Once upon a time, if an official stole money in his home country, there wasn’t much he could do with it. He could buy himself a new car, or build himself a nice house, or give it to his friends and relatives, but that was more or less it. His appetites were limited by the fact that the local market could not absorb endless sums of money. If he kept stealing after that, the money would just build up in his house until he had no rooms left to put it in, or it was eaten by mice.
Offshore finance changes that. Some people call shell companies getaway cars for dodgy money, but – when combined with the modern financial system – they’re more like magical teleporter boxes. If you steal money, you no longer have to hide it in a safe where the mice can get at it. Instead, you stash it in your magic box, which spirits it away at the touch of a button, out of the country, to any destination you choose. It’s the financial equivalent of never feeling full no matter how much you eat. It’s no wonder officials become such gluttons, since there is now no limit on how much money they can steal, and therefore no limit on how much they can spend. If they want a yacht, they can send the money to Monaco and choose one at its annual boat show. If they want a house, they can send the money to London or New York and find an estate agent who doesn’t ask too many questions. If they want fine art, they can send the money to an auction house. Offshore means never having to say ‘when’.
And the magic does not stop there. Once ownership of an asset (be that a house, or a jet, or a yacht, or a company) is obscured behind multiple corporate vehicles, hidden in multiple jurisdictions, it is almost impossible to discover. Even if the corrupt regime from which the insider profited collapses, as it did in Ukraine, it is difficult – if not impossible – to find his money, confiscate it and return it to the nation it was stolen from. You may have read how millions of dollars have been sent back to Nigeria, Indonesia, Angola or Kazakhstan, and that is true. But they represent less than one cent of every dollar that was originally stolen. The corrupt rulers have got so good at hiding their wealth that, essentially, once it’s stolen it’s gone for ever, and they get to keep their luxury properties in west London, their superyachts in the Caribbean and their villas in the South of France, even if they lose their jobs.
The damage this does to the countries that lose the money is clear. Nigeria has lost control of its northern regions, and millions of people have been displaced. Libya is barely recognisable as a state, with multiple armed factions vying for control, leaving a free path for people traffickers. The corruption of Afghanistan’s rulers has stopped them battling opium growers, meaning cheap heroin continues to flow wherever smugglers wish to send it. Russia, which consumes much of the heroin, has more than a million HIV-positive inhabitants, while its health service remains underfunded and its government would rather pursue cheap propaganda wins than help its citizens.
Ukraine, meanwhile, is a mess. The roads running between its cities are poorly maintained, while those in the villages are scarcely maintained at all. Travelling around the country is an ordeal, made worse by the constant threat of being stopped and shaken down by traffic cops looking for infringements of the dozens of traffic regulations, or inventing them if necessary.
Moneyland is not controlled by an archvillain, stroking a white cat on the arm of a leather chair. If there was a controlling brain behind Moneyland it would be easy to deal with. The reality is far more complex, and far more insidious: it is the natural result of a world in which money moves freely, laws do not, and where a good living can be made from exploiting the mismatches that result. If a tax rate is low in Jersey and high in Britain, there’s money to be made for anyone who can move her clients’ assets out of Britain and into Jersey. The same goes for jurisdictions all over the world: they all have subtly different rules and regulations.
Moneyland is more like an ant hill than a traditional organisation. In an ant hill, the individual ants are not obeying instructions; there aren’t middle manager ants directing them to go out and pick up grass seed. There aren’t police ants arresting wrongdoers who keep grass seeds for themselves, or judge ants sentencing them to terms in ant prison. The ants are responding in a predictable manner to external stimuli. In Moneyland, the individual lawyers, accountants and politicians are also responding in a predictable manner. If a law is helpful to any aspect of a rich person’s existence, Moneyland’s enablers make sure the rich person can enjoy the benefits of that law wherever and whatever it is, to the greater good of the rich person and to the detriment of the rest of us. If you squash one ant, or arrest one crooked lawyer, the activities of the rest will continue unaffected. It is the whole system that must be changed, and this is hard – but not (as I discuss in the book) impossible.
Moneyland is out now. Oliver Bullough joins us at Hay Festival Winter Weekend on Sunday 25 October. Find out more and get your tickets here.