August 14, 2023 • 37 mins
Tune in for an explosive conversation with Casey Michel, author of American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History.
Casey shares his insights into the labyrinth of complex kleptocratic networks, the rise of anonymous shell companies, and the role individual U.S. states play in transnational money laundering. Beyond the U.S., he discusses the global repercussions of kleptocracy and money laundering, the influence of kleptocrats and the extravagant (and very public) lifestyles these individuals can lead. We also dive into the steps being taken in places like the UK to expose who is really behind shell companies in an effort to combat global money laundering.
For more information on Casey's work, visit www.caseymichel.com.
DISCLAIMER: The information provided in this podcast is for informational purposes only and is not intended to and shall not be used as legal advice. The views and opinions expressed in this podcast are solely those of the speakers and do not necessarily reflect the views or positions of LexisNexis Risk Solutions. LexisNexis Risk Solutions does not warrant that the information provided in this podcast is accurate or error-free.
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Episode Transcript
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Speaker 1 (00:12):
On this episode of the Rig Tech Pulse, we're joined
by Casey Michelle, author ofAmerican Kleptocracy how the US
created the world's greatestmoney laundering scheme in
history.
If you're interested inlearning more about Casey, his
book or his other journalisticworks, you'll find a link to his
website in the show notes.
Casey, thank you so much forjoining us today.
Speaker 2 (00:32):
Julie, thanks so much for having me today.
Speaker 1 (00:34):
No, no problem, Can you?
I mean, you've got a veryinteresting background as a
journalist and obviously now asan author.
Could you just give us a littlebit of background about kind of
your career to date, how youcame up with sort of the areas
of interest that you work in now, and then we'll dive into the
book after that.
Speaker 2 (00:50):
Yeah, absolutely.
I mean, I think I've followedmaybe a relatively atypical path
in so far as it's not the onethat you would generally find of
a journalist certainly anAmerican journalist covering
transnational crime,transnational money laundering.
I mean much of it.
There's plenty of influences myprevious work as a journalist
in the States and elsewhere, aswell as my time back in academia
and graduate school here in NewYork studying the topic of
(01:12):
transnational money launderingand how it is that authoritarian
and dictatorial regimes moveand hide and launder their money
across the West, especially inplaces like the United States of
America.
But really, to get back to theroot of things, on my end, kind
of the initial spark for thiswas my time living, working and
covering the country ofKazakhstan.
(01:33):
This was back in the early2010s.
I was actually working as aPeace Corps volunteer over there
, working as an English teacherin a very small village up in
northern Kazakhstan, obviouslyworking with some wonderful
people, working with somewonderful kids.
But while I was there, it wasmy first time really living and
operating and socializing in acountry overseen by what we
(01:54):
would come to understand as akleptocratic regime at the time,
overseen by a truly distastefulgentleman named Nersultan
Nazarbayev, who really createdthe playbook for so much of what
we now understand as modernkleptocracy.
But that's my first time livingand operating in a country like
that and seeing firsthand notonly how it is that these
regimes, these individuals,these ruling family members and
(02:16):
their inner circles rule thesecountries, control the state
finances and really pillagethose nations themselves and
those populations, tapping intothe educational budgets, the
health budgets, theinfrastructure budgets, but
beyond that, how it is thatthose countries and those
regimes move their moneyelsewhere, nersultan Nazarbayev
himself moving so much of themoney associated with himself
(02:38):
and his inner circle into placeslike the West and certainly
into places like the UnitedStates of America.
So I've said elsewhere, the bookthat I wrote wasn't dedicated
to Nazarbayev himself.
It certainly wasn't writtenwith him in mind in particular.
There are plenty of otherstories that I addressed
throughout the book, but he wasalways this kind of little voice
in the back of my head or thislittle figure on my shoulder as
(02:59):
I wrote, who was just, you know,someone I liked to reference
throughout because of theplaybook that he set in
Kazakhstan, that I got to see onthe ground there.
That really propelled so muchof my interest in modern
kleptocracy.
Speaker 1 (03:13):
So I guess you came at it obviously sort of seeing
firsthand and then the bookitself.
So American kleptocracy how theUS created the world's greatest
money laundering scheme inhistory.
You worked as an investigativejournalist.
How did it go from working oninvestigative pieces to actually
writing a book?
Is it something that you alwayswanted to do?
Is it something that you alwayshad in the back of your mind?
Is it kind of a?
(03:33):
How long did it take to getfrom sort of concept to actually
publishing this thing?
Speaker 2 (03:39):
Yeah, julia, that's a great question and honestly, it
wasn't something I wanted to doinitially at the outset.
Insofar as I wanted to, or endedup writing a book on
kleptocracy and certainly theUS's transformation therein, I
mean, it wasn't something that Iwas motivated by at the outset,
but I think part of that is thereason that I ended up writing
the book in and of itself,because at the outset of
(03:59):
covering transnational moneylaundering networks, covering
kleptocratic networks,investigating how it is that
they use whether it's Americanshell companies, american trusts
, american real estate agents,american lawyers, so on and so
forth to hide and launder theirmillions or billions, or
potentially even more, inillicit wealth attached to them
and their regimes, you know whenI certainly began as a
(04:19):
journalist, and I'm sure as manyother investigative journalists
, began covering this topic, youknow our understanding of this
world, our understanding ofthese networks, how they operate
, how they maneuver, how theynavigate and, beyond that, who's
helping them construct thesenetworks.
You know our understanding ofthat at the outset is so
miniscule and it really tookyears for me working as a
(04:40):
journalist, studying in graduateschool, connecting with some
incredible academics that haddevoted their careers to this,
communicating with otherpolicymakers in places like
Washington or London or Ottawaor elsewhere, to kind of slowly
begin peeling back the layers ofhow it is that the world of
modern kleptocracy operates inthe 21st century.
(05:01):
But beyond that actuallydeveloped in the first place,
and obviously beyond that wherethings are going moving forward.
I mean again, at the outset Ihad no idea I'd ever write a
book like this, but that wasbecause I and the others that
were beginning their careersdoing this had such a little
understanding of how thesenetworks operated.
And it wasn't until I don'tknow how many years, in six,
seven, eight, nine years workingas a journalist and obviously
(05:23):
again in academia as well, thatI finally have this idea,
finally had this notion foraddressing in particular the
American story, the Americanrole within this.
Obviously the story is abouttransnational, this
transnational phenomenon writlarge, but in particular the
American transformation into thecenter of so many of these
off-shoring networks.
And, as I'm sure you andlisteners can hear you know I do
(05:46):
have this American accent.
I am a proud, you know, bornand bred American that realized
only after years of working onthis topic that there was a
particular story of the UnitedStates transformation that was
worth telling, because I and somany other Americans as well,
had no idea that this was takingplace right here in the United
States of America.
Speaker 1 (06:07):
And some, I mean some of the figures.
I think initially, like youknow, I won't kind of go into
the book too much becauseobviously you know people can
read it for themselves, but Imean it's vast amounts of wealth
.
You know huge amounts of moneyand I think you talk about one
of the phrases that you use issort of these sudden eruptions
of wealth.
Can you, without sort ofspoiling too much, I maybe give
(06:28):
some of the obvious examplesthat you talk through in the
book, because I mean it'sfascinating and it's
mind-blowing?
Speaker 2 (06:33):
Sure, I mean, I think that's, without tooting my own
horn, a great phrase tohighlight, because I do think
that notion of eruptions orgeysers, or new fountains of
wealth, especially illicit,questionable, suspect wealth
erupting around the world overthe past 20, 30, 40 years, much
of it from newly independentstates, post-colonial states,
(06:56):
post-soviet states, in which newruling powers, ruling regimes,
grab the levers of state powerand of state finances and open
their economies, open theirbodies politic to new
investments without any kind ofregulatory or transparency
oversight.
That we saw, whether it's inplaces like Sub-Saharan Africa,
(07:18):
certainly in places like CentralAsia, parts of Eastern Europe,
parts of Southeast Asia, overand over and over again, these
new governments coming in andopening up these new seams,
these new sieves, these newgeysers of wealth that were, as
we now know, always looking fora new home, always looking for a
(07:39):
new place to go.
Because these new eruptions ofwealth, unfortunately, because
they were affiliated with andassociated with and controlled
by those ruling regimes whichall too often are toppled, are
overthrown, follow themselves afowl of, whatever government may
follow them, those individualsand their wealth associated with
them are always looking to movethat money elsewhere, to hide
(08:03):
that money elsewhere, whilestill enjoying that money, the
fruits of their rule, of theirregime, or of their family
members or of their innercircles as well.
