Moneyland: Why Thieves and Crooks Now Rule the World and How To Take It Back

by Oliver Bullough

A Bentley showroom within half a mile of the Kremlin sold cars for hundreds of thousands of dollars, and the Russian media boasted that it was the luxury brand’s busiest outlet anywhere on Earth.

Ukraine had 18,500 prosecutors, who operated like foot soldiers for a mafia don. If they decided to take you to court, the judge did what they asked. With the entire legal system onside, insiders’ opportunities to make money were limited only by their imaginations.

Fraud of the state procurement system may have cost the government as much as $15 billion a year. In 2015, two Ukrainian children caught polio and were paralysed, despite it being a disease that had supposedly been eradicated from Europe.

In Tunisia, official greed became so bad a street vendor set himself on fire, and launched what became the Arab Spring.

In Malaysia, a group of young well-connected investors looted a sovereign wealth fund, and spent the proceeds on drugs, sex and Hollywood stars.

In Equatorial Guinea, the president’s son had an official salary of $4,000 a month, yet bought himself a ...

Officials in Nigeria, Russia, Malaysia, Kenya, Equatorial Guinea, Brazil, Indonesia, the Philippines, China, Afghanistan, Libya, Egypt and dozens of other countries have likewise stashed their wealth beyond the reach and the oversight of their fellow citizens.

In Britain and America, lawyers create trusts that allow their rich clients to technically give away their riches, while retaining the benefit of them, and thus pass them on to their children. In continental Europe, the same job is done by foundations.

the 4 per cent of Russians that Credit Suisse considers to be middle class (worth $18,000–180,000) saw their collective wealth increase by $137 billion,

The 0.5 per cent of Russians who have more than $180,000 saw their wealth increase by an astonishing $687 billion.

The top 10 per cent of Russians own 87 per cent of everything: a higher proportion than in any other major country – pretty stark for a place th...

Corruption is a force multiplier for the West’s enemies, and yet the West

continues to accept dirty money into its economies by the billion.

Ukraine is a deep red on TI’s map, the 131st least honest place in the

Manafort’s money was hidden by banks and companies in Cyprus and St Vincent, and they’re ranked a relatively clean 47th and 35th respectively. The United States, where his money ended up, is 18th.

Money flows across frontiers, but laws do not. The rich live globally, the rest of us have borders.

Goncharenko’s mansion is one of eighty-six different properties on this square alone that is held via the kind of anonymous structures that stop anyone, including the taxman, from finding out who the true owner

Across England and Wales, more than 100,000 properties are owned offshore, just like Yanukovich’s and Manafort’s properties were.

The wealthy nomads who own these properties are taking advantage of the way money moves across borders, but laws stay put, to pick and choose which laws to obey. Under British law, you have to declare who owns a property. If you own that property in Mauritius, you do not. It will cost you money to structure your holdings that way, but if you can afford it, you have access to a privacy denied to everyone else in the country.

I call this new world Moneyland – Maltese passports, English libel, American privacy, Panamanian shell companies, Jersey trusts, Liechtenstein foundations, all add together to create a virtual space that is far greater than the sum of their parts.

Without bandits constantly raiding them, and stealing their property, groups of humans built increasingly complex communities and economies, becoming increasingly prosperous, which led eventually to the birth of the state, to civilisation, and to everything we now take for granted.

Moneyland is where globalisation acts differently. It is not a function of capital being allocated efficiently to garner the greatest return for its owners, but of capital being allocated secretly to gain the greatest degree of protection.

This is the dark side of globalisation, and there is no positive case to be made for it, unless you are a thief or a thief’s enabler.

City banks, cut off from sterling, began to use dollars instead, and they obtained those dollars from the Soviet Union, which was keeping them in London and Paris so as to avoid becoming vulnerable to American pressure.

These stateless dollars – they became known as ‘eurodollars’, perhaps because of the ‘Euro’ telex address used by one of the Soviet-owned banks – could flow between countries unhindered, just like in the old days.

