how kleptocrats are adapting to pushback by democracies // january 25
by Matthew T. Page, Carnegie Endowment for International Peace, and Jodi Vittori, Georgetown University
Russia’s invasion of Ukraine focused democracies’ attention squarely on the threat of transnational kleptocracy. Democracies reacted with speed and unity to sanction Russian oligarchs, freeze their assets, and introduce legislation to close opportunities for kleptocratic influence. Kleptocrats, however, did not sit idly by in the face of these unprecedented steps by democracies. In response, kleptocratic regimes refined their own tactics, finding new ways to weaponize corruption and fund corrosive enterprises with their ill-gotten gains.
As sanctions and enforcement mechanisms were developed, kleptocrats found ways to increase their access to the international financial system by funneling vast sums of money through “bridging jurisdictions.” These jurisdictions have strong links to the international financial and trade systems and act as important destinations and conduits for ill-gotten wealth. Because these jurisdictions are often strategically important to Western countries, pressuring them to stop acting as conduits for illicit finance and trade may require significant tradeoffs with other Western goals.
In the last decade, kleptocrats have also adapted to heightened scrutiny by increasing their use of anonymous shell companies, dark-money entities, proxy donors, surreptitious gifts, and promises of future consultancies or appointments to cultivate influence among political elites outside of their home countries.
Given its unyielding pace and serious strategic implications, kleptocratic adaptation is a threat that demands a stronger and more purposeful reaction. Yet, democracies’ current responses are anemic and ad hoc; they are hampered by outdated laws, inadequate regulations, substandard enforcement tools, and weak accountability mechanisms. In addition, many democracies have become entangled in global kleptocratic networks, mortgaging their institutional integrity and strategic stability for perceived economic and geopolitical gains. In failing to recognize and appropriately respond to kleptocracy, policymakers have jeopardized their own strategic interests and the broader rules-based international order.
A robust response to kleptocratic adaptation will require three core components.
First, democracy stakeholders must view kleptocracy as a top-order challenge. In many countries, lawmakers are reluctant to view it as a national security threat. Instead, it is often treated as a niche policy concern and, therefore, superseded by more traditional national security considerations. If democracies are to confront this challenge, corruption must figure more prominently in foreign and domestic policymaking strategies and be viewed as integral to national security.
Second, policymakers in rule-of-law settings must focus on kleptocratic-enabling locales abroad, especially “bridging jurisdictions.” Rather than sanctioning and marginalizing bridging jurisdictions, however, democracies continue to cultivate extensive economic, military, and diplomatic interactions with these countries due to their perceived strategic significance. Democratic governments will have to engage in difficult internal discussions, perhaps even considering rebalancing some relationships, in order to put a stop to bridging jurisdictions’ enabling behaviors.
Lastly, democracies must strengthen their defenses against kleptocratic networks’ corrosive effects. This effort will require changing kleptocrats’ cost-benefit analysis by increasing the financial, reputational, and personal risks they face, as well as neutralizing their enablers. To help them identify gaps in their defenses, democracies need to draw upon their considerable intelligence-gathering capabilities and better leverage the expertise and fact-finding capacity of civil society and independent media.
As international corruption networks evolve, so too must the countermeasures and safeguards that mitigate the damage they cause. Granted, the scope and scale of the policy progress needed to respond to kleptocratic adaptation effectively is significant. Yet, in light of the severe threat that kleptocratic adaptation poses, it is imperative that democracies rise to the challenge.
For more on this topic, be sure to read the Forum’s latest report, Kleptocratic Adaptation: Anticipating the Next Stage in the Battle Against Kleptocracy, by Matthew T. Page and Jodi Vittori or watch our virtual discussion featuring insights from the report authors as well as Larry Diamond.