This is a story we saw over andover and over, again and again.
I obviously write about a fewof them in my book, focusing on
countries like Equatorial Guinea, focusing on countries like
(08:24):
Ukraine, but by no means limitedto those we've seen this in,
whether it's the Gabon's, theVenezuelas, the Sri Lankans, the
Malaysians, the Kyrgyzstan's,the Kazakhstan's of the world,
over and over and over.
Anytime, you see thisauthoritarian, non-democratic
regime taking power andespecially again in these
post-colonial, post-sovietstates, the eruption of wealth
being hoovered up, as we nowknow, by these Western
(08:47):
jurisdictions, in many cases theformer colonial powers
themselves, whether it's theUnited Kingdoms, the France's,
or even the Canada's, theAustralia's or, as I write about
in this book, the United Statesof America, that opened their
doors over and over and overagain, year in and year out, to
all of this illicit wealth,creating the kinds of policies,
(09:09):
creating the kinds of loopholesand exemptions that invited all
of this suspect, questionable inmany cases, dirty money in to
be laundered, to be stashed and,at the end of the day, to be
enjoyed by those new rulingregimes, those new kleptocratic
regimes whose wealth, accordingto the best estimates that we
have, runs into the trillionsand potentially tens of
(09:32):
trillions of dollars.
And I say again, the bestestimate.
So much of what we have seen inthis world is so baked, so
slathered, so covered in secrecythat we still have such a small
idea of how much money we'reactually talking about.
But again, the best estimateswe're talking about trillions of
dollars, in some casesequivalent to the size of the
GDP of China.
(09:53):
It's really this kind ofinvisible superpower that we're
talking about when we talk aboutthe offshore economy.
Speaker 1 (09:59):
And I guess when you talk about loopholes and sort of
the ways that this is beingmade possible anonymous shell
companies that's kind of the keyelement that you call out there
.
And obviously there are statesin the US where this happens.
It's not country wide.
So I guess the question maybefor people who aren't familiar
with the US, why is it that somestates can allow these other?
(10:19):
The federal government can't doanything about it.
Why is it that legislation isdiffering so much?
Speaker 2 (10:24):
Sure, absolutely.
I mean.
Another great question thatreally kind of gets into the
weeds about the particularAmerican elements of this story.
Just to pull back for a moment,I think a lot of folks at this
point are familiar, at leasttangentially familiar, with
anonymous shell companies.
These are legal entities, Imean, they are companies, they
are corporations, but they existreally only on paper.
(10:45):
There's no brick and mortar,there's no product they sell.
They exist only for the sake ofexisting and, beyond that, for
anonymizing who's controllingthem, who's controlling their
finances and who is controllingtheir wealth, and beyond that,
where that money associated withthose companies is actually
going.
And again, this is not aspecifically American phenomenon
or creation.
We see anonymous shell companiesformed around the world,
(11:08):
whether it's in Canada, inAustralia, perhaps, most
spectacularly, in the UnitedKingdom.
Think of things like London orthe British Virgin Islands or
the Cayman Islands, Britishoverseas territories and crown
dependencies.
There's plenty of jurisdictionsaround the world, especially in
the West, that provideanonymous shell companies
incredibly easily, incrediblycheaply.
(11:29):
You never have to actually goto these jurisdictions to set
one up.
A simple phone call or emailwill suffice.
That's all fine and good.
The American component of thisis simply, by dint of its size,
of its magnitude, the UnitedStates of America towers above
all other jurisdictions, allother countries and competitors
when it comes to setting upshell companies, when it comes
(11:52):
to setting up anonymous shellcompanies.
The last stat that I saw in themost recent study was that the
United States of America nowforms more legal entities than
the next 40-plus tax havenscombined.
As one example of the magnitude, the size and the heft of the
United States of America, theparticular twist within the
(12:13):
United States' example and rolewithin shell company creation
and, beyond that, the role ofshell companies in transnational
money laundering networks, isthat these companies are not
actually created by the federalgovernment themselves.
They're not actually created bythe White House or by the
Treasury Department or by folksin Washington DC.
(12:34):
This has a far broader historythat I go into more detail in
the book.
It really is a fascinatingintellectual journey.
But at the end of the day, it'snot the federal government that
oversees shell companies.
It's the American statesthemselves.
It is, and obviously the US has50 different states.
What we have at the end of theday is 50 different policies, 50
(12:56):
different sovereign entitiesthat are overseeing their own
shell company empire, shellcompany policies, shell company
creations and protections.
Again, the book goes into farmore detail.
Some of those states may befamiliar to readers and
listeners at this point.
These are places like Delaware,these are places like Wyoming,
(13:16):
places like Nevada.
These are all too oftenrelatively small states that
don't have a lot of otherindustrial base or natural
resource base that realize thereis a growing global market
Again much of it rooted in thekleptocratic regimes, the
dictators, autocracies, narcotraffickers, environmental
climate destroyers, wildlifepoachers, on and on and on, that
(13:39):
are looking to use anonymousshell companies to hide and
launder their money legallyeasily and, in many cases in
perpetuity, to hide their tracks.
These American states, theAmerican state legislatures in
charge of these states, realizethere is a growing demand for
anonymous shell companies.
And why can't?
(14:00):
Why shouldn't the Delaware'sand the Wyoming's and the
Nevada's of the world, andcertainly of the US, be the ones
to provide it?
Why can't the Delaware's of theworld be the ones that make it
as easy as possible for any andall, regardless of the source of
wealth, regardless of how theymade their money, to set up an
anonymous shell company, toenjoy all of the secrecy
(14:20):
provisions while still beingable to control all the wealth
associated with that shellcompany and they'd be able to
move that money into whateverthey want, launder it into
whatever they want.
Why shouldn't Delaware be thetitan of this new world of
anonymous shell companies and,beyond that, the world of
offshoreing?
So, again, this is just onetool in a broader American
toolbox.
But when we're talking aboutshell companies in the US, it's
(14:43):
worth remembering it's not thefederal government, it is the
states that are all competingwith one another to provide more
secrecy provisions, moreoffshoring, more financial
protections and services thanone another for any and all
clients around the world.
Speaker 1 (14:58):
And there are examples as well.
I think what is key to pointout is just because somebody is
setting up an anonymous shellcompany, that doesn't
necessarily mean that they areguaranteed to be involved in
kind of illegal behavior, thatit's money laundering.
I think you've got a couple ofexamples in the book of where
companies have been set upanonymously for legitimate
reasons.
But I guess it does.
It enables that right.
As soon as that money is intheir shell company, there's no
(15:21):
way of knowing where it's comefrom, right.
Speaker 2 (15:23):
No, this is you're absolutely right.
Just because you see ananonymous show company
associated with a figure, with anetwork, with a government,
with whatever it may be, thatdoesn't necessarily mean that
money associated with that showcompany is illicit, is
ill-gotten, is dirty.
I mean, I think the most famousexample certainly the one that I
mentioned in the book is thatwhen the Disney Company was
(15:43):
first trying to purchase land inFlorida to create the magical
kingdom of Disney World downthere, they didn't want to spook
locals who would then drive theprice for their land up, so
they actually formed anonymousshow companies themselves to
purchase all of the land thatwould then become Disney World
itself.
So again, we do have anonymousshow companies to thank for all
(16:06):
the fun times families have beenhaving with Mickey Mouse and
the rest of the Disney folks inFlorida for however many decades
it's been.
Now, again, that's all fine andgood, but we have God knows how
many more examples at thispoint of arms traffickers, of
cartel heads, of sex traffickersand then, beyond that,
(16:32):
kleptocratic regimes themselvesalso relying on these anonymous
show companies.
As far as I'm concerned, thenegatives of these tools clearly
, and by a significant margin,outweigh all the positives that
we've seen associated again withthe theme parks and the
Disneyland's of the world in thepast.
Speaker 1 (16:51):
True and I think and going back to the kleptocracy
angle, I think what some of thethings in the book that it's
sometimes it's so obvious andit's such in terms of the money
and the wealth and the showiness.
You know there's somebody who'scollected this, the biggest
Michael Jackson collection inthe world.
That was one of the things thatthey did with their money.
You know, people buyingMaserati's, people sort of
(17:13):
partying on yachts, I guess.
And one thing that we talkedabout when we had conversations
earlier was is social mediaalmost making it more obvious
where this money is going?
Because obviously, if you'repartying on a yacht, you know,
with a billionaire, you'll postit to your Instagram, you'll
post it to your TikTok.
So it's not necessarily them,but maybe sort of the people
around them wanting to show offtheir wealth.