This concept of ‘offshore’ – of being legally absent while physically present – was a useful one, and the term started to be employed to describe financial transactions as well.

The two sets of transactions took place in the same geographical location – the City of London – but legally one of them was elsewhere, somewhere rules did not apply. And this concept, the idea of offshore, the idea of an asset being legally outside the jurisdiction that it is physically present in, is absolutely central to our story.

This is the first glimpse of the tunnel into Moneyland. It works as follows: first, you obtain money (you might have stolen it; or avoided taxes on it; or simply earned it); then you hide it; then you spend it. Previously, you could take two of the three steps, but never all of them together. You could obtain money, then spend it, but that was risky. Or you could obtain money, then hide it, but that meant it was stuck in Switzerland, and you never got to enjoy it.

That first deal was for $15 million. But once the way to sidestep the obstacles that stopped cash flowing offshore had been flagged, there was nothing to stop more money following its path. In the second half of 1963, $35 million of eurobonds were sold. In 1964, the market was $510 million. In 1967, the total passed a billion dollars for the first time, and it is now one of the biggest markets in the world.

‘Our planet as a whole has a net debt, a net financial debt, which of course is not possible at a global level,’ he said. If you put the inflows and outflows of all the countries in the world into a spreadsheet, the sums should add up – all outflows are just someone else’s inflows – but they don’t. It’s like the list of countries’ foreign investment positions is missing an entry. One more country is needed in the spreadsheet to make the columns match: let’s put it between Monaco and Mongolia. That seems apt.

Navinder Sarao, the British day trader convicted in 2016 for ‘spoofing’ the US markets in the ‘Flash Crash’ of 2010 (when the Dow Jones Industrial Average lost more than 600 points in minutes, at least partly because Sarao sent fake orders to drive down prices, temporarily wiping trillions of dollars off the value of US shares), diverted his profits into two Nevis-registered trusts, one of which he called the NAV Sarao Milking Markets Fund.

Members of the ruling family of Azerbaijan, according to articles by the fearless investigative journalist Khadija Ismaylova, owned mobile phone and gold mining companies at least partly via Nevis.

It is hardly surprising that bloggers who sought to damage the reputation of French presidential candidate Emmanuel Macron when he ran for election in 2017 did so by inventing a company in Nevis – La Providence LLC, purportedly named after the school he attended – and claiming it was where he hides his cash. The accusation was false, but gained publicity because having a company in Nevis is precisely the kind of thing a crooked politician would do.

Thirty metres north is the Morning Star office, which is the nominal home of companies owning thirty-six houses in Britain, including one in Mayfair with a view over Hyde Park. In total, more than 300 properties in England and Wales are owned via Nevis companies, almost all of them headquartered in an area little bigger than a football pitch.

The advantages of this from the perspective of a potential Moneylander are clear: if you no longer own something, you cannot be taxed on it, only on the revenue that it generates. Trusts are central to ‘succession planning’ – the euphemism for when rich people dodge inheritance tax – and Jersey lawyers are very good at setting them up.

If you walk up to the front door, you will notice a line of nine doorbells down the left-hand side: the top one reads, in white letters on a light blue background, ‘Formations House’. This is the real tenant. It is a company that creates companies, and has been since 2001.

There are several hundred company formation agents – companies that make companies – in the UK (the precise number is unknown – owing to a flaw in Britain’s regulatory architecture, these gatekeepers don’t have to register with anyone before going into business), and theirs is a high-volume, low-margin game. They do charge extra for businesses with particularly rare names – at the time of writing, Formations House had both ‘Apple Ltd’ and ‘Sex Ltd’ for sale at £100,000 each – but their main product is the standard limited company, which costs just £95. You have to sell a lot of those to cover the rent on a building like 29 Harley Street, and Formations House does just that: according to its website, more than 10 million companies have been conjured into existence at the address in the last sixteen years, not just in Britain, but everywhere from Delaware to the Seychelles.

