Spotlight on Kleptocracy: KI’s Top Reads on Grand Corruption

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The Kleptocracy Initiative has assembled articles and reports highlighting how kleptocrats use large-scale corruption to leverage political allegiances, cement positions of power, and profit at the expense of their citizens. These “top reads” expose the players—the kleptocrats and their cronies, the enablers within Western financial institutions, and the consequences of kleptocratic influence on our national interests.

CORRUPTION AT THE HIGHEST LEVELS

In kleptocracies, corruption is business as usual. This is best illustrated by the extent to which corrupt practices pervade the upper ranks of the political leadership.

Xi Jinping Millionaire Relations Reveal Fortunes of Elite
Bloomberg News 
June 29, 2012

In the story that ultimately led to China blocking access to the Bloomberg website, Bloomberg News reveals how Xi Jinping’s relatives controlled “investments in companies with total assets of $376 million; an 18 percent indirect stake in a rare-earths company with $1.73 billion in assets; and a $20.2 million holding in a publicly traded technology company.”

Private Bank Fuels Fortunes of Putin’s Inner Circle
New York Times
September 27, 2014

During Putin’s early days in St. Petersburg, some of his associates founded Bank Rossiya. The Obama Administration has since referred to it as the “personal bank” of Putin’s inner circle. As Putin rose in the ranks of the Russian government, so did the fortunes of those associated with Bank Rossiya.

Comrade Capitalism: How Russia Does Business in the Putin Era
Reuters
Series, May – December 2014

In Russia, 110 individuals control roughly 35 percent of the country’s total household wealth. As Reuters journalists set out to investigate, a pattern emerged: “significant sums of state money were passing either through intermediaries with links to Putin or into companies with secretive owners.”

 

THE ROLE OF “OFFSHORE” FINANCE

Illegal fortunes can be hard to hide. Enter the Western financial system, where “offshore” tax havens, banking secrecy jurisdictions, and unscrupulous banks and law firms unite to hide the money and cash-in on kleptocratic capital. Well-versed in disguising the owners and sources of large sums, they employ legal, but perhaps unethical, smokescreens that facilitate high-level corruption.

Looting Ukraine: How East and West Teamed Up to Steal a Country
Legatum Institute
July 1, 2014

Ousted Ukrainian President Viktor Yanukovych used Western money-laundering techniques and offshore financial vehicles to support and hide his extensive corruption. “Looting Ukraine” discusses how Western offshore structures have facilitated kleptocracy both in Ukraine and the former Soviet Union.

Leaked Records Reveal Offshore Holdings of China’s Elite
International Consortium of Investigative Journalists
January 21, 2014

This ICIJ investigative report demonstrates how relatives of high-level Chinese politicians, including President Xi Jinping’s brother-in-law and former Premier Wen Jiabao’s son, use offshore holdings to obscure their wealth in secrecy jurisdictions. The report also highlights the role of PricewaterhouseCoopers, UBS, and other Western firms in helping clients establish their offshore holdings.

The Russian Laundromat
Organized Crime and Corruption Reporting Project
August 2014

The OCCRP uncovered a $20 billion money-laundering scheme that used nineteen UK-based front companies and banks in Russia, Moldova, and Latvia to launder money stolen by corrupt officials or earned by the activities of organized criminals

 

WHERE DOES THE MONEY GO?

Just how would a kleptocrat spend money stolen from the state? Here is a look at some of the potential perks and privileges of looting your country’s coffers.

Billions in Hidden Riches for Family of Chinese Leader
New York Times
October 25, 2012

David Barboza follows the $2.7 billion paper trail that reveals how former Premier Wen Jiabao’s relatives reportedly used multiple layers of ownership through friends and business partners to hide wealth obtained via lucrative political connections. This article resulted in the Chinese government blocking access to the English and Chinese language websites of the New York Times.

Red Aristocrats Series
Asahi Shimbun
September  – October 2012

In this series, the Asahi Shimbun profiles the children of high-level Chinese officials who lead extravagant lifestyles and are largely considered to act as conduits for illicit wealth gained in China.

Inside Ousted Ukrainian Leader Viktor Yanukovych’s Palace
The Guardian
February 24, 2014

After he fled the country, the spoils of corruption on display at Viktor Yanukovych’s palace stunned people around the world. Thousands of Ukrainians citizens flocked to see the mansion. “We want to see where our money went,” said one angry visitor.

 

CONSEQUENCES OF KLEPTOCRACY

Grand corruption is not just a problem for citizens living under kleptocratic regimes. Below are articles that explain how illicit finance undermines democracy, erodes legitimate international trade, weakens neighboring countries, emboldens oppressive regimes, and threatens the national security of the U.S. and its allies.

Corruption: The Unrecognized Threat to National Security
Carnegie Endowment for International Peace
June 2014

This report discusses the often-overlooked influence of large-scale corruption on important international security issues, arguing that a better understanding of corruption may lead to better foreign policy decision-making.

How Offshore Finance Sank Western Soft Power
The American Interest
May 8, 2014

Ben Judah argues that the West is losing its high ground in the global fight against corruption. “East European corruption fighters are discovering that Western countries and their systems of offshore economies have enabled the colossal theft of their countries’ resources.”

Why Are Chinese Millionaires Buying Mansions in an L.A. Suburb?
Bloomberg Businessweek
October 15, 2014

Through deals that are mainly all-cash and rarely publicly-listed, China’s new millionaires are quickly transforming Arcadia’s economic and social landscape. For example, the 19-year-old daughter of a chief executive at a state-owned enterprise is reported to be a co-owner of a $6.5 million house. This rapid buy-up of Arcadia’s real estate market reflects an influx of mainland Chinese seeking to park their money in the West.

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