Speaker 2 (17:34):
Yeah, I think, I think and again, another great
question, I think, really one ofthe beauties, one of the few
enjoyable moments I had writingthis book, putting this book
together, you know,investigating the broader world
of kleptocracy and obviouslybeyond that, the United States
role therein is, you know, oneof the case studies that I focus
on in the book is this guynamed Theodore Obyang, who you
(17:58):
know his father is now thelongest standing dictator in the
world has been ruling the smallAfrican nation of Equatorial
Guinea for decades.
At this point, almost a halfcentury.
At this point, equatorialGuinea actually has, you know,
it's a very wealthy nation, hasthe highest per capita GDP of
any African state and yet somany of its people, so much of
(18:20):
its population, lives in dire,abject poverty, no access to
education, no access to, youknow, things like clean water,
you know, no access to just thebasic infrastructure of life,
because all of that money, somuch of that money has gone
toward the ruling family.
So this guy, theodore Obyang,he's the son, you know, he's
kind of the heir apparent to hisfather, and there is nothing
(18:42):
more he loves than trying totransform that wealth and use
that wealth to transform himselfinto a modern celebrity in the
21st century.
You see him, you hear storiesof him hobnobbing and schmoozing
with all of these celebritiesin places like the US, in places
like Europe.
You know he builds up thisfleet of you know, super
(19:03):
high-end cars, he has the yachts, he has the private jets, he
has the clothes and the watchesand he has all of the trappings
of modern celebrity andcertainly of modern wealth as
well.
And he was, you know, maybe alittle spoiler for the book.
He is the gentleman that youjust mentioned a moment ago,
julia, about collecting,creating the world's greatest
collection of Michael Jacksonmemorabilia.
(19:23):
I wouldn't know nearly as muchabout what he has been doing,
who he has been doing it with,where he's been spending his
money, how he's been spendinghis money.
I wouldn't know nearly as muchof that if it hadn't been for
his social media account, inparticular his Instagram account
, which, again, I hesitate torecommend to people because I
(19:46):
think it's going to leave acertainly a sour taste, a very
queasy feeling, in your stomachafter you do.
But it is a glimpse into thislifestyle of these kleptocrats,
of these transnational crooksand criminals that are taking
full advantage of their role inthese regimes, in pillaging
these populations inimmiserating entire nations and
(20:08):
then enjoying that wealthelsewhere.
And I will say it again, youknow there's far more details in
the book, but one of the thingsthat I was able to glean from
his social media account whichyou know writing before the
2010s, before the 2010s we do,but 2020s we never would have
known about is he had a, youknow, a big birthday bash a year
or two ago that he was able toinvite all of these American
(20:30):
singers, all these Americancelebrities to, and there's
videos on his Instagram accountof them singing to him, then
performing for him, schmoozingwith him, apparently not caring
one way or the other about wherehe got his wealth, about where
they are then getting theirpayment from, what it might mean
for local individuals, families, populations in Equatorial
(20:50):
Guinea itself, to say nothing oftheir participation in these
transnational money launderingnetworks.
You know, social media hasprovided just a incomparable
insight into the lives of thesekleptocrats.
That certainly, from a researchperspective, has been a gold
mine.
But, again, you do end uphaving a plenty sour taste in
(21:10):
the back of your throat whenyou're done scrolling through
these Instagram feeds.
Speaker 1 (21:15):
Yeah, I can imagine I'm tempted, but then not as
well.
Speaker 2 (21:18):
Yeah, yeah, yeah.
Speaker 1 (21:19):
Because I guess that, and I guess, going back to sort
of the more serious elements ofit, the damage to society is
obviously huge from thecommunities where the wealth is
exploited and it's removed from.
But then, in terms of thenations that are then holding
that money, I mean, does itundermine national security?
Does it undermine sort ofsanctions effectiveness?
(21:40):
It's such a loophole.
Speaker 2 (21:46):
No, I don't want to sound like I'm overblowing
things, but when we're talkingabout trillions of dollars
swirling and swilling throughthe offshore economy, we're
talking about a topic thattouches on, frankly everything,
and this was honestly one of thedifficulties of the book is
narrowing these things down,narrowing these topics,
narrowing these policies and,obviously, the effects on the
(22:07):
ground.
The title of the prologue wassomething that my editor
actually provided for me.
His phrase that we ended upusing for the title of the
prologue to the book was too bigto see, because we're talking
about things that certainly inthe US, talking about everything
from the finance sector to thereal estate sector, to the art
and auction house sector overthe automobile sector, the
(22:29):
luxury goods sector, plenty ofindustries involved but the
impacts on the ground range fromeverything from democratic
backsliding to environmentaldegradation and climate change,
to national security, to on andon and on.
Whether it's wealth inequality,whether it's gender imbalance
and gender violence, whetherit's, again, wildlife
(22:51):
trafficking, narco trafficking,sex trafficking, over and over
and over again.
All of these topics are relatedto the financial secrecy
provisions, the things likeanonymous shell companies or
anonymous trusts or anonymousinvestments elsewhere, the tools
and tactics that thesekleptocrats use with abandon and
(23:12):
that are provided by, in manycases, western jurisdictions,
especially the United States ofAmerica.
I mean, I can't tell you howmany times, julia, I was writing
this book, that I would justkind of sit back in my chair to
have to try to force myself towrap my mind around all these
different topics that areintertwined with that interweave
with what I was trying to writeabout, which is the modern
(23:34):
world of kleptocracy and, beyondthat, how it is that these
kleptocratic regimes are usingthe United States of America as
their effective money laundromat, their effective piggy bank to
continue, in many cases,destroying their nation's
wholesale, while gripping,holding on to power themselves.
Speaker 1 (23:50):
I mean, the litany of topics just goes on and on and
on, and I guess, in a moreoptimistic note, we talked about
some of the things that arebeing done in the UK to kind of
address this problem and thereare things that are, I guess,
trying to happen in the US,maybe talk through some of the
legislation that potentially aregoing to come in to, I guess,
well, attempt to tackle theproblem.
Speaker 2 (24:10):
Sure, julie, I have been accused and probably
rightfully so of being maybe alittle too optimistic about
where things are, where thingsare going, and maybe, at the end
of the day, that optimism ismaybe all we have to hang on to.
That's not exactly true.
We have seen significant policydevelopments over the past few
years, but there is still plentyof room to go in terms of
(24:32):
finally clamping down, finallybringing some transparency to
these networks.
So maybe I'll just talk aboutsome of the reasons for my
optimism over the past few yearsand you just mentioned the
United Kingdom.
For a decade, maybe longer, Ithink it's the United Kingdom
that a lot of folks think ofwhen they think of Western
(24:54):
jurisdictions that havetransformed into homes of dirty
money.
I mean, after all, london nowhas the nickname of London grad
for the Russian oligarchicwealth that has been stampeding
for years into the UnitedKingdom, as well as, obviously,
the UK's overseas territoriesand crown dependencies, places
like the British Virgin Islandsand the Caimans, providing all
(25:15):
of these tools that kleptocratsaround the world need.
At the same time, the UnitedKingdom of London has past
significant reforms over thepast few years that actually had
an article just a few monthsago in Financial Times
celebrating, calling to beemulated elsewhere, because of
(25:37):
how progressive and how muchforesight we have finally seen
from British politicians, fromBritish policymakers.
And these are things likefinally enforcing the
transparency requirements forBritish formed shell companies,
finally being able to identifyand then going after those
companies that don't identifythose who are actually
(25:59):
controlling British shellcompanies.
Or look at things like Britishreal estate.
At long last we are finallyseeing legislation that will no
longer allow offshore entitiesto be purchasing British
property in places like Mayfair,in places like Surrey you know,
all these other jurisdictionsthat are so closely associated
with oligarchic, kleptocraticwealth.
And we have seen finally afocus in London at tackling the
(26:23):
scourge of London grad, thescourge of the UK's
transformation in the firstplace.
That is absolutely a reason foroptimism.
The United Kingdom can do thisin every other jurisdiction that
is now an offshore jurisdictionitself can follow suit and
obviously should follow suit.
Now in the United States ofAmerica, unfortunately, we
haven't seen as much progress,but we have seen progress
(26:45):
nonetheless.
A few years ago, the US finallypassed something called the
Corporate Transparency Act,which is still going through the
rulemaking progress.
They're still finalizing thelanguage, but once it's finally
implemented, will no longerallow the formation of anonymous
shell companies in the UnitedStates of America.
At long last, states and otherjurisdictions will have to
(27:07):
identify who is actually behindthe shell companies in the
Delaware's and the Wyoming's andthe Nevada's of the world.
