Tackling kleptocracy in post-Soviet states

The West needs to do more to stem the tide of illic­it cash flow­ing from Central Asia into their countries.

Peter Zalmayev, TRT World, 21 Dec, 2020,

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 rightsabus­es 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 USand 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 rightsabuses.

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. 

Disclaimer: The view­points expressed by the authors do not nec­es­sar­i­ly reflect the opin­ions, view­points and edi­to­r­i­al poli­cies of TRT World.

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