Understanding transnational kleptocracy as a vehicle for theft, repression, and democratic erosion…and how we can respond. If you enjoy this newsletter, forward it to a friend or share on social media so that others can subscribe.

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africa’s stolen potential // february 23

by Melissa Aten (@melissaaten), International Forum for Democratic Studies

“Welcome to the #Kleptolands,” a trailer for a series of short films produced by the civil society coalition Opening Central Africa, takes the audience to a scenic beach with palm trees, modern skyscrapers, and other trappings of luxury. Viewers might assume that it takes place in Miami, the south of France, or any number of lavish tourist destinations. In reality, it was filmed in Luanda, the capital of Angola—a state where corruption runs rampant and 94 percent of the rural population lives in poverty.

Non-Africa watchers often perceive the continent to be severely impoverished and in need of constant economic assistance. As such, beachfront scenes like the one in “Kleptolands” may be a bit surprising. Outside the circle of expert observers, there are many who associate Africa with images of malnourished children, outdoor classrooms, and decrepit housing, among other signs of poverty. This conception of Africa’s socio-economic status obscures a more nuanced reality. As many average citizens struggle to make ends meet, kleptocrats plunder the continent’s wealth, while education, healthcare, and other much-needed services frequently go underfunded. Kleptocracy has robbed the continent of trillions of dollars that could have otherwise helped support socio-economic development, particularly in Central Africa. Since kleptocracy is transnational in nature, the money leaves the continent through the assistance of enablers in rule-of-law settings who ensure that is difficult to trace the origins of funds parked overseas. This practice makes it nearly impossible for the money to ever return, even if political circumstances would allow it.

Given the secrecy involved in these transactions, the precise amount of money that has disappeared due to kleptocratic networks in Africa is unclear; however, the estimates are staggering. Brookings Institution research indicates that between 1980 and 2018, $1.3 trillion has been lost to illicit financial flows, of which kleptocratic money is a major component. In addition, UN Africa Renewal estimates that $88.6 billion is lost annually.

The countries which Opening Central Africa serves—Angola, the Republic of the Congo, Chad, Cameroon, and Equatorial Guinea—face an even bleaker reality. Regimes in these states, often in power for decades, have squandered their vast wealth from natural resources to enrich themselves. At the peak of Equatorial Guinea’s oil boom in 2012, for example, the country had a GDP per capita roughly equivalent to those in Central Europe, according to the 2012 CIA World Factbook. Yet, according to Human Rights Watch, the government only allocated three percent of its budget to education and under two percent to health—remarkably low figures.

Cameroon offers another sobering example of kleptocracy’s true cost in Central Africa. President Paul Biya, who has been in power for nearly 41 years, has spent at least four-and-half-years of his time in office on “private trips” to Switzerland where he stays at the Intercontinental Hotel for $40,000 a night (this figure excludes official trips taken in his capacity as president). Furthermore, the IMF estimates that $300 million from Cameroon’s national oil company went missing in 2017 (likely stolen by the Biya regime). In a country where 25 percent of the population lives off less than two dollars per day, Biya’s extravagant lifestyle and these lost funds put kleptocracy’s cost—severe inequity and injustice—in stark light.

However, there is good news. In addition to its vast natural riches, Africa has another source of enormous wealth that is not as easily squandered: its people. At a recent workshop organized by Global Integrity, the National Endowment for Democracy, and the International Budget Partnership, the African civil society participants were energized and ready to tackle this issue. Their initiatives ranged from increased and more concerted reporting efforts on the transnational ties of kleptocratic networks in Africa to forging new relationships with international organizations.

The Washington Post recently estimated that by the end of the century, thirteen of the world’s twenty biggest urban areas will be in Africa. Imagine what a powerful force on the global stage Africa could be if the continent freed itself from kleptocracy’s malign influence.

Assessing the Costs of AML Initiatives and Outputs in Small Caribbean States (Central Bank of the Bahamas)

Aretha M. Campbell from the University of the West Indies Open Campus analyzed the outcome of Anti-Money Laundering (AML) standards in four states: the Bahamas, Bermuda, the British Virgin Islands, and the Cayman Islands. Positive AML outcomes benefit OECD and EU member states, more so than those outside of these institutions. Despite money laundering’s toll on the small Caribbean nations, the key benefactors of AML measures are, in fact, the U.S., U.K, and Russia. Campbell’s paper was one of many reports submitted for a recent conference hosted by the Central Bank of the Bahamas.

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UK Government Helped Sanctioned Putin Ally Sue British Journalist (openDemocracy)

The U.K. Treasury allowed Russian oligarch and Wagner Group founder Yevgeny Prigozhin to bypass sanctions and bring a SLAPP suit against British journalist Eliot Higgins for libel. The Treasury granted Prigozhin a license which could override sanctions that the U.K. government previously levied against Prigozhin; this license enabled him to pay lawyers from the legal firm, Discreet Law, and fly them to Russia for meetings. Oliver Bullough called for an investigation into why the U.K. Treasury granted Prigozhin the license, proclaiming “now is the moment when the [U.K.] government must show whose side it’s on: that of the oligarchs, or that of their victims.” Be sure to read Oliver Bullough’s report for the Forum, “An Offshore Cold War: Forging a Democratic Alliance to Combat Transnational Kleptocracy.”

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Exploiting Vulnerabilities and Loopholes in Democracies’ Anti-Kleptocracy Mechanisms

Kleptocrats weaponize a broad arsenal to conceal their wealth in rule-of-law settings. Raymond W. Baker of Global Financial Integrity explains how kleptocrats use shell companies to anonymously hide their money in U.S. banks. Government measures aimed at countering this trend are insufficient. Many types of entities are excluded from mandates to report ownership to the Treasury Department, and foreign shell companies are still able to conduct business in the U.S. Meanwhile, the U.K. has tried to crack down on anonymous foreign ownership. Yet, as the BBC revealed, despite February 2022 legislation requiring that anonymous foreign companies reveal their owners’ identities, about 18,000 offshore companies disregarded the ruling or listed another opaque foreign entity as the owner, among other evasive tactics.

Kleptocratic Adaptation: Scaling the Democratic Response | National Endowment for Democracy and Royal United Services Institute
Register for an upcoming discussion featuring Matthew Page, Jodi Vittori, Helena Wood, and Melissa Aten. The event will take place on Tuesday, March 7 at 10:00 – 12:30 ET / 15:00 – 17:30 GMT. To attend either virtually or in person in London, please register here.

Shielding Democracy: Civil Society Adaptations to Kremlin Disinformation About Ukraine | Adam Fivenson, Galyna Petrenko, Veronika Víchová, and Andrej Poleščuk
Russia’s full-scale invasion of Ukraine in 2022 triggered a backlash against authoritarian influence and the kleptocrats that enabled this act of aggression. Read about how local civil society in Ukraine and Central and Eastern Europe gained the upper hand in the competition with Russia in the transatlantic information space, or watch the report launch event here.

Kleptocracy: Its Global Impact on Markets and Democracy | Forum 2000, the Raoul Wallenberg Centre for Human Rights, and the Center for International Private Enterprise

Invisible Trillions: How Financial Secrecy is Imperiling Capitalism and Democracy and the Way to Renew our Broken System | Raymond W. Baker

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