So we're still waiting for that.
We're also still waiting, butit is coming.
Not sure if it's going to bethis week, next week, next month
, a few months from now.
It's going to come at somepoint.
Regulations from the executivebranch, from the White House,
(27:28):
finally requiring the Americanreal estate industry to also
conduct basic due diligenceabout who it is selling
properties to, about whose moneyit is circulating.
It is in many cases launderinginto the American real estate
industry.
Now this is again a far broaderstory.
This should have happeneddecades ago, but because of an
(27:48):
exemption in the real estateindustry, the American you know
again whether it's residentialproperties, commercial
properties, so on and so forththey've been free to work with
any kleptocrat they've wantedfor years and at long last that
appears to be finishing sometimein the not too distant future.
So again, we've seen progressin the shell companies.
We've seen progress in realestate.
There are plenty of other areaswe have seen slow, fitful
(28:11):
progress in, but it has beenprogress nonetheless.
Now again, it would have beengreat to have this 20, 30 years
ago, but I do think, or maybewonder, whether or not we had to
kind of get to this point inthe first place before folks
realized just how much damageplaces like the United States of
America were doing, what anoutsized role the Delaware's,
(28:32):
the Wyoming's and Nevada's wereplaying for transnational
criminal networks to operateinto launder untold wealth in
the US and elsewhere.
Speaker 1 (28:43):
So I guess there is.
There is hope and, like yousaid, you're often been accused
of being too optimistic.
I mean, how do you, how do yousee things panning out in the
future?
Do you think that this is goingto?
I mean, I don't think there'sever going to be a magic one
where suddenly everything iswonderful and nothing.
You know, there's nokleptocratic activity anywhere.
But I mean, how optimistic areyou that things will change?
What do you think that it willtake, maybe above the
(29:06):
legislation that you justreferred to, to really make an
impact?
Speaker 2 (29:09):
I do, I guess, two responses to that, julie One.
You know, on the one hand myoptimism has continued, however
misplaced some of it has been.
Unfortunately, much of that isdue to Vladimir Putin's you know
expanded invasion last year ofUkraine, which I think brought
the national security elementand salience of kleptocracy
(29:30):
certainly unchecked kleptocracylike we see in Russia really
brought that to bear tolegislators and policy makers in
Washington, in London, inBrussels, in Ottawa and
elsewhere.
You know, I really think thatthat has lit a fire among policy
makers, among civil society,among even those who were just
kind of on the fence aboutwhether or not we actually
needed things like shell companyreform, things like
(29:52):
transparency, reform in realestate.
You know, this is going to befor future historians to kind of
debate and disentangle, but Ido think that that's, you know,
the fact that that has continued, the fact that it's
destabilized so much else hasacted as a propellant for these
long overdue reforms themselves.
That will continue, at least inWestern jurisdictions, for the
(30:15):
foreseeable future.
Now you mentioned, you know youdon't think the scourge of
kleptocracy is going anywhereanytime soon, and you're
absolutely right.
So you know the demand sidefrom these kleptocratic regimes,
dictators, autocrats, armstraffickers, so on and so forth.
You know that's not goinganywhere.
They still want to hide andlaunder their wealth in.
(30:37):
You know third partyjurisdictions get it out of the
country that they're looting sothey can enjoy it elsewhere.
That demand's not goinganywhere.
The supply side elements, youknow the shell company formation
, the anonymous investments, thelegal protections.
You know that is what we seeshifting right now and because
of the progress we've seen inWashington, because of the
progress we've seen in theUnited Kingdom, as well as in
(30:59):
Brussels, as well as inAustralia, in the broader West,
the progress we've seen, youknow, to my mind indicates and
we're seeing early evidence ofthis that the best days of
offshoring that wealth in theWest may be, perhaps will be
behind us, which is greatinsofar as I certainly no longer
want to see the United Statesof America as the center of the
(31:21):
offshoring world.
But you know, it's kind of likewhack-a-mole Some other
jurisdiction is going to pop up,some other countries, some
other nation is going to pop itshead up and say, well, if
you're not going to take thatwealth certainly we'd love to
have it we would be more thanhappy to service, to anonymize,
to launder all that money thatthe oligarchs and the
clup-tocrats around the worldwant.
(31:42):
And certainly we're seeingearly indications that other
jurisdictions are happy to pickup the slack to offer all of the
laundering services thatpreviously the United States and
places like the United Kingdomhad offered.
So, yes, I suppose, with allthe optimism about where things
are going in the United States,there's still plenty of
pessimism abounding, julia,about a new jurisdiction acting
(32:04):
as a new home for all the crooksand the criminals and the
clup-tocrats around the world tofind safe harbor.
Speaker 1 (32:12):
So good for the US, not so good for other areas.
But we'll see, we'll have tokeep an eye on it.
I think I guess is there any.
You know one thing we alwaysask on these podcasts is there
any kind of closing advice?
You know we obviously work withcompliance professionals, we
work with a range of companies.
You know, is there anythingthat I guess that you would
(32:33):
advise in terms of maybe justbeing aware of this, just
raising awareness?
How can companies or corporatesor, you know, ngos, maybe play
their part to try to addressthis problem?
Speaker 2 (32:45):
Yeah, yeah, absolutely.
And again, I'm sure thelisteners of this are obviously
in many ways far more wellversed in these topics than I am
and certainly than the generalbody politic I mean.
My advice for the broaderaudiences out there is to
understand that the word, theterm offshore is, you know, by
(33:05):
the 21st century.
It is such a misnomer, it issuch a misleading term in and of
itself.
The days of financial secrecy,jurisdictions, of
pro-clutocratic havens beingoffshore, being small islands in
the Caribbean or theMediterranean or the South
Pacific, which they originallywere, you know, those days are
far, far, far behind us and inthe United States example, in
(33:28):
case you know, those offshoringservices have been brought in a
very real sense back onshore.
So even though we're using thatterm offshore finance, offshore
services, offshorejurisdictions it is such a
misleading term that it's justworth remembering Whenever you
see it.
It no longer means those smallislands somewhere far away.
It means those Westerneconomies, those states like
(33:50):
Delaware and Wyoming, you know,the landlocked states themselves
.
That's what it now indicates.
It doesn't actually meanliterally offshore anymore.
I would say more, particularlyfor audiences that I think you
know you and your colleagues areaddressing and are working with
Julia.
It's that one things are reallyin such flux right now that
we're going to see emergingjurisdictions as these new
(34:13):
centers of offshore finance.
You know, I don't know what'sgoing to emerge, but some other
jurisdiction is going to rise tothe fore.
One thing.
The other element and one thingwe didn't talk about today is,
even though I have been talkingabout, you know, shell companies
, real estate investments.
You know, to another extent,private equity investments,
hedge fund investments.
You know auction houses, artmarkets and so on and so forth.
(34:35):
You know, in the United States,one other jurisdiction and one
another tool that I go into inthe book that I do think is
still worth elevating theprofile of, is the role and
construction of trusts and mostparticularly the role and
construction of trusts in thestate of South Dakota, which
again the book goes into farmore detail on and other
(34:57):
journalists have begun lookinginto it.
South Dakota has emerged as kindof an offshore haven unto
itself that has really kind ofrefined, has really perfected
the art of financial secrecy, ofperpetual financial secrecy,
that is attracting, at lastcheck, hundreds and hundreds of
(35:19):
billions of dollars from aroundthe world that no one has any
idea where it's coming from.
No one has any idea what it'sbeing done after it kind of goes
through this till of SouthDakota trusts.
You know what investments areflowing from that, what other
financial networks are connectedto that.
You know I was actually justlooking at some of the state
filings just yesterday and youknow South Dakota is on pace to
(35:40):
have trillions of dollars inanonymized wealth housed in the
state by the end of this decadeand tens of trillions of dollars
by the end of the next decade.
Again, we only have a fractionof a fraction of a fraction of
understanding of where thatwealth is coming from, which
kleptocratic regimes, whichcomponents, which criminal
networks, which launderingnetworks it's connected to.
(36:02):
And you know, for as muchoptimism as I mentioned a moment
ago about progress inWashington in certain elements,
we still haven't seen anyprogress whatsoever about the
trust industry.
So that's just.
You know.
One thing I would flag, I wouldrecommend flagging on my end,
is just be on the lookout forthe usage, the increasing usage,
of trust and trust structures,especially out of states like
(36:22):
South Dakota, because you knowwhat little we know is
incredibly concerning in and ofitself, whether it's, you know,
money launderers, whether it'sfentanyl dealers, whether it's
armed traffickers that arealready looking to the South
Dakotas of the world, to youknow, hide their wealth, launder
their wealth and use thosesecrecy provisions for all their
(36:43):
worth.
