The Corrosive Impact of Illicit Finance: A Wake Up Call for Democracy

July 27, 2022
10:00 am - 11:30 am


Event summary

The International Forum for Democratic Studies at the National Endowment for Democracy (NED) and the Centre for Financial Crime & Security Studies at the Royal United Services Institute held an event on July 27 on the growing threat of transnational kleptocracy, its repercussions for national security and human rights, and what democratic alliances can do to stop it. Oliver Bullough, Isabella Chase, and Adam M. Smith examined the ways in which the Russian invasion of Ukraine has changed perceptions of the threat posed by kleptocracy and what democracies can do to respond to it.

Isabella Chase listed the domestic vulnerabilities that created the opening for “illicit finance to find homes” in the United States and the United Kingdom, and called for democracies to own up to their responsibility for kleptocracy to take root. Among these vulnerabilities, she identified the lack of transparency of corporate structures, the strength of professional enablers, and the lack of adequate resourcing for law enforcement agencies and oversight bodies as the most important in perpetuating this problem. With the downfall of U.K. Prime Minister Boris Johnson, Chase called into question how the United Kingdom’s next prime minister will respond to transnational kleptocracy and begin to operationalize the political and domestic response.

When examining the current state of play, Oliver Bullough warned that the resistance the world is witnessing to reform in places like Hungary may mean we have to accept “at best a coalition of the not particularly willing.” Democracies must learn the consequences from Russia’s invasion, and that democracies enabled the ongoing aggression and led Russia to believe that transatlantic alliance would not be united in response. Bullough also argued that democracies must not recognize kleptocracy as a vague and unfortunate problem but as a “real and present danger.”

In response to Russia’s aggression, the United States, the United Kingdom, and other democratic allies turned to sanctions as a method to counteract kleptocratic influence. Adam M. Smith argued that previous sanctions around narcotics trafficking has shown that sanctions can be an effective method to hold corrupt actors accountable when they create clear incentives for people like enablers to change their behavior to be removed from sanctions lists. Democratic allies have established a comprehensive and “multilateral front with similarity of desired political outcome” to punish Russia for its actions across the democratic alliance, which has come a long way but still must do more to achieve its goal.

To close the event, the International Forum’s Melissa Aten emphasized that without the crucial role and courage of “independent journalists and civil society operating within tough environments,” democracies would lack the critical information needed to expose these networks. This support for civil society and robust independent journalism offer an important complement to the strong, transatlantic partnerships that work to tackle this challenge around the world.


About the Participants

Oliver Bullough is a widely published author and journalist from Wales. Previously, he served as Caucasus editor for the Institute of War and Peace Reporting, a security correspondent with Reuters Moscow, co-editor of The Times of Central Asia, and deputy editor of Pulse magazine in St. Petersburg. He is the author of Butler to the World: How Britain Helps the World’s Worst People Launder Money, Commit Crimes, and Get Away with Anything, as well as The Last Man in RussiaLet Our Fame Be Great, and Moneyland: The Inside Story of the Crooks and Kleptocrats Who Rule the World, which was selected as an Economist Book of the Year in 2018.

Isabella Chase is a senior research fellow at the Centre for Financial Crime and Security Studies at RUSI. She is the research lead on RUSI’s Taskforce on a Transatlantic Response to Illicit Finance (TARIF), which aims to strengthen global democracy by identifying viable ways in which the UK and US can combine efforts in tackling illicit finance. At the CFCS, Chase leads a research cluster on “Financial Crime Futures,” which assesses the role of technology in compliance, evolving AML/CFT policy frameworks and how inclusive financial integrity can be achieved. She is the host of the CFCS podcast, the Suspicious Transaction Report, which is now in its third season. Prior to joining RUSI, Chase was the financial crime writer at RegTech, ComplyAdvantage.

Adam M. Smith is a Chambers & Partners-ranked partner at Gibson, Dunn and Crutcher, LLP. He previously served in the Obama Administration as the Senior Advisor to the Director of the Office of Foreign Assets Control (OFAC) and as the Director of Multilateral Affairs on the National Security Council. Smith is one of the world’s leading sanctions and trade lawyers and regularly advises companies on mission critical matters including providing compliance guidance, representing them before U.S. and foreign governments, and defending them against enforcement actions brought by regulators around the world. His analysis has been featured in The Economist, Foreign Affairs, the Wall Street Journal, the N.Y. Times, and the Washington Post, and more. In 2019, Smith published a commissioned volume for Bloomberg BNA entitled U.S., EU, and UN Sanctions: Navigating the Divide for International Business, the first-ever desktop treatise on the topic.


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