Kleptocracy #4: How corruption is reshaping global politics
The latest global news, research and analysis
Welcome to Kleptocracy, the newsletter from Hudson Institute’s Kleptocracy Initiative on how corruption is reshaping global politics and security. Nate Sibley here—but keep scrolling for KI’s compilation of all the latest news, research and analysis from around the world.
The release of Meng Wanzhou from detention in Canada on US charges earlier this week was widely presented as yet another spat between the US and China. But dig deeper and, from start to finish, the Huawei CFO’s case is a frightening illustration of just how brazenly the world’s second superpower has inserted its own authoritarian practices into international politics—and normalized kleptocracy throughout the global economy.
Huawei—which claims to be independent company but is widely agreed to be a state-controlled entity—is accused of using a shell company to conceal significant business dealings with Iran in breach of US sanctions. Meng herself has now admitted to lying about this arrangement to US bank executives with whom she had hoped to do business—and who could have found themselves in hot water with US authorities had they agreed to work with her. Then, in order to pressure Canada and the US to release her, Beijing simply kidnapped two Canadians and held them hostage until she was on a flight home. As one Canadian academic puts it:
“China was sending a message not just to Canada, but to every other country in the world that they take hostages. And if you step out of line from their policies or don’t toe the line the way Beijing has instructed you to do, then they will take retaliatory action and kidnap your citizens… This is the behaviour of a medieval kingdom – not a 2021 superpower.”
Unless there is more to the deferred prosecution agreement signed by Meng and the US Justice Department than meets the eye, the terms are so favorable to her that it’s hard to avoid concluding that the US simply caved in the face of hostage-taking and blackmail. In so doing, it has set a terrible precedent not only for Beijing but other authoritarian regimes who seek to protect their criminal elites as they go about undermining rule of law abroad.
Speaking of truly brazen kleptocracy, don’t miss KI’s recent discussion with the US Justice Department and civil society leaders on recent developments in the case against Teodorin Obiang, Equatorial Guinea’s playboy princeling who has become the “poster child” for global corruption.
Finally: If you’re enjoying KI’s Making a Killing podcast, check out Fat Leonard—a new nine-part series from Tom Wright and Bradley Hope, the journalists who chronicled the epic 1MDB scandal in Billion Dollar Whale. Says Tom:
“The story of Leonard Francis' rise to power in the [US] navy through bribery and kickbacks is the most important corruption case in recent military history.”
Like the 1MDB case, Fat Leonard’s is a shocking tale that reveals the extent of Western elites’ dependence on corrupt intermediaries who are, in turn, linked to some very dangerous people—and the national security nightmare that erupts when things inevitably go awry.
Best,
Nate Sibley
New from KI
Virtual Event: Obiang’s Kleptocracy in Equatorial Guinea | Hudson Institute
Equatorial Guinea is rich in natural resources, including oil. But decades of corruption by the ruling Obiang family has made it one of the poorest and most oppressed countries on Earth. In particular, the venality and extravagance of heir-apparent Teodorin Obiang has made him a global “poster child” for transnational kleptocracy. But efforts to pursue his stolen wealth have spurred innovative new approaches to fighting corruption from civil society and law enforcement alike. Representatives from the US Department of Justice, EG Justice and Transparency International France joined KI to examine latest developments and lessons learned.
Making a Killing, Episode 23: Hunter’s Anonymous Art Problem and China’s Hostage Diplomacy | Hudson Institute
Casey, Paul and Nate discuss why Hunter Biden’s plan to auction his artwork to anonymous bidders engages serious money laundering risks, what Meng Wanzhou’s release tells us about China’s globalized kleptocracy, and the latest on anti-corruption reforms in Washington, DC.
Virtual Briefing on Enabling Kleptocracy | US Helsinki Commission
KI’s Paul Massaro and Casey Michel join other experts in Congress to examine how US lawyers, lobbyists, accountants, real estate professionals and others help kleptocrats launder their money and reputations—and the growing momentum behind efforts to better regulate their activities.
News
Morgan Stanley and Interactive Brokers face federal scrutiny in Venezuela probe | Wall Street Journal
The firms allegedly managed “large-sum accounts for Venezuelan businessman Luis Mariano Rodriguez Cabello, who is under investigation for his role in allegedly helping conceal some of the $2 billion in question within the US financial system...”
China’s Xinjiang crackdown reaps millions of dollars in assets for the state | Wall Street Journal
“Since 2019, Xinjiang courts have put at least 150 assets—ranging from home appliances to real estate and company shares—belonging to at least 21 people and valued at a total $84.8 million up for auction on e-commerce sites.”
US arrests finance chief of Russian natural gas group Novatek | Financial Times
Mark Gyetvay is charged with “alleged tax misconduct linked to tens of millions of dollars held in offshore accounts.”
Shadow contracts, corruption keep the lights out in Iraq | Associated Press
Accusations against Mexico’s former top cop grow in US courts | Insight Crime
$73 million is missing from South Sudan’s coffers: corruption or conspiracy? | Trevor Filseth, National Interest
Fat Leonard: The man at the center of a shocking US Navy scandal | Wall Street Journal
1MDB casts shadow on ex-Swiss bank CEO’s money laundering trial | Bloomberg
China steps up anti-corruption drive as Evergrande crisis puts spotlight on financial risk | South China Morning Post
China wields new legal weapon to fight claims of intellectual property theft | Wall Street Journal
“In four major cases since 2020, Chinese courts granted so-called anti-suit injunctions blocking foreign companies from taking legal action anywhere in the world to protect their trade secrets.”
Hong Kong’s dirty money sleuths track criminals using cryptocurrency trading platforms to move illegal funds across borders | South China Morning Post
Deripaska-linked firms sent thousands to Moscow on election day. Some said they were on standby for a pro-Kremlin rally | Moscow Times
Report: Corruption at South Africa health ministry during COVID | Washington Post
US solicits public feedback on anti-money laundering rules for antiquities dealers | Wall Street Journal
Unit high in world’s tallest condo sells for $28.5M — a $10M discount | New York Post
“Condo units on Billionaires’ Row have been taking a hit lately, as the US government slightly tightened its anti-money laundering laws to make it a little less easy for anonymous entities to stash dirty cash in American real estate…”
Insights: Research and Analysis
Shadow states are the biggest threat to democracy in Africa: fresh reports detail how | Nic Cheeseman & H. Kwasi Prempeh, The Conversation
How art dealers, real estate agents, and hedge funds enable corruption | Josh Rudolph, Foreign Policy
Canada’s new government must work with other parties to end “snow washing” | James Cohen, iPolitics
Ex-prosecutor recounts early difficulties of investigating kleptocracy | Clara Hudson, Global Investigations Review
US and UK see eye to eye on ending illegal wildlife trade | Tim Wittig & Ari Mittleman, The Hill