Speaker 1 (36:44):
It's fascinating conversation, casey.
Thank you so much for joiningus today.
It's been brilliant, casey,michelle, author of American
Kleptocracy, how the US createdthe world's greatest money
laundering scheme in history.
Speaker 2 (36:56):
Julie, thanks so much for having me.
Thank you.
On this episode of the Rig Tech Pulse, we're joined
by Casey Michelle, author ofAmerican Kleptocracy how the US
created the world's greatestmoney laundering scheme in
history.
If you're interested inlearning more about Casey, his
book or his other journalisticworks, you'll find a link to his
website in the show notes.
Casey, thank you so much forjoining us today.
Speaker 2 (00:32):
Julie, thanks so much for having me today.
Speaker 1 (00:34):
No, no problem, Can you?
I mean, you've got a veryinteresting background as a
journalist and obviously now asan author.
Could you just give us a littlebit of background about kind of
your career to date, how youcame up with sort of the areas
of interest that you work in now, and then we'll dive into the
book after that.
Speaker 2 (00:50):
Yeah, absolutely.
I mean, I think I've followedmaybe a relatively atypical path
in so far as it's not the onethat you would generally find of
a journalist certainly anAmerican journalist covering
transnational crime,transnational money laundering.
I mean much of it.
There's plenty of influences myprevious work as a journalist
in the States and elsewhere, aswell as my time back in academia
and graduate school here in NewYork studying the topic of
(01:12):
transnational money launderingand how it is that authoritarian
and dictatorial regimes moveand hide and launder their money
across the West, especially inplaces like the United States of
America.
But really, to get back to theroot of things, on my end, kind
of the initial spark for thiswas my time living, working and
covering the country ofKazakhstan.
(01:33):
This was back in the early2010s.
I was actually working as aPeace Corps volunteer over there
, working as an English teacherin a very small village up in
northern Kazakhstan, obviouslyworking with some wonderful
people, working with somewonderful kids.
But while I was there, it wasmy first time really living and
operating and socializing in acountry overseen by what we
(01:54):
would come to understand as akleptocratic regime at the time,
overseen by a truly distastefulgentleman named Nersultan
Nazarbayev, who really createdthe playbook for so much of what
we now understand as modernkleptocracy.
But that's my first time livingand operating in a country like
that and seeing firsthand notonly how it is that these
regimes, these individuals,these ruling family members and
(02:16):
their inner circles rule thesecountries, control the state
finances and really pillagethose nations themselves and
those populations, tapping intothe educational budgets, the
health budgets, theinfrastructure budgets, but
beyond that, how it is thatthose countries and those
regimes move their moneyelsewhere, nersultan Nazarbayev
himself moving so much of themoney associated with himself
(02:38):
and his inner circle into placeslike the West and certainly
into places like the UnitedStates of America.
So I've said elsewhere, the bookthat I wrote wasn't dedicated
to Nazarbayev himself.
It certainly wasn't writtenwith him in mind in particular.
There are plenty of otherstories that I addressed
throughout the book, but he wasalways this kind of little voice
in the back of my head or thislittle figure on my shoulder as
(02:59):
I wrote, who was just, you know,someone I liked to reference
throughout because of theplaybook that he set in
Kazakhstan, that I got to see onthe ground there.
That really propelled so muchof my interest in modern
kleptocracy.
Speaker 1 (03:13):
So I guess you came at it obviously sort of seeing
firsthand and then the bookitself.
So American kleptocracy how theUS created the world's greatest
money laundering scheme inhistory.
You worked as an investigativejournalist.
How did it go from working oninvestigative pieces to actually
writing a book?
Is it something that you alwayswanted to do?
Is it something that you alwayshad in the back of your mind?
Is it kind of a?
(03:33):
How long did it take to getfrom sort of concept to actually
publishing this thing?
Speaker 2 (03:39):
Yeah, julia, that's a great question and honestly, it
wasn't something I wanted to doinitially at the outset.
Insofar as I wanted to, or endedup writing a book on
kleptocracy and certainly theUS's transformation therein, I
mean, it wasn't something that Iwas motivated by at the outset,
but I think part of that is thereason that I ended up writing
the book in and of itself,because at the outset of
(03:59):
covering transnational moneylaundering networks, covering
kleptocratic networks,investigating how it is that
they use whether it's Americanshell companies, american trusts
, american real estate agents,american lawyers, so on and so
forth to hide and launder theirmillions or billions, or
potentially even more, inillicit wealth attached to them
and their regimes, you know whenI certainly began as a
(04:19):
journalist, and I'm sure as manyother investigative journalists
, began covering this topic, youknow our understanding of this
world, our understanding ofthese networks, how they operate
, how they maneuver, how theynavigate and, beyond that, who's
helping them construct thesenetworks.
You know our understanding ofthat at the outset is so
miniscule and it really tookyears for me working as a
(04:40):
journalist, studying in graduateschool, connecting with some
incredible academics that haddevoted their careers to this,
communicating with otherpolicymakers in places like
Washington or London or Ottawaor elsewhere, to kind of slowly
begin peeling back the layers ofhow it is that the world of
modern kleptocracy operates inthe 21st century.
(05:01):
But beyond that actuallydeveloped in the first place,
and obviously beyond that wherethings are going moving forward.
I mean again, at the outset Ihad no idea I'd ever write a
book like this, but that wasbecause I and the others that
were beginning their careersdoing this had such a little
understanding of how thesenetworks operated.
And it wasn't until I don'tknow how many years, in six,
seven, eight, nine years workingas a journalist and obviously
(05:23):
again in academia as well, thatI finally have this idea,
finally had this notion foraddressing in particular the
American story, the Americanrole within this.
Obviously the story is abouttransnational, this
transnational phenomenon writlarge, but in particular the
American transformation into thecenter of so many of these
off-shoring networks.
And, as I'm sure you andlisteners can hear you know I do
(05:46):
have this American accent.
I am a proud, you know, bornand bred American that realized
only after years of working onthis topic that there was a
particular story of the UnitedStates transformation that was
worth telling, because I and somany other Americans as well,
had no idea that this was takingplace right here in the United
States of America.
Speaker 1 (06:07):
And some, I mean some of the figures.
I think initially, like youknow, I won't kind of go into
the book too much becauseobviously you know people can
read it for themselves, but Imean it's vast amounts of wealth
.
You know huge amounts of moneyand I think you talk about one
of the phrases that you use issort of these sudden eruptions
of wealth.
Can you, without sort ofspoiling too much, I maybe give
(06:28):
some of the obvious examplesthat you talk through in the
book, because I mean it'sfascinating and it's
mind-blowing?
Speaker 2 (06:33):
Sure, I mean, I think that's, without tooting my own
horn, a great phrase tohighlight, because I do think
that notion of eruptions orgeysers, or new fountains of
wealth, especially illicit,questionable, suspect wealth
erupting around the world overthe past 20, 30, 40 years, much
of it from newly independentstates, post-colonial states,
(06:56):
post-soviet states, in which newruling powers, ruling regimes,
grab the levers of state powerand of state finances and open
their economies, open theirbodies politic to new
investments without any kind ofregulatory or transparency
oversight.
That we saw, whether it's inplaces like Sub-Saharan Africa,
(07:18):
certainly in places like CentralAsia, parts of Eastern Europe,
parts of Southeast Asia, overand over and over again, these
new governments coming in andopening up these new seams,
these new sieves, these newgeysers of wealth that were, as
we now know, always looking fora new home, always looking for a
(07:39):
new place to go.
Because these new eruptions ofwealth, unfortunately, because
they were affiliated with andassociated with and controlled
by those ruling regimes whichall too often are toppled, are
overthrown, follow themselves afowl of, whatever government may
follow them, those individualsand their wealth associated with
them are always looking to movethat money elsewhere, to hide
(08:03):
that money elsewhere, whilestill enjoying that money, the
fruits of their rule, of theirregime, or of their family
members or of their innercircles as well.
This is a story we saw over andover and over, again and again.
I obviously write about a fewof them in my book, focusing on
countries like Equatorial Guinea, focusing on countries like
(08:24):
Ukraine, but by no means limitedto those we've seen this in,
whether it's the Gabon's, theVenezuelas, the Sri Lankans, the
Malaysians, the Kyrgyzstan's,the Kazakhstan's of the world,
over and over and over.
