Monday, January 18, 2021

Money laundering shifting away from tax havens to US, UK shell structures

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Journalist and kleptocracy expert, Oliver Bullough, said at the 2019 Lennart Meri Conference on Saturday that in money laundering, the trend has long shifted away from tax havens toward shell companies, predominantly in the United States and the United Kingdom. The Danske case, which heavily involved the Estonian branch of Danske Bank, is no exception.

Bullough, author of Moneyland: The Inside Story of the Crooks and Kleptocrats Who Rule the World, said that the stereotype of tax havens by now has become misleading: since the financial crisis, Western countries have been fairly successful at isolating tax havens and driving them out of the market, which is why we need to look at what is happening right now, and not just old stereotypes.

He pointed out that where e.g. the Danske Bank scandal is concerned, by now the biggest known case of money laundering in the world, most of the money wasn’t laundered in tax havens, but in the United Kingdom, which has become the jurisdiction of choice for the kleptocrats concerned.

More specifically, the approach used is one of setting up structures made up of shell companies.

Adding to the U.K., the U.S. states of Pennsylvania and Delaware are currently the places where it is easiest to establish such a legal entity. Bullough also highlighted that the South Dakota trust industry has grown four-fold, fuelled by money coming directly from former island tax havens.

Bullough called a recent refusal of the British parliament to crack down on shell companies “cynical.” The opinions expressed in the debate mainly revolved about a purported million-pound damage to the British economy, the journalist said. To fight this new angle of kleptocrats and money launderers, only transparency in ownership relations can help reveal how illicit funds are directed into the economy.

People don’t steal money to bury it, Bullough added. As a threat to transparency, the journalist highlighted the so-called “golden visa” issue, a scheme popular in several countries where residency can be bought for money.

Bullough pointed out that in addition to Russian money, a rising concern are illicit funds from China, the amounts of which outweigh what Russian kleptocrats have been hauling out of their country by far.

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The 2019 Lennart Meri Conference is taking place in Tallinn from May 17 to 19. The conference’s format has brought together high-level actors and stakeholders since 2007 to discuss foreign and security policy with a focus on the European and transatlantic realm. The Estonian president is traditionally the patron of the conference.

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