this started, in Bullough’s highly readable account, with Britain’s disastrous military adventurism in Suez in 1956, when it joined France and Israel to try to dislodge Egypt’s nationalisation of the canal. This ended in humiliation when US opposition exposed British strategic postwar impotence. His thesis is that after strategic withdrawal, “butlering” became the answer to US secretary of state Dean Acheson’s challenge that Britain had “lost an empire, but not yet found a role”. The role would be to facilitate money flows around the world, no questions asked.

Several factors came together to make this happen. Bullough describes a postwar City of London determined to insulate itself from government regulation, ready to embrace innovations that would mean good business for financiers. He also highlights how in a world of hard currency shortage — withholding dollars was the means by which Washington made London give up Suez — there was a lot to like in allowing cross-border money flows that escaped national regulation. For Bullough, whose earlier book Moneyland explored corruption in the global financial system, the midcentury emergence of the eurodollar system of offshore dollar transfers and of Britain’s butlering role are two sides of the same dirty coin.



Then there was the imperial wind-down. “If Westminster was the head of the British empire,” Bullough writes, “the City [of London] was its heart, pumping money out into financial arteries that stretched to every continent and every city on earth.” In Bullough’s telling, “butlering” came to the rescue of British finance. Butler to the World bulges with stories of how past or remaining outposts of the empire, from the British Virgin Islands to Gibraltar, reinvented themselves as places to secrete away money or escape onerous rules.

American Kleptocracy, by corruption researcher Casey Michel, gives the US the same treatment as Bullough gives the UK. Reading the two together makes one a little sceptical of Bullough’s thesis that the UK is uniquely depraved in catering to dirty money. As Michel shows, some of the world’s deepest tax havens are US states, including not just Delaware (inventor of the shell company, according to the author) but also Nevada, South Dakota and Wyoming.

Like Bullough, Michel masterfully recounts the tragicomic outcomes when outré autocrats meet serviceable financial and legal systems — such as the “dictator bling” of Teodoro Nguema Obiang Mangue, son of Equatorial Guinea’s detestable president and notorious for his dozens of luxury cars and boats, friendships with US pop stars, and magpie-like collection of Michael Jackson memorabilia.

Michel gives Washington a more mixed assessment than the state governments — which in this context is a relative compliment. But Washington, too, is guilty of leaving too many loopholes in otherwise decent anti-money laundering laws for a number of transactions and professions, most notoriously real estate. Just one example from Michel’s book: in “Trump SoHo . . . the New York construct most closely affiliated with the entire Trump family . . . a staggering 77 per cent of unit sales went to buyers who fit money laundering profiles”.



These two books will leave no reader in any doubt that the US and the UK have a large class of “enablers”, or service providers such as bankers, lawyers, real estate agents, accountants and PR advisers needed to give dirty money a good home. That term gives the title to another book in this genre, Enablers, where the international financier class is taken to task by Frank Vogl, a former economic journalist and communications adviser to financial institutions who laments what has become of the professions he has spent a lifetime working for.

The US enabling class may be the most dangerous, given its influence in the politics of a more powerful country. But the US has successful heroes in Michel’s account. They range from the late senator Carl Levin, who attached anti-money laundering provisions to the Patriot Act after 9/11, to the dogged investigators who traced Obiang’s money and a justice department unit for confiscating kleptocrats’ assets. More recently, a bipartisan congressional vote banned anonymous shell companies last year, and the Biden administration has committed itself to an anti-corruption agenda.


Old peculiarities of British law, from Scottish limited partnerships to private criminal prosecutions, became perfect instruments for crooks to hide their money and silence their critics



Bullough’s heroes, in contrast, are few and far between, and much less powerful than Michel’s: backbenchers without the staffing US legislators enjoy, or underresourced regulators. Bullough makes a good case that there is something particularly conducive to “butlering” in Britain’s peculiar set-up. The country’s unwritten social codes; its upper class’s exclusive solidarity and unspoken obsession with money; the common law tradition and resistance to codified rules — all conspire to frustrate crackdowns or even the willingness to crack down.

In Britain’s financial elite, “chaps don’t tell other chaps how to behave,” writes the author. And so old peculiarities of British law, from Scottish limited partnerships to private criminal prosecutions, became perfect instruments for crooks to hide their money and silence their critics.

Bullough and Michel both deserve praise for going beyond moralising and pointing out how an industry geared to enabling the corrupt is not just unsavoury but can hurt a country’s real economic prospects. In his account Michel shows how derelict factories in America’s rust belt bizarrely became conduits for laundering dirty money. Twenty-something investors from an orthodox Jewish community in Miami would turn up, bereft of industrial or corporate experience but flush with cash which US authorities say derived from Ukrainian corruption. They would pay over the odds for metal plants and buildings in backwater communities desperate for outside investment.

But these communities languished as the new owners proved indifferent to development; all they needed was the safety and discretion offered by obscure US land and property holdings.

The attack on Ukraine shows America’s and Britain’s enabling industries (though they are not alone) are plainly international security risks. It is mind-numbing that it should take war in Europe to make politicians aware of this. All the more credit to writers who keep lifting the veil on the unseemly parts of the financial services industry and urging us all not to avert our eyes. There are signs governments are being galvanised into ending their addiction to dirty money inflows.

Upon reading these books, you realise that we still fall far short of this, despite current sanctions. This reader, at least, will not believe things have changed until he sees it.

Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals by Oliver Bullough, Profile, £20, 288 pages

American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme in History by Casey Michel, St Martin’s Press, $29.99/ Scribe UK, £18.99, 368 pages

The Enablers: How the West Supports Kleptocrats and Corruption — Endangering Our Democracy by Frank Vogl, Rowman & Littlefield, $32/£25, 216 pages

Martin Sandbu is the FT’s European economics commentator

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Source: Financial Times