Tackling kleptocracy in post-Soviet states

While some of the countries that once formed part of the Soviet Union have managed to transition to democratic forms of government overseen by the rule of law, many suffer from high levels of corruption, human rights abuses and a lack of political freedom. They can be described as kleptocracies – where the ruling elite use their power to make vast fortunes from the country’s assets (often oil, gas and minerals) at the expense of the people.

Much of this wealth ends up in foreign bank accounts: the recent FinCEN scandal highlights how global banks help kleptocrats launder their gains into the US and Europe, which act as safe havens for the wealth acquired by families of corrupt leaders. 

The kleptocrats are helped by a coterie of Western ‘gatekeepers’: bankers, real estate agents, company service providers, PR agents, lobbyists and lawyers, who turn a blind eye on the origin of the wealth in return for a share of the spoils.

The transfer of illicit capital into the West from kleptocracies not only deprives citizens who live in these countries of much-needed revenue, but it also has a corrosive effect on the jurisdictions where the money ends up: lawmakers’ opinions are swayed by shadowy lobbyists and paid-for articles in Western media paint rosy pictures of corrupt autocracies.

The global community needs to do more to stem the tide of dubious and illicit cash flowing from kleptocracies into the so-called developed world.

Entrenched kleptocracies

Headlines regarding Uzbekistan have been dominated in recent years by legal proceedings against Gulnara Karimova, the daughter of Uzbekistan’s first president.

In March 2019, Gulnara was subject to criminal charges brought by the US Department of Justice in relation to a telecoms bribery scheme that netted Karimova more than $800 million from a variety of international companies who paid her to gain access to the Uzbek telecommunications market. Much of this money was ploughed by Karimova into real estate around the world – Switzerland, France, UK, and the United Arab Emirates (UAE).

In Kazakhstan, the country’s first president, Nursultan Nazarbayev, stepped down in 2019 after 29 years in office, yet the kleptocratic system remains, with members of his family and close political allies controlling vast sections of the economy, including oil, gas, minerals, telecommunications and banking.

The Forbes’ list of the richest Kazakhs includes many relatives and political allies of Nazarbayev. The wealth of his daughter, Dariga, a politician who first became a member of the Kazakh parliament in 2004, and served in the Senate from 2016-2019, was estimated in 2013 to be around $595 million. The current assessment of the wealth of Nazarbayev’s son-in-law, Timur Kulibayev, is $2.9 billion. Along with his wife Dinara (Nazarbayev’s second daughter), Kulibayev owns Kazakhstan’s largest bank, Halyk.

In Tajikistan, the ruling family has virtually privatised state aluminium firm TALCO by routing its profits through a company in the British Virgin Islands. 

Turkmenistan remains the most repressive country in Central Asia, if not the world, with a business sector dominated by the family of its dictatorial president, Gurbanguly Berdymukhamedov.

Kyrgyzstan has seen three of its presidents deposed or stepped down by popular unrest, one in 2005, a second in 2010, and a third just recently in 2020. The first two revolutions were in large part caused by the corruption and cronyism of its first two presidents, Askar Akayev and Kurmanbek Bakiyev, and the country has not managed to escape the legacy of corruption that these presidents left behind.

Only last week a former Kyrgyz customs official, Raimbek Matraimov, was sanctioned by the US Treasury Department for his role in an alleged $700 million corruption and money laundering scheme that saw Matraimov reportedly bribe officials to avoid customs fees and regulations.

However, Matraimov is a rare example of an official from a post-Soviet Central Asian country to face any kind of sanction. The EU and the UK have recently passed similar legislation to the Magnitsky Act, but crucially these new laws do not apply to foreign officials involved in corruption, only to those involved in human rights abuses.

The international community needs to do more to investigate illicit funds laundered by these regimes into the West, and to prevent further funds from flowing there in the future.

For the EU, this could mean setting up a European Anti-Money Laundering Agency, as recommended by the Hudson Institute in 2019. Better coordination is needed on anti-kleptocracy initiatives and criminal investigations between the EU, the US, the UK and other nations. 

The collective West should do a fair bit of soul-searching about the acquiescence of its political class and the greed of its financial elites. This would involve  good-faith efforts to crack down on the fraud-enabling ecosystem of “gatekeepers.” Taken together, these measures will send a message to the corrupt elites of Central Asia that their money is not welcome on western shores.