Veteran U.S. prosecutor to lead task force probing Russian oligarchs Reuters. Task force “KleptoCapture.”
Non-Fiction
How London and the US became safe havens for dirty money
Three books examine how and why financial centres in Britain and the US responded to the challenges of the postwar world by assuming the role of ‘butlers’ for autocrats
When Liz Truss recently stood up in parliament to announce a “hit list of oligarchs” the UK foreign secretary said that she wanted “a situation where they cannot access their funds, their trade cannot flow, their ships cannot dock and their planes cannot land”. Her speech, along with others from the floor of the House of Commons slamming oligarchs and their associates, was just one prominent example of how Vladimir Putin’s savage attack on Ukraine has brutally brought to the fore the phenomenon known as “Londongrad”.
The warm home the British establishment and its financial system provide for dirty money from the post-Soviet sphere and elsewhere may finally begin to be seen as the embarrassment — and worse — that it constitutes. Take Dmitry Firtash, exposed in 2006 as the part-owner of the company handling Russia’s Ukrainian gas shipments which long gave Moscow a stranglehold over Kyiv. After he spent money lavishly on everything from luxury houses to Cambridge scholarships and political donations, Firtash’s UK social status seemed to have no limits — he was feted by parliamentarians and shook hands with the Duke of Edinburgh — until he was arrested in Austria on an FBI indictment for corruption.
Much excellent reporting in the past decade has revealed how corrupt elites from around the world launder looted money in the west. Yet the focus has been on the looting as much as on the laundering. The hows and whys of rich countries’ transformation into autocrats’ handmaids — or in Oliver Bullough’s powerful metaphor, butlers — have not received the attention they deserve. A number of new books have set out to change that — and their timing, sadly, could not be better, as tightening sanctions on Putin’s cronies becomes a weapon of choice in the west’s pushback against his aggression.
In Butler to the World, Bullough takes the UK to task. Jeeves, the unflappable butler of PG Wodehouse’s Bertie Wooster series, much loved by thousands of British and Anglophile readers, may not be an obvious angle of attack. But Bullough’s aim is sharp: “As written by Wodehouse it’s jolly funny, but [if] you focus on Jeeves’s actions rather than on his smooth-talking, soft-shoed manner, you end up with something extremely dark: a mercenary, a fixer-for-hire.” And that is just what, Bullough explains, Britain has become in its willingness to service all comers as long as they pay enough.
Bullough takes his metaphors seriously, to the point of enrolling in a school for actual butlers (he was kicked out after flower decoration class, once he was rumbled as a money-laundering researcher). Butlering goes far beyond accepting deposits from the world’s corrupt: it extends to procuring (palatial) housing for them, educating their children, honouring them in every way from naming rights at Britain’s world-class universities to royal patronage, as well as catering to all the minor needs the super-rich might need.
All this started, in Bullough’s highly readable account, with Britain’s disastrous military adventurism in Suez in 1956, when it joined France and Israel to try to dislodge Egypt’s nationalisation of the canal. This ended in humiliation when US opposition exposed British strategic postwar impotence. His thesis is that after strategic withdrawal, “butlering” became the answer to US secretary of state Dean Acheson’s challenge that Britain had “lost an empire, but not yet found a role”. The role would be to facilitate money flows around the world, no questions asked.
Several factors came together to make this happen. Bullough describes a postwar City of London determined to insulate itself from government regulation, ready to embrace innovations that would mean good business for financiers. He also highlights how in a world of hard currency shortage — withholding dollars was the means by which Washington made London give up Suez — there was a lot to like in allowing cross-border money flows that escaped national regulation. For Bullough, whose earlier book Moneyland explored corruption in the global financial system, the midcentury emergence of the eurodollar system of offshore dollar transfers and of Britain’s butlering role are two sides of the same dirty coin.
Then there was the imperial wind-down. “If Westminster was the head of the British empire,” Bullough writes, “the City [of London] was its heart, pumping money out into financial arteries that stretched to every continent and every city on earth.” In Bullough’s telling, “butlering” came to the rescue of British finance. Butler to the World bulges with stories of how past or remaining outposts of the empire, from the British Virgin Islands to Gibraltar, reinvented themselves as places to secrete away money or escape onerous rules.