Anytime, you see thisauthoritarian, non-democratic
regime taking power andespecially again in these
post-colonial, post-sovietstates, the eruption of wealth
being hoovered up, as we nowknow, by these Western
(08:47):
jurisdictions, in many cases theformer colonial powers
themselves, whether it's theUnited Kingdoms, the France's,
or even the Canada's, theAustralia's or, as I write about
in this book, the United Statesof America, that opened their
doors over and over and overagain, year in and year out, to
all of this illicit wealth,creating the kinds of policies,
(09:09):
creating the kinds of loopholesand exemptions that invited all
of this suspect, questionable inmany cases, dirty money in to
be laundered, to be stashed and,at the end of the day, to be
enjoyed by those new rulingregimes, those new kleptocratic
regimes whose wealth, accordingto the best estimates that we
have, runs into the trillionsand potentially tens of
(09:32):
trillions of dollars.
And I say again, the bestestimate.
So much of what we have seen inthis world is so baked, so
slathered, so covered in secrecythat we still have such a small
idea of how much money we'reactually talking about.
But again, the best estimateswe're talking about trillions of
dollars, in some casesequivalent to the size of the
GDP of China.
(09:53):
It's really this kind ofinvisible superpower that we're
talking about when we talk aboutthe offshore economy.
Speaker 1 (09:59):
And I guess when you talk about loopholes and sort of
the ways that this is beingmade possible anonymous shell
companies that's kind of the keyelement that you call out there
.
And obviously there are statesin the US where this happens.
It's not country wide.
So I guess the question maybefor people who aren't familiar
with the US, why is it that somestates can allow these other?
(10:19):
The federal government can't doanything about it.
Why is it that legislation isdiffering so much?
Speaker 2 (10:24):
Sure, absolutely.
I mean.
Another great question thatreally kind of gets into the
weeds about the particularAmerican elements of this story.
Just to pull back for a moment,I think a lot of folks at this
point are familiar, at leasttangentially familiar, with
anonymous shell companies.
These are legal entities, Imean, they are companies, they
are corporations, but they existreally only on paper.
(10:45):
There's no brick and mortar,there's no product they sell.
They exist only for the sake ofexisting and, beyond that, for
anonymizing who's controllingthem, who's controlling their
finances and who is controllingtheir wealth, and beyond that,
where that money associated withthose companies is actually
going.
And again, this is not aspecifically American phenomenon
or creation.
We see anonymous shell companiesformed around the world,
(11:08):
whether it's in Canada, inAustralia, perhaps, most
spectacularly, in the UnitedKingdom.
Think of things like London orthe British Virgin Islands or
the Cayman Islands, Britishoverseas territories and crown
dependencies.
There's plenty of jurisdictionsaround the world, especially in
the West, that provideanonymous shell companies
incredibly easily, incrediblycheaply.
(11:29):
You never have to actually goto these jurisdictions to set
one up.
A simple phone call or emailwill suffice.
That's all fine and good.
The American component of thisis simply, by dint of its size,
of its magnitude, the UnitedStates of America towers above
all other jurisdictions, allother countries and competitors
when it comes to setting upshell companies, when it comes
(11:52):
to setting up anonymous shellcompanies.
The last stat that I saw in themost recent study was that the
United States of America nowforms more legal entities than
the next 40-plus tax havenscombined.
As one example of the magnitude, the size and the heft of the
United States of America, theparticular twist within the
(12:13):
United States' example and rolewithin shell company creation
and, beyond that, the role ofshell companies in transnational
money laundering networks, isthat these companies are not
actually created by the federalgovernment themselves.
They're not actually created bythe White House or by the
Treasury Department or by folksin Washington DC.
(12:34):
This has a far broader historythat I go into more detail in
the book.
It really is a fascinatingintellectual journey.
But at the end of the day, it'snot the federal government that
oversees shell companies.
It's the American statesthemselves.
It is, and obviously the US has50 different states.
What we have at the end of theday is 50 different policies, 50
(12:56):
different sovereign entitiesthat are overseeing their own
shell company empire, shellcompany policies, shell company
creations and protections.
Again, the book goes into farmore detail.
Some of those states may befamiliar to readers and
listeners at this point.
These are places like Delaware,these are places like Wyoming,
(13:16):
places like Nevada.
These are all too oftenrelatively small states that
don't have a lot of otherindustrial base or natural
resource base that realize thereis a growing global market
Again much of it rooted in thekleptocratic regimes, the
dictators, autocracies, narcotraffickers, environmental
climate destroyers, wildlifepoachers, on and on and on, that
(13:39):
are looking to use anonymousshell companies to hide and
launder their money legallyeasily and, in many cases in
perpetuity, to hide their tracks.
These American states, theAmerican state legislatures in
charge of these states, realizethere is a growing demand for
anonymous shell companies.
And why can't?
(14:00):
Why shouldn't the Delaware'sand the Wyoming's and the
Nevada's of the world, andcertainly of the US, be the ones
to provide it?
Why can't the Delaware's of theworld be the ones that make it
as easy as possible for any andall, regardless of the source of
wealth, regardless of how theymade their money, to set up an
anonymous shell company, toenjoy all of the secrecy
(14:20):
provisions while still beingable to control all the wealth
associated with that shellcompany and they'd be able to
move that money into whateverthey want, launder it into
whatever they want.
Why shouldn't Delaware be thetitan of this new world of
anonymous shell companies and,beyond that, the world of
offshoreing?
So, again, this is just onetool in a broader American
toolbox.
But when we're talking aboutshell companies in the US, it's
(14:43):
worth remembering it's not thefederal government, it is the
states that are all competingwith one another to provide more
secrecy provisions, moreoffshoring, more financial
protections and services thanone another for any and all
clients around the world.
Speaker 1 (14:58):
And there are examples as well.
I think what is key to pointout is just because somebody is
setting up an anonymous shellcompany, that doesn't
necessarily mean that they areguaranteed to be involved in
kind of illegal behavior, thatit's money laundering.
I think you've got a couple ofexamples in the book of where
companies have been set upanonymously for legitimate
reasons.
But I guess it does.
It enables that right.
As soon as that money is intheir shell company, there's no
(15:21):
way of knowing where it's comefrom, right.
Speaker 2 (15:23):
No, this is you're absolutely right.
Just because you see ananonymous show company
associated with a figure, with anetwork, with a government,
with whatever it may be, thatdoesn't necessarily mean that
money associated with that showcompany is illicit, is
ill-gotten, is dirty.
I mean, I think the most famousexample certainly the one that I
mentioned in the book is thatwhen the Disney Company was
(15:43):
first trying to purchase land inFlorida to create the magical
kingdom of Disney World downthere, they didn't want to spook
locals who would then drive theprice for their land up, so
they actually formed anonymousshow companies themselves to
purchase all of the land thatwould then become Disney World
itself.
So again, we do have anonymousshow companies to thank for all
(16:06):
the fun times families have beenhaving with Mickey Mouse and
the rest of the Disney folks inFlorida for however many decades
it's been.
Now, again, that's all fine andgood, but we have God knows how
many more examples at thispoint of arms traffickers, of
cartel heads, of sex traffickersand then, beyond that,
(16:32):
kleptocratic regimes themselvesalso relying on these anonymous
show companies.
As far as I'm concerned, thenegatives of these tools clearly
, and by a significant margin,outweigh all the positives that
we've seen associated again withthe theme parks and the
Disneyland's of the world in thepast.
Speaker 1 (16:51):
True and I think and going back to the kleptocracy
angle, I think what some of thethings in the book that it's
sometimes it's so obvious andit's such in terms of the money
and the wealth and the showiness.
You know there's somebody who'scollected this, the biggest
Michael Jackson collection inthe world.
That was one of the things thatthey did with their money.
You know, people buyingMaserati's, people sort of
(17:13):
partying on yachts, I guess.
And one thing that we talkedabout when we had conversations
earlier was is social mediaalmost making it more obvious
where this money is going?
Because obviously, if you'repartying on a yacht, you know,
with a billionaire, you'll postit to your Instagram, you'll
post it to your TikTok.
So it's not necessarily them,but maybe sort of the people
around them wanting to show offtheir wealth.
Speaker 2 (17:34):
Yeah, I think, I think and again, another great
question, I think, really one ofthe beauties, one of the few
enjoyable moments I had writingthis book, putting this book
together, you know,investigating the broader world
of kleptocracy and obviouslybeyond that, the United States
role therein is, you know, oneof the case studies that I focus
on in the book is this guynamed Theodore Obyang, who you
(17:58):
know his father is now thelongest standing dictator in the
world has been ruling the smallAfrican nation of Equatorial
Guinea for decades.