In 2016, a Japanese newspaper reported that top Chinese officials were extracting eggs from their wives, fertilising them, then having them implanted in women in Japan. The loophole here is that Japanese law does not regulate surrogacy, and lists the surrogate as mother on the child’s birth certificate, thus making the child eligible for Japanese citizenship. A corrupt official can therefore transfer his wealth to an apparently unrelated Japanese child, with no one realising that the child is his son or daughter.

It costs ¥15 million (around $130,000) and, perhaps more seriously, may well mean having almost no contact with the child. Another Chinese parent who spoke to the paper had a son born in August 2014, who lived at a childcare centre in the Kanto Region, and they only saw each other twice a month. That might be bad for the child’s relationship with his parents, but it was clearly good for the family’s wealth-management strategy. The journalist saw the toddler’s bank statement: it contained ¥2 billion (more than $17 million), all of them embarrassment-free.

connections. Karimova used Takilant, a company in Gibraltar, to own bank accounts that channelled more than $114 million in bribes from Vimpelcom, a Russian-owned, Bermuda-incorporated, Dutch-based telecoms company, from 2006 until 2012. The accounts were at banks in Latvia, Hong Kong, the Netherlands and New York, and the payments were disguised as consulting services, and came from companies in the British Virgin Islands.

The cases do reveal, however, how potent a Gibraltar shell company can be as a wealth-gathering weapon, once twinned with bank accounts around the world. Karimova is currently under house arrest in Uzbekistan, having been swept up in palace intrigue when her father became ill (he died in 2016). The criminal investigation against her has now spread to Switzerland, where prosecutors have frozen 800 million Swiss francs, and are investigating a private bank for allegedly laundering her money. The bank – Lombard Odier, which was founded in 1796 – itself reported its suspicions about the money, although not until 2012, which is when the corruption investigations into her began.

On 28 February 1995, Mexican police officers arrested Salinas on suspicion of murder, causing a flurry of phone calls between bankers in London, Switzerland and New York, although the bankers’ concerns were not what you might have imagined. ‘The private bank’s initial reaction to the arrest was not to assist law enforcement, but to determine whether the Salinas accounts should be moved to Switzerland to make discovery of the assets and bank records more difficult,’ a later Senate investigation concluded, based on the bank’s automatic tape recordings of the conversations.

Wealth-X, a consulting company that maps the movements of the super-rich as if they are wildebeest, calculates that in 2016 there were 226,450 people in the world with assets worth more than $30 million (it calls them ultra-high-net worth people, or UHNWs), a 3.5 per cent increase on the year before. Collectively, their wealth had increased over the previous twelve months by 1.5 per cent to $27 trillion, which is roughly equivalent to the entire output of China and the United States added together. And the outlook for further increases is good:

The logical consequence of their effectiveness in preserving their clients’ wealth is the creation of dynasties, which will ensure a family’s temporary advantage is never removed, but instead becomes entrenched, and that the inequality of this precise moment is maintained in perpetuity.

‘Using trusts, offshore firms, and foundations, professionals can ensure that inequality endures and grows in a way that becomes difficult to reverse short of revolution.’

‘Corruption exists where you have a healthy state; and it takes up just 10, or maximum of 15, per cent of the country. When it takes up 99 per cent of the country, that’s not corruption, that is the state.

Perhaps the cleverest aspect – from the point of view of the kleptocrats – is that, while the doctors have to raise the money in Ukraine and in hyrvnias, the managers get their cut paid in dollars offshore. The kleptocracy system automatically transports its payments to Moneyland.

‘But the investigation was never finished. It was closed, someone paid for that, and so it never led to anything. To this day, with all my contacts and skills, I still don’t know who was behind it. It would have been in the interests of any one of the clans that are still working the system.’

The president is, in the words of one of Forsyth’s characters, ‘mad as a hatter, and nasty as a rattlesnake’.

On 14 November 1968, he was three years into a 25-year stint as Singapore’s foreign minister, and made a speech in which he laid out his concerns about the way some fellow ex-colonies were being looted.