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The West Must Widen the War on Kleptocracy

Russian sanctions have shown how democracies can flex their power.

By , a member of the Canadian Parliament who currently serves as the shadow minister for foreign affairs for Canada’s Official Opposition, and , the chair of the British Parliament’s Foreign Affairs Committee.
The Russian-owned superyacht Phi, which has been seized by the U.K. government, is seen at Canary Wharf in London on March 29.
The Russian-owned superyacht Phi, which has been seized by the U.K. government, is seen at Canary Wharf in London on March 29.
The Russian-owned superyacht Phi, which has been seized by the U.K. government, is seen at Canary Wharf in London on March 29. Dan Kitwood/Getty Images

As the bombs fall on Kyiv and Mariupol, Russia’s kleptocrats are in a state of shock, reeling from the sanctions the West has imposed on them. From football clubs to yachts, their assets are being frozen, shattering their self-assurance. Countries they had assumed were decadent democracies have stood up for Ukraine and imposed the harshest sanctions ever on a major country—and on them personally. But this is not enough. Democracies must now widen the war against global kleptocracy.

The West must turn the page on decades of complicity. Russian kleptocrats thrived from Vancouver to Vladivostok because governments let them. Loopholes were left in laws. Anti-money laundering systems were left incomplete. Data systems functioned poorly. Enablers, from British bankers and Canadian lawyers to U.S. lobbyists and even German politicians, were free to help kleptocrats park their ill-gotten gains and pursue their agendas in the West. Now, with democratic countries impressively taking aim at these Russian kleptocrats, these countries must fix the broken system that made them so vulnerable to exploitation by Russian President Vladimir Putin’s cronies in the first place.

The G-7 and its major partners have launched a common front against Russia’s war chest, using tools unprecedented in scope and reach. This includes pursuing freezing and seizing sanctions against the assets of senior Russian and Belarusian government and military leaders, oligarchs, military industrial companies, and parts of the Russian government itself, including its finance ministry and central bank. Russia now surpasses Iran as the most sanctioned country in the world, facing 9,405 total designations from around the world as of April 14, compared with Iran’s 3,616.

As the bombs fall on Kyiv and Mariupol, Russia’s kleptocrats are in a state of shock, reeling from the sanctions the West has imposed on them. From football clubs to yachts, their assets are being frozen, shattering their self-assurance. Countries they had assumed were decadent democracies have stood up for Ukraine and imposed the harshest sanctions ever on a major country—and on them personally. But this is not enough. Democracies must now widen the war against global kleptocracy.

The West must turn the page on decades of complicity. Russian kleptocrats thrived from Vancouver to Vladivostok because governments let them. Loopholes were left in laws. Anti-money laundering systems were left incomplete. Data systems functioned poorly. Enablers, from British bankers and Canadian lawyers to U.S. lobbyists and even German politicians, were free to help kleptocrats park their ill-gotten gains and pursue their agendas in the West. Now, with democratic countries impressively taking aim at these Russian kleptocrats, these countries must fix the broken system that made them so vulnerable to exploitation by Russian President Vladimir Putin’s cronies in the first place.

The G-7 and its major partners have launched a common front against Russia’s war chest, using tools unprecedented in scope and reach. This includes pursuing freezing and seizing sanctions against the assets of senior Russian and Belarusian government and military leaders, oligarchs, military industrial companies, and parts of the Russian government itself, including its finance ministry and central bank. Russia now surpasses Iran as the most sanctioned country in the world, facing 9,405 total designations from around the world as of April 14, compared with Iran’s 3,616.

The allies are rapidly establishing new tools to fight this war on Russian kleptocracy. To guide this battle, financial law enforcement units from the G-7 and Australia established the Russian Elites, Proxies, and Oligarchs (REPO) Task Force. REPO will consist of the national bodies launched off the back of the war to the same end, such as the recently formed U.S. KleptoCapture and European Union “Freeze and Seize” task forces and those soon to be established in other allied jurisdictions. This is the plan: REPO is authorized to seize or freeze the assets of 50 individuals sanctioned by all eight states, including senior members of the Russian government such as Putin himself and Foreign Minister Sergey Lavrov. This is the core of Putin’s kleptocracy.

Democracies will need to come good on what they have already promised to do to prosecute this campaign. In the United States, this means launching the Democracies Against Safe Havens Initiative to tackle tax havens and the Global Accountability Program to assist with asset recovery in less developed countries, both of which were promised in the U.S. Strategy on Countering Corruption. In the United Kingdom, the recently passed Economic Crime Bill, which provides new powers to the National Crime Agency (NCA) to crack down on sanctions evasion, will have to be implemented. The kleptocracy cell promised by Downing Street within the NCA to achieve this has been put in place. Worryingly, other allies crucial to the fight are falling behind. For example, in Canada, no counterkleptocracy unit analogous to the KleptoCapture or Freeze and Seize task force has yet been established by the Trudeau government.

Taking on kleptocracy is an enormous challenge. Until all of the allies have the necessary resources put in place, there will be room for Putin’s proxies to evade sanctions. Just look at Iran, where the allies have had severe trouble fully enforcing all 3,616 of those designations, especially when those sanctions did not overlap. Shadowy enterprises and elites have become adept at sanctions-busting, such as the “gas for gold” scheme in which Turkish elites facilitated an estimated $13 billion to Iran. Given that Iran’s economy is far smaller than Russia’s, even under sanctions, this raises the awkward question of whether our financial law enforcement is up to a far bigger task. Already, law enforcement is stretched thin.

Even building out these task forces to their fullest extent will not be enough. The battle against global money laundering was long being lost for structural reasons and will need more than an anti-Kremlin task force to fix it. The four core structural flaws that kleptocrats have been taking advantage of for decades are a lack of legal coordination, regulatory asymmetries, poor financial intelligence-sharing, and too little enforcement. These are huge policy challenges that require a whole new level of cooperation.

The allies that have come together to support Ukraine need a bolder and more integrated approach in the form of a Global Anti-Corruption Coordination (GACC) Council. The GACC Council would work with REPO but remain separate, given the latter’s specialized purpose and larger geographic scope. The GACC Council should also be modeled on the U.S.-EU Trade and Technology Council, which brings together lead figures at the ministerial level on a regular basis to coordinate a whole-of-government approach among their respective countries. The GACC Council would establish working groups to address the four core structural flaws that have allowed Putin’s kleptocrats and enablers, as well as other kleptocracies, to thrive and flourish.

The war has shown that democracies still have immense power when they act together and with purpose. But the West should not close its eyes to the challenges ahead. This could be a long confrontation with Putin and his kleptocratic regime. We will need a long-term commitment to build the coordinating structures that will make the world safe for democracy and not for kleptocracy—which it has been, with terrible strategic consequences for Ukraine and the West, for far too long.

Michael Chong is a member of the Canadian Parliament who currently serves as the shadow minister for foreign affairs for Canada’s Official Opposition.

Tom Tugendhat is a Conservative member of the British Parliament, where he chairs the Foreign Affairs Committee. Twitter: @TomTugendhat

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