At this point, almost a halfcentury.
At this point, equatorialGuinea actually has, you know,
it's a very wealthy nation, hasthe highest per capita GDP of
any African state and yet somany of its people, so much of
(18:20):
its population, lives in dire,abject poverty, no access to
education, no access to, youknow, things like clean water,
you know, no access to just thebasic infrastructure of life,
because all of that money, somuch of that money has gone
toward the ruling family.
So this guy, theodore Obyang,he's the son, you know, he's
kind of the heir apparent to hisfather, and there is nothing
(18:42):
more he loves than trying totransform that wealth and use
that wealth to transform himselfinto a modern celebrity in the
21st century.
You see him, you hear storiesof him hobnobbing and schmoozing
with all of these celebritiesin places like the US, in places
like Europe.
You know he builds up thisfleet of you know, super
(19:03):
high-end cars, he has the yachts, he has the private jets, he
has the clothes and the watchesand he has all of the trappings
of modern celebrity andcertainly of modern wealth as
well.
And he was, you know, maybe alittle spoiler for the book.
He is the gentleman that youjust mentioned a moment ago,
julia, about collecting,creating the world's greatest
collection of Michael Jacksonmemorabilia.
(19:23):
I wouldn't know nearly as muchabout what he has been doing,
who he has been doing it with,where he's been spending his
money, how he's been spendinghis money.
I wouldn't know nearly as muchof that if it hadn't been for
his social media account, inparticular his Instagram account
, which, again, I hesitate torecommend to people because I
(19:46):
think it's going to leave acertainly a sour taste, a very
queasy feeling, in your stomachafter you do.
But it is a glimpse into thislifestyle of these kleptocrats,
of these transnational crooksand criminals that are taking
full advantage of their role inthese regimes, in pillaging
these populations inimmiserating entire nations and
(20:08):
then enjoying that wealthelsewhere.
And I will say it again, youknow there's far more details in
the book, but one of the thingsthat I was able to glean from
his social media account whichyou know writing before the
2010s, before the 2010s we do,but 2020s we never would have
known about is he had a, youknow, a big birthday bash a year
or two ago that he was able toinvite all of these American
(20:30):
singers, all these Americancelebrities to, and there's
videos on his Instagram accountof them singing to him, then
performing for him, schmoozingwith him, apparently not caring
one way or the other about wherehe got his wealth, about where
they are then getting theirpayment from, what it might mean
for local individuals, families, populations in Equatorial
(20:50):
Guinea itself, to say nothing oftheir participation in these
transnational money launderingnetworks.
You know, social media hasprovided just a incomparable
insight into the lives of thesekleptocrats.
That certainly, from a researchperspective, has been a gold
mine.
But, again, you do end uphaving a plenty sour taste in
(21:10):
the back of your throat whenyou're done scrolling through
these Instagram feeds.
Speaker 1 (21:15):
Yeah, I can imagine I'm tempted, but then not as
well.
Speaker 2 (21:18):
Yeah, yeah, yeah.
Speaker 1 (21:19):
Because I guess that, and I guess, going back to sort
of the more serious elements ofit, the damage to society is
obviously huge from thecommunities where the wealth is
exploited and it's removed from.
But then, in terms of thenations that are then holding
that money, I mean, does itundermine national security?
Does it undermine sort ofsanctions effectiveness?
(21:40):
It's such a loophole.
Speaker 2 (21:46):
No, I don't want to sound like I'm overblowing
things, but when we're talkingabout trillions of dollars
swirling and swilling throughthe offshore economy, we're
talking about a topic thattouches on, frankly everything,
and this was honestly one of thedifficulties of the book is
narrowing these things down,narrowing these topics,
narrowing these policies and,obviously, the effects on the
(22:07):
ground.
The title of the prologue wassomething that my editor
actually provided for me.
His phrase that we ended upusing for the title of the
prologue to the book was too bigto see, because we're talking
about things that certainly inthe US, talking about everything
from the finance sector to thereal estate sector, to the art
and auction house sector overthe automobile sector, the
(22:29):
luxury goods sector, plenty ofindustries involved but the
impacts on the ground range fromeverything from democratic
backsliding to environmentaldegradation and climate change,
to national security, to on andon and on.
Whether it's wealth inequality,whether it's gender imbalance
and gender violence, whetherit's, again, wildlife
(22:51):
trafficking, narco trafficking,sex trafficking, over and over
and over again.
All of these topics are relatedto the financial secrecy
provisions, the things likeanonymous shell companies or
anonymous trusts or anonymousinvestments elsewhere, the tools
and tactics that thesekleptocrats use with abandon and
(23:12):
that are provided by, in manycases, western jurisdictions,
especially the United States ofAmerica.
I mean, I can't tell you howmany times, julia, I was writing
this book, that I would justkind of sit back in my chair to
have to try to force myself towrap my mind around all these
different topics that areintertwined with that interweave
with what I was trying to writeabout, which is the modern
(23:34):
world of kleptocracy and, beyondthat, how it is that these
kleptocratic regimes are usingthe United States of America as
their effective money laundromat, their effective piggy bank to
continue, in many cases,destroying their nation's
wholesale, while gripping,holding on to power themselves.
Speaker 1 (23:50):
I mean, the litany of topics just goes on and on and
on, and I guess, in a moreoptimistic note, we talked about
some of the things that arebeing done in the UK to kind of
address this problem and thereare things that are, I guess,
trying to happen in the US,maybe talk through some of the
legislation that potentially aregoing to come in to, I guess,
well, attempt to tackle theproblem.
Speaker 2 (24:10):
Sure, julie, I have been accused and probably
rightfully so of being maybe alittle too optimistic about
where things are, where thingsare going, and maybe, at the end
of the day, that optimism ismaybe all we have to hang on to.
That's not exactly true.
We have seen significant policydevelopments over the past few
years, but there is still plentyof room to go in terms of
(24:32):
finally clamping down, finallybringing some transparency to
these networks.
So maybe I'll just talk aboutsome of the reasons for my
optimism over the past few yearsand you just mentioned the
United Kingdom.
For a decade, maybe longer, Ithink it's the United Kingdom
that a lot of folks think ofwhen they think of Western
(24:54):
jurisdictions that havetransformed into homes of dirty
money.
I mean, after all, london nowhas the nickname of London grad
for the Russian oligarchicwealth that has been stampeding
for years into the UnitedKingdom, as well as, obviously,
the UK's overseas territoriesand crown dependencies, places
like the British Virgin Islandsand the Caimans, providing all
(25:15):
of these tools that kleptocratsaround the world need.
At the same time, the UnitedKingdom of London has past
significant reforms over thepast few years that actually had
an article just a few monthsago in Financial Times
celebrating, calling to beemulated elsewhere, because of
(25:37):
how progressive and how muchforesight we have finally seen
from British politicians, fromBritish policymakers.
And these are things likefinally enforcing the
transparency requirements forBritish formed shell companies,
finally being able to identifyand then going after those
companies that don't identifythose who are actually
(25:59):
controlling British shellcompanies.
Or look at things like Britishreal estate.
At long last we are finallyseeing legislation that will no
longer allow offshore entitiesto be purchasing British
property in places like Mayfair,in places like Surrey you know,
all these other jurisdictionsthat are so closely associated
with oligarchic, kleptocraticwealth.
And we have seen finally afocus in London at tackling the
(26:23):
scourge of London grad, thescourge of the UK's
transformation in the firstplace.
That is absolutely a reason foroptimism.
The United Kingdom can do thisin every other jurisdiction that
is now an offshore jurisdictionitself can follow suit and
obviously should follow suit.
Now in the United States ofAmerica, unfortunately, we
haven't seen as much progress,but we have seen progress
(26:45):
nonetheless.
A few years ago, the US finallypassed something called the
Corporate Transparency Act,which is still going through the
rulemaking progress.
They're still finalizing thelanguage, but once it's finally
implemented, will no longerallow the formation of anonymous
shell companies in the UnitedStates of America.
At long last, states and otherjurisdictions will have to
(27:07):
identify who is actually behindthe shell companies in the
Delaware's and the Wyoming's andthe Nevada's of the world.
So we're still waiting for that.
We're also still waiting, butit is coming.
Not sure if it's going to bethis week, next week, next month
, a few months from now.
It's going to come at somepoint.
Regulations from the executivebranch, from the White House,
(27:28):
finally requiring the Americanreal estate industry to also
conduct basic due diligenceabout who it is selling
properties to, about whose moneyit is circulating.
It is in many cases launderinginto the American real estate
industry.
Now this is again a far broaderstory.