American Kleptocracy, by corruption researcher Casey Michel, gives the US the same treatment as Bullough gives the UK. Reading the two together makes one a little sceptical of Bullough’s thesis that the UK is uniquely depraved in catering to dirty money. As Michel shows, some of the world’s deepest tax havens are US states, including not just Delaware (inventor of the shell company, according to the author) but also Nevada, South Dakota and Wyoming.
Like Bullough, Michel masterfully recounts the tragicomic outcomes when outré autocrats meet serviceable financial and legal systems — such as the “dictator bling” of Teodoro Nguema Obiang Mangue, son of Equatorial Guinea’s detestable president and notorious for his dozens of luxury cars and boats, friendships with US pop stars, and magpie-like collection of Michael Jackson memorabilia.
Michel gives Washington a more mixed assessment than the state governments — which in this context is a relative compliment. But Washington, too, is guilty of leaving too many loopholes in otherwise decent anti-money laundering laws for a number of transactions and professions, most notoriously real estate. Just one example from Michel’s book: in “Trump SoHo . . . the New York construct most closely affiliated with the entire Trump family . . . a staggering 77 per cent of unit sales went to buyers who fit money laundering profiles”.
These two books will leave no reader in any doubt that the US and the UK have a large class of “enablers”, or service providers such as bankers, lawyers, real estate agents, accountants and PR advisers needed to give dirty money a good home. That term gives the title to another book in this genre, Enablers, where the international financier class is taken to task by Frank Vogl, a former economic journalist and communications adviser to financial institutions who laments what has become of the professions he has spent a lifetime working for.
The US enabling class may be the most dangerous, given its influence in the politics of a more powerful country. But the US has successful heroes in Michel’s account. They range from the late senator Carl Levin, who attached anti-money laundering provisions to the Patriot Act after 9/11, to the dogged investigators who traced Obiang’s money and a justice department unit for confiscating kleptocrats’ assets. More recently, a bipartisan congressional vote banned anonymous shell companies last year, and the Biden administration has committed itself to an anti-corruption agenda.
Old peculiarities of British law, from Scottish limited partnerships to private criminal prosecutions, became perfect instruments for crooks to hide their money and silence their critics
Bullough’s heroes, in contrast, are few and far between, and much less powerful than Michel’s: backbenchers without the staffing US legislators enjoy, or underresourced regulators. Bullough makes a good case that there is something particularly conducive to “butlering” in Britain’s peculiar set-up. The country’s unwritten social codes; its upper class’s exclusive solidarity and unspoken obsession with money; the common law tradition and resistance to codified rules — all conspire to frustrate crackdowns or even the willingness to crack down.
In Britain’s financial elite, “chaps don’t tell other chaps how to behave,” writes the author. And so old peculiarities of British law, from Scottish limited partnerships to private criminal prosecutions, became perfect instruments for crooks to hide their money and silence their critics.
Bullough and Michel both deserve praise for going beyond moralising and pointing out how an industry geared to enabling the corrupt is not just unsavoury but can hurt a country’s real economic prospects. In his account Michel shows how derelict factories in America’s rust belt bizarrely became conduits for laundering dirty money. Twenty-something investors from an orthodox Jewish community in Miami would turn up, bereft of industrial or corporate experience but flush with cash which US authorities say derived from Ukrainian corruption. They would pay over the odds for metal plants and buildings in backwater communities desperate for outside investment.
But these communities languished as the new owners proved indifferent to development; all they needed was the safety and discretion offered by obscure US land and property holdings.
The attack on Ukraine shows America’s and Britain’s enabling industries (though they are not alone) are plainly international security risks. It is mind-numbing that it should take war in Europe to make politicians aware of this. All the more credit to writers who keep lifting the veil on the unseemly parts of the financial services industry and urging us all not to avert our eyes. There are signs governments are being galvanised into ending their addiction to dirty money inflows.
Upon reading these books, you realise that we still fall far short of this, despite current sanctions. This reader, at least, will not believe things have changed until he sees it.
Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminalsby Oliver Bullough, Profile, £20, 288 pages
American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme in History by Casey Michel, St Martin’s Press, $29.99/ Scribe UK, £18.99, 368 pages
The Enablers: How the West Supports Kleptocrats and Corruption — Endangering Our Democracy by Frank Vogl, Rowman & Littlefield, $32/£25, 216 pages
Martin Sandbu is the FT’s European economics commentator
General Sir Nick Carter: ‘Ukraine is a wake-up call’
The former head of the UK’s armed forces on how the west can reach out to Russians — and counter Vladimir Putin
It is no surprise that lunch with General Sir Nick Carter, recently retired head of the UK’s armed forces, begins with a history lesson. When I ask where he wants to eat, Carter, a keen amateur historian, invites me to join him for a German-themed meal at the National Army Museum.
This is specially cooked by the museum’s chef and served, at the general’s request, inside the exhibition on Britain’s deployment to postwar Germany. Given the news in Ukraine, it is all too relevant a setting.
“I think that there’s a bit of ‘back to the future’ about what’s unfolding [in Ukraine],” Carter explains. “What this exhibition reflects is a time when we had a balance of power in Europe and lots of mutual understanding between [the Soviet forces and the west] . . . and there’s an interesting question about how one gets back to a position where there’s mutual trust, and stability, and people are reassured.”
He zips around the dimly lit rooms of the Foe to Friend exhibition, showing me battle sketches, maps, and making sure to emphasise the UK-Soviet “Brixmis” mission, established at the end of the cold war as a legitimate communication channel between Soviet and British forces. The subtext — that Vladimir Putin’s regime would never agree to any such co-operation with Nato allies — is clear.
The general, 63, is the longest-serving military chief since Lord Mountbatten, having spent nearly eight years in senior leadership: the first four as head of the army, followed by another three and a half in the top job, Chief of the Defence Staff (CDS).
It is in this role that he has helped pioneer a shift in UK military priorities towards new projects in space, cyber and information warfare. The updated defence strategy, published last year to great fanfare, made much of Britain’s ambitions to boost its defence presence in the Indo-Pacific, anticipating a rising threat from China.
Now, however, the risks seem much closer to home. The exhibition tour over, we sit down to eat at a table for two between a plaque bearing the insignia of Britain’s military government in Germany and a 4ft-long slab of the Berlin Wall. Two videos from the exhibition are blaring out in the background: one loudly punctuated by bombing raids, the other a victors’ propaganda film. Anna, the museum’s head of catering, pours us each a glass of Pinot Grigio and agrees to turn down the sound effects. I think it’s only when you aggregate up everything that’s happened in the last 15 years . . . [that] you get a genuine appreciation of how Putin and his regime have essentially been fighting with us
We are meeting two days before Russia’s invasion. He points out that modern warfare is played out far more in the open than traditional conflict used to be. “I think that some of the imagery that we’ve seen of Russian deployments around Ukraine’s borders, 10 years ago, that would have been very highly classified information.
Now it’s available to everybody via Google satellites and Google Maps.” Anna arrives with our starters — rosettes of smoked salmon sprinkled with caviar and dill, served with asparagus and an avocado purée. Once Carter has explained the menu (“this is meant to be a German meal, and the Germans love their Spargel”), we turn back to Ukraine. The general himself has been unusually hawkish on Russia, having warned in a speech four years ago that Moscow represented “a clear and present danger” on Europe’s doorstep and “could initiate hostilities sooner than we expect”.
He advised that Britain should reduce its vulnerabilities to Russian malign influence and disinformation and upgrade its armoured infantry capabilities. The recent defence strategy repeatedly cited Russia as the “most acute” security threat to the UK, but ministers did not act consistently to curb the risks.
Downing Street sat on a report by parliament’s intelligence watchdog that criticised Moscow’s influence at the top of British society and the City of London’s role in laundering Russian finance. Ministers cut back on armoured vehicles and reduced the army by nearly 10,000 personnel to its smallest size in over three centuries. Were they ignoring Carter’s advice?
“I think it’s only when you aggregate up everything that’s happened in the last 15 years . . . [that] you get a genuine appreciation of how Putin and his regime have essentially been fighting with us,” he suggests. “And unless you really focus in on it, I think, given the pace of modern life and the dynamic nature of the media environment, there’s only so much bandwidth.
And actually, you’ve got to be quite geeky to genuinely know everything that’s happened in relation to Russia.” But how about the national security experts in Whitehall, I ask. Isn’t this their job? “I think that if you go to the heart of the national security system, people could see what was happening,” he says. “But like everything in life, it’s about risk management.
