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Tough US actions challenge Britain to step up the fight against kleptocracy

The writer is author of ‘American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme’

Late last year, amid the broader rhetoric and pledges of the US-led Summit for Democracy, the Biden administration turned to tackling an issue that’s spiked in prominence in the past few years: kleptocracy.

In early December, the White House published a 38-page document on countering corruption, transnational money laundering and the kinds of regimes and oligarchic figures reliant on these financial networks. Months after elevating corruption to a core national security threat, the administration finally revealed the specific steps it would take to combat modern kleptocracy.

As the White House detailed, the US has become a “significant destination for the laundered proceeds of illicit activity, including corruption”. Pointing to specific industries such as real estate, lawyers and trust service providers, the White House highlighted how such American industries are “often sought by criminal organisations to facilitate their illicit activities”. Or as Treasury secretary Janet Yellen said, “there’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States.”

The White House’s willingness to acknowledge the American role in modern corruption was striking — as is the stream of counter-kleptocracy policy proposals it has begun rolling out. This and the related legislation coming out of Congress — notably that produced by the bipartisan Counter-Kleptocracy Caucus — shows that the US has not only begun addressing its own role in illicit financing networks, but has claimed clear leadership in this space.

What’s less clear, though, is how this new direction will affect America’s allies, many of whom act as money laundering hotspots of their own. And one country, in particular, should be concerned about what all this means for its future relations with Washington: the UK.

It’s hardly a secret that the UK has spent years providing the kinds of financial secrecy tools that oligarchic and kleptocratic forces around the world need to thrive. A recent Chatham House report revealed billions of pounds linked to post-Soviet elites that had flooded the UK since the 1990s. Combined with the US’s new turn, these numbers make Britain’s claims to combating corruption and kleptocracy look even more threadbare than before.

Where the White House has pledged to target those who provide services to kleptocrats both at home and abroad, we’ve heard little from Downing Street. It is not that the ideas are not there — proposals such as that for a registry of foreign-owned British property have been languishing for years — but despite growing calls from British anti-corruption campaigners, No 10 has hardly evinced any interest in the topic.

Things came to a head in late January, after Theodore Agnew, a minister in the UK Treasury and Cabinet Office, resigned suddenly, issuing a statement that specifically mentioned the British government’s failure to tackle the country’s kleptocratic services industries. Perhaps most shockingly, Lord Agnew revealed that the government had dropped an economic crime bill, which would significantly improve Britain’s counter-kleptocracy toolkit. While officials subsequently denied the claims, MPs railed against any move to slow down the progress of the bill — and potentially to pass up the best chance the UK has had to end its role as a centre of transnational money laundering.

It is clear that a gap has opened between the Americans and the British and their willingness to tackle the issue head-on. And if the UK continues to twiddle its thumbs, it will not be long before the roles of British nationals, industries and policies in incentivising kleptocratic networks become impossible for the US to ignore.

We have already seen increased American readiness to target nationals in allied countries who are creating and profiting from illicit finance networks. How much longer until Washington begins targeting British firms aiding the looting that these regimes and their cronies are responsible for?

The longer the UK drags its feet when it comes to cleaning up the kleptocratic mess in London and elsewhere, the greater the likelihood Washington will conclude that it is in this fight alone.

It will be a tragedy if that happens, and we will all be worse off for it. But if Britain doesn’t want to join the fight against corruption and money laundering, its leaders will only have themselves to blame when Washington turns its attention from Moscow and Minsk to the British nationals, industries and enablers who help modern kleptocracy to flourish.

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