This should have happeneddecades ago, but because of an
(27:48):
exemption in the real estateindustry, the American you know
again whether it's residentialproperties, commercial
properties, so on and so forththey've been free to work with
any kleptocrat they've wantedfor years and at long last that
appears to be finishing sometimein the not too distant future.
So again, we've seen progressin the shell companies.
We've seen progress in realestate.
There are plenty of other areaswe have seen slow, fitful
(28:11):
progress in, but it has beenprogress nonetheless.
Now again, it would have beengreat to have this 20, 30 years
ago, but I do think, or maybewonder, whether or not we had to
kind of get to this point inthe first place before folks
realized just how much damageplaces like the United States of
America were doing, what anoutsized role the Delaware's,
(28:32):
the Wyoming's and Nevada's wereplaying for transnational
criminal networks to operateinto launder untold wealth in
the US and elsewhere.
Speaker 1 (28:43):
So I guess there is.
There is hope and, like yousaid, you're often been accused
of being too optimistic.
I mean, how do you, how do yousee things panning out in the
future?
Do you think that this is goingto?
I mean, I don't think there'sever going to be a magic one
where suddenly everything iswonderful and nothing.
You know, there's nokleptocratic activity anywhere.
But I mean, how optimistic areyou that things will change?
What do you think that it willtake, maybe above the
(29:06):
legislation that you justreferred to, to really make an
impact?
Speaker 2 (29:09):
I do, I guess, two responses to that, julie One.
You know, on the one hand myoptimism has continued, however
misplaced some of it has been.
Unfortunately, much of that isdue to Vladimir Putin's you know
expanded invasion last year ofUkraine, which I think brought
the national security elementand salience of kleptocracy
(29:30):
certainly unchecked kleptocracylike we see in Russia really
brought that to bear tolegislators and policy makers in
Washington, in London, inBrussels, in Ottawa and
elsewhere.
You know, I really think thatthat has lit a fire among policy
makers, among civil society,among even those who were just
kind of on the fence aboutwhether or not we actually
needed things like shell companyreform, things like
(29:52):
transparency, reform in realestate.
You know, this is going to befor future historians to kind of
debate and disentangle, but Ido think that that's, you know,
the fact that that has continued, the fact that it's
destabilized so much else hasacted as a propellant for these
long overdue reforms themselves.
That will continue, at least inWestern jurisdictions, for the
(30:15):
foreseeable future.
Now you mentioned, you know youdon't think the scourge of
kleptocracy is going anywhereanytime soon, and you're
absolutely right.
So you know the demand sidefrom these kleptocratic regimes,
dictators, autocrats, armstraffickers, so on and so forth.
You know that's not goinganywhere.
They still want to hide andlaunder their wealth in.
(30:37):
You know third partyjurisdictions get it out of the
country that they're looting sothey can enjoy it elsewhere.
That demand's not goinganywhere.
The supply side elements, youknow the shell company formation
, the anonymous investments, thelegal protections.
You know that is what we seeshifting right now and because
of the progress we've seen inWashington, because of the
progress we've seen in theUnited Kingdom, as well as in
(30:59):
Brussels, as well as inAustralia, in the broader West,
the progress we've seen, youknow, to my mind indicates and
we're seeing early evidence ofthis that the best days of
offshoring that wealth in theWest may be, perhaps will be
behind us, which is greatinsofar as I certainly no longer
want to see the United Statesof America as the center of the
(31:21):
offshoring world.
But you know, it's kind of likewhack-a-mole Some other
jurisdiction is going to pop up,some other countries, some
other nation is going to pop itshead up and say, well, if
you're not going to take thatwealth certainly we'd love to
have it we would be more thanhappy to service, to anonymize,
to launder all that money thatthe oligarchs and the
clup-tocrats around the worldwant.
(31:42):
And certainly we're seeingearly indications that other
jurisdictions are happy to pickup the slack to offer all of the
laundering services thatpreviously the United States and
places like the United Kingdomhad offered.
So, yes, I suppose, with allthe optimism about where things
are going in the United States,there's still plenty of
pessimism abounding, julia,about a new jurisdiction acting
(32:04):
as a new home for all the crooksand the criminals and the
clup-tocrats around the world tofind safe harbor.
Speaker 1 (32:12):
So good for the US, not so good for other areas.
But we'll see, we'll have tokeep an eye on it.
I think I guess is there any.
You know one thing we alwaysask on these podcasts is there
any kind of closing advice?
You know we obviously work withcompliance professionals, we
work with a range of companies.
You know, is there anythingthat I guess that you would
(32:33):
advise in terms of maybe justbeing aware of this, just
raising awareness?
How can companies or corporatesor, you know, ngos, maybe play
their part to try to addressthis problem?
Speaker 2 (32:45):
Yeah, yeah, absolutely.
And again, I'm sure thelisteners of this are obviously
in many ways far more wellversed in these topics than I am
and certainly than the generalbody politic I mean.
My advice for the broaderaudiences out there is to
understand that the word, theterm offshore is, you know, by
(33:05):
the 21st century.
It is such a misnomer, it issuch a misleading term in and of
itself.
The days of financial secrecy,jurisdictions, of
pro-clutocratic havens beingoffshore, being small islands in
the Caribbean or theMediterranean or the South
Pacific, which they originallywere, you know, those days are
far, far, far behind us and inthe United States example, in
(33:28):
case you know, those offshoringservices have been brought in a
very real sense back onshore.
So even though we're using thatterm offshore finance, offshore
services, offshorejurisdictions it is such a
misleading term that it's justworth remembering Whenever you
see it.
It no longer means those smallislands somewhere far away.
It means those Westerneconomies, those states like
(33:50):
Delaware and Wyoming, you know,the landlocked states themselves
.
That's what it now indicates.
It doesn't actually meanliterally offshore anymore.
I would say more, particularlyfor audiences that I think you
know you and your colleagues areaddressing and are working with
Julia.
It's that one things are reallyin such flux right now that
we're going to see emergingjurisdictions as these new
(34:13):
centers of offshore finance.
You know, I don't know what'sgoing to emerge, but some other
jurisdiction is going to rise tothe fore.
One thing.
The other element and one thingwe didn't talk about today is,
even though I have been talkingabout, you know, shell companies
, real estate investments.
You know, to another extent,private equity investments,
hedge fund investments.
You know auction houses, artmarkets and so on and so forth.
(34:35):
You know, in the United States,one other jurisdiction and one
another tool that I go into inthe book that I do think is
still worth elevating theprofile of, is the role and
construction of trusts and mostparticularly the role and
construction of trusts in thestate of South Dakota, which
again the book goes into farmore detail on and other
(34:57):
journalists have begun lookinginto it.
South Dakota has emerged as kindof an offshore haven unto
itself that has really kind ofrefined, has really perfected
the art of financial secrecy, ofperpetual financial secrecy,
that is attracting, at lastcheck, hundreds and hundreds of
(35:19):
billions of dollars from aroundthe world that no one has any
idea where it's coming from.
No one has any idea what it'sbeing done after it kind of goes
through this till of SouthDakota trusts.
You know what investments areflowing from that, what other
financial networks are connectedto that.
You know I was actually justlooking at some of the state
filings just yesterday and youknow South Dakota is on pace to
(35:40):
have trillions of dollars inanonymized wealth housed in the
state by the end of this decadeand tens of trillions of dollars
by the end of the next decade.
Again, we only have a fractionof a fraction of a fraction of
understanding of where thatwealth is coming from, which
kleptocratic regimes, whichcomponents, which criminal
networks, which launderingnetworks it's connected to.
(36:02):
And you know, for as muchoptimism as I mentioned a moment
ago about progress inWashington in certain elements,
we still haven't seen anyprogress whatsoever about the
trust industry.
So that's just.
You know.
One thing I would flag, I wouldrecommend flagging on my end,
is just be on the lookout forthe usage, the increasing usage,
of trust and trust structures,especially out of states like
(36:22):
South Dakota, because you knowwhat little we know is
incredibly concerning in and ofitself, whether it's, you know,
money launderers, whether it'sfentanyl dealers, whether it's
armed traffickers that arealready looking to the South
Dakotas of the world, to youknow, hide their wealth, launder
their wealth and use thosesecrecy provisions for all their
(36:43):
worth.
Speaker 1 (36:44):
It's fascinating conversation, casey.
Thank you so much for joiningus today.
It's been brilliant, casey,michelle, author of American
Kleptocracy, how the US createdthe world's greatest money
laundering scheme in history.
Speaker 2 (36:56):
Julie, thanks so much for having me.
Thank you.
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