And there’s only so much money to go around . . . and the brutal truth of it is that you have to take a risk management view.” Given that the risk has very much asserted itself, I ask Carter how Nato allies can regain the initiative over Putin. The most important point, he says, is an information manoeuvre — “reaching out” to the Russian people.
“What ultimately led to the end of the cold war was the populations of eastern Europe recognised that our values and standards and our system was something that they wanted to be a part of,” he explains. Isn’t this going to be difficult when Putin controls the media? “The BBC World Service has always managed to reach people the world over,” he says, adding that it’s “very encouraging” that the UK Foreign Office had re-established its cold war counterpropaganda unit earlier this month to “marshal the narrative in an effective way”. History, as he told me earlier, “doesn’t repeat itself, but it has a rhythm”.
Carter may be the embodiment of a traditional British general but he never expected to join the armed forces. Born in Kenya in 1959, where his father was serving in the King’s African Rifles, he later attended Winchester College and planned to study English at Oxford or Cambridge. However, after failing his entrance exams he was pushed to enrol at Sandhurst.
“My father was always very clear that he wasn’t going to underwrite — as he put it in his Victorian way — an education at a red-brick university, and that he thought it’d be more constructive to go in the army briefly and then earn a professional qualification after that,” Carter explains. But instead of leaving the army to join a family friend’s accountancy firm as envisaged, he was lured to stay, by enticing postings, and then the first Gulf war.
“I was given very stimulating jobs and I found that it was very rewarding. It was exciting, I thoroughly enjoyed the people that I worked with, and it was a good quality of life,” he recalls. If in a year or two’s time one sees Afghanistan becoming more inclusive, part of the reason would be because we invested for 20 years in trying to bring on a generation who will see a different future for their country His leadership skills attracted the attention of senior politicians during his years fighting Blair’s wars, first in Iraq and Kosovo and latterly Afghanistan, where he was deployed on several tours in the first decade of operations.
There, he acquired the reputation of a dynamic commander, sleeves rolled up and ready to engage. However, the months ahead of his retirement as CDS were almost entirely overshadowed by the Allied withdrawal from Afghanistan: a decision made by US president Joe Biden which, Carter has made clear, he did not agree with.
As the chaos of the troops’ departure unfolded, the general was criticised for his unrealistic estimations of the Afghan security forces, which Britain had helped to train. He wrote an opinion piece for The Times eight days before Kabul fell to the Taliban, claiming there were “increasing signs that moderate Afghans in support of the government and its security forces are beginning to show the sort of defiance that’s needed to win”. Only last autumn, he suggested it was too early to write off the withdrawal as a defeat.
Now, I ask, with millions of Afghans on the brink of famine, the country in economic collapse and the Taliban reportedly carrying out targeted killings, does he accept that the Allied mission was a failure? “As of today, it is,” he admits.
“But if in a year or two’s time, one sees Afghanistan becoming more inclusive and it gets beyond this, then part of the reason that that would happen is because we invested for 20 years in trying to bring on a generation of Afghans who perhaps will see a different future for their country,” he argues. He doesn’t believe the current state of repression and crisis can last for ever.
“I think it will evolve,” he says. “I think it has to evolve”. This strikes me as overwhelmingly optimistic. He counters that “it’s important to be positive”, and says he wrote the Times piece “to try and make sure that we were positive enough to give the Afghan government confidence to be able to carry on”. Does he believe his words of encouragement filtered through to Afghan fighters and civilians? “Definitely,” he assures me.
Even if the message prompted ridicule at home, he suggests, it landed successfully abroad. “I think it is very difficult being a public person in the modern media environment,” he says, slightly sharply. Our main courses arrive — sirloin steak with pickled cabbage and a neat tower of thick-cut chips. We are offered a glass of red wine. I say I’d rather stick to white and the general immediately agrees. His wine, I notice, has barely been touched.
I pick up on a throwaway remark about how he nearly signed off from the armed forces aged 27, because he thought this was “not necessarily the best career to pursue for somebody who is married”. Did this turn out to be the case? “I’m very envious of the relationship that my wife has with the children,” he admits (his three sons and daughter are now aged between 22 and 34). He says he was not as present as he would have liked to be.
“And even when you’re there with them . . . you’re either remembering what you’ve been up to or looking forward to what you’re about to go and do,” he says “You become emotionally detached, and how you then come home and try and reconnect is really difficult.”
Menu Searcys at the National Army Museum Royal Hospital Road, London SW3 4HT Loch Duart smoked salmon, Lake District sirloin steak and Black Forest gateau for two £168.75 Still and sparkling water £10.13 Vinuva Pinot Grigio, Terre Siciliane 2018 £30 Private chef £120 Total £328.88 The challenges persist for modern servicemen and women. “It is a fact of military life that your commitment to service is unlimited,” he says.
This seems like a good moment to broach the subject of army culture, which has been the topic of much debate following a parliamentary report that found almost two-thirds of women in the armed forces had experienced bullying, sexual harassment and discrimination during their career and that some even considered the mess and military accommodation as “places of danger” for female recruits. Carter, who says some of these cases are historical, does not rise to the bait.
“Ultimately I’m not surprised by those sorts of challenges because I think that in an institution like the armed forces, how you manage the problem of bullying, harassment, discrimination and a laddish or sexist culture is a perennial problem,” he says. The difficulty, he suggests, is unique to the armed forces: achieving the right balance between “managing the aggression and the team-building that is necessary to prevail on a battlefield” and being true to the values expected outside that environment.
Currently, only about 11 per cent of UK military personnel are female, which the general admits is not enough. “We have to make sure that the career structure is a bit more user-friendly for those who might wish to stand down for a while and raise a family or whatever they might want to do.” I suggest the problem may also be a lack of prominent women in senior military roles.
“There are a number of very able women who’ve risen to two- or one-star rank in all three services . . . they probably do need to become more visible to the public. I think that’s perfectly fair,” he acknowledges. “I think that would change over time. I think we do need to be patient.” We are interrupted by the arrival of two gigantic slabs of Black Forest gateau, thickly filled with cream and syrupy black cherries.
On the side is a melting scoop of vanilla ice cream. Carter looks at it warily: “That’ll keep you quiet,” he suggests optimistically. We both order Americanos, and I ask whether in retrospect there’s anything he would have done differently during his years as chief.
He says he wishes he’d moved faster with some of his reforms, but that “I don’t think I’d have changed the general direction of travel at all”. I ask about the failed £5.5bn Ajax armoured vehicle programme, which is now in jeopardy after causing vibration injuries and hearing loss in soldiers. “Yes, I think one was quizzical about Ajax all the way through, but it was locked down well before I took over,” he says. Trying again, I probe on whether, given events in Ukraine, Britain’s pivot towards the Indo-Pacific looks overambitious.
“Well, genuinely, how much resources are we going to be putting into the Indo-Pacific?” he asks, suggesting the premise was more a PR gesture than a genuine manoeuvre. “I can’t think of major things that we got wrong, given the circumstances,” he says decisively. Two days after our lunch, Putin launches a full-scale invasion of Ukraine; within a week, he has put Russia’s nuclear deterrent on high alert. I phone Carter to discuss the latest developments.
“I think this is a wake-up call for all those who thought that the land instrument might no longer be as essential to deterrence as events are proving it is,” the general comments very formally. I interpret this as a veiled jibe at Boris Johnson, who confidently told MPs last November that “the old concepts of fighting big tank battles on European land mass are over and there are other better things we should be investing in”.
I don’t think any of us can really believe that the Ukrainians will continue to be able to resist as doughtily as they have done Carter believes Putin is likely to succeed in taking Kyiv and installing his own regime, “because I don’t think any of us can really believe that the Ukrainians will continue to be able to resist as doughtily as they have done”. It’s “not entirely inconceivable” that the economic damage to Russia will be so severe that Putin is ousted, he says.
“The worst of all scenarios is that we have uncontrolled escalation, and the war is no longer limited to Ukraine and it becomes more European,” the general suggests bleakly. “That, of course, is a very unpleasant prospect.” Now that the threat he planned for has finally come to a head, I ask, does he regret not being at the helm? “You have mixed feelings.
There’s something very stimulating about being at the heart of matters.” Another long pause follows. “But then on the other hand, I’ve contributed a significant amount over the last eight years as chief of staff. And actually it’s probably time for someone else to get on and have the stress that goes with it.” He sounds unconvinced.
As war returns to Europe, I suspect Britain’s former defence chief may be wishing he was rather closer to the action. Helen Warrell is the FT’s former defence and security editor