–> This is a pre-event interview in the run-up to the Leaders in Finance Cyber AML Europe event on 29 June 2023 in Brussels.
Jeroen: Tom, thanks a lot for taking the time to talk to Leaders in Finance in the run-up to our Leaders in Finance AML Europe event. It is great that you will be actively participating at the event. First, for people who do not know you, could you introduce yourself?
Tom: Yes! I am a failed poet who ended up in South America about twenty years ago on a tiny newspaper called The Santiago Times, when the former dictator in Chile, Augusto Pinochet, was being found to have been not only a brutal ruler, but also a kleptocrat who had secret accounts in Washington. It was at that moment that I became interested in corruption, and it just got deeper and deeper when I lived in Africa as a foreign correspondent for the Financial Times. And then writing books, chasing dirty money all over the world, including through the former Soviet Union. And now I am working on a third book, while also being on the investigations team of The Guardian in London.
Jeroen: What is the thing you find most important in your job? What drives you most?
Tom: Part of it is just that I am a reporter, a good story is a good story, and you want to get it out. But perhaps slightly more profoundly than that, it was especially with my posting in West Africa that I could start to see up close the connection between corruption and violence and how political clauses that are taken over by corruption end up ruling through violence because there is no other way to maintain control. You can use patronage to a point, but if you do not have that contract between the rules and the ruled that comes from democracy or from a government that is funded by the practice of the many rather than the kickbacks of multinational oil companies, there is no other cause than violence. So whether that is in Eastern Congo and the whole terrorization of the civilian population by a constellation of armed groups, or in Nigeria, where the political system is so based on who can get hold of the petrol dollars, that people in the elite will happily manipulate ethnic feeling to maintain control to the point that villages burn. And it is not unique to Africa at all. For Kleptopia, I covered a massacre in Kazakhstan and found some of the people who had survived the torture that followed it; you can very clearly see the link between kleptocracies and the violence they use and their need to control information. It is all the same process of maintaining power.
Jeroen: You refer to countries that are relatively far away from where you and I live. What exactly is the role of places like the UK or the Netherlands, or any other rich countries?
Tom: I think that is a very good question. I tried to get away from the idea that there are corrupt countries and clean countries. What there are, are networks of kleptocracy. They can extend from the daughter of a central Asian dictator to the Senior Executive of a Scandinavian telecom company to the Senior Mining Partner at a law firm in London to top Wallstreet bankers. They are all equally participants in this kind of transnational kleptocracy that is the defining force of our time. That is how we understand Putin, that is how we understand the Chinese Communist Party, it is how we understand Donald Trump. But fundamentally, the deal is that the dictators control raw materials, that is why they can supply access to oil, minerals and the raw ingredients of the global economy. They control them by using violence. They are laundering their own images, so they can change from thugs to statesmen and their business allies can launder their reputation from crooks to entrepreneurs, tycoons, Davos types. And they are doing that to their reputation, they do that to their money, the ability to transform a kickback from an oil deal into a big house. At the simplest level, a big house somewhere in the west where it is protected by the rule of law. This is where we get to the question of whether the western financial system is actually interested in preventing the inflow of dirty money. Or rather in giving the appearance that it would like to, so that they can maintain that legitimacy, which is the commodity it is selling.
Jeroen: That is interesting. As much as these dictator kleptocrats dislike the rule of law, they love to use it.
Tom: There is a phrase in psychology, “The bigger the front, the bigger the back.” I think there are psychological reasons for that too. And no one wants to think they are the crook, no one wants to think that they are the bad guy. There is a famous comedy sketch in England about two guys in Nazi uniforms talking, “Do you think maybe we are the bad guys?” There is a psychological reason why no one believes they are the bad guy. Everyone believes anything they do and every bribe they accept – with the exception of psychopaths – is in some way the legitimate thing to do. That is the kind of legitimization the industry trains on. Whether it is former British government speechwriters hiring themselves out to dictators to present themselves as statesmen or whether it is top Wallstreet bankers providing advice for how Isabel dos Santos or John Lowe (?) or whoever it might be can present themselves to the world as independent entrepreneurs completely detached from their position in a raging kleptocracy back home. This is all to allow them to participate in the rules-based global economy. The microcosm of this is the city of London. The fundamental argument why the city of London is still so dirty is that it wanted to present itself as being tough on dirty money while actually guzzling every last bit it can. Excellent anti-money laundering rules, magnificent anti-corruption law, but tiny enforcement budgets.
Jeroen: Everyone has seen over the years that in many countries and regions, including Europe, banks and financial institutions are adding an enormous amount of people to their workforce that are busy with anti-money laundering and KYC-activities. I do not know to what extent you talk to financial institutions, but I suppose you have seen this trend?
Tom: Yes, quite a lot.
Jeroen: There are tens of thousands of people now working in the UK in just a couple of banks alone to do KYC. That is not show; they are there, they are actually checking things. Does that mean things are changing?
Tom: No. The best research that I have come across about this was done by Global Financial Integrity. The evidence suggests that attempts to vet clients for dirty money have very little effect. So if you are a crook, your likelihood of being stopped by the KYC-system is not that different from the likelihood of being stopped if you are not a crook.
That is not to say it is not a useful process, because it clearly makes it harder. And everything that makes it harder is worthwhile. But I think this is the fundamental problem, which is that this whole process is designed to treat the symptom and not the cause. Leaving aside the big political questions of the extent to which kleptocrats have been allowed to get away with whatever they want if they for instance signed up to the war on terror. Just a basic principle is to do financial secrecy. If you think about it, it is absurd that we must have these massive processes, that we have to have tens of thousands of suspicious activity reports, pouring like a waterfall into agencies that are massively too understaffed to be able to do anything useful with it. It is right that a bank keeps your banking details properly protected, it doesn’t just hand them over to commercial interest or state interest without a proper process. This is secrecy. Jeremy Bentham did not like secrecy because conspiracy thrives therein. There is no legitimacy for that. And that is essentially what we have done, what the rich nations or what the governments have done, dodge that entire question by outsourcing it to the private sector and saying, “You just file the suspicious activity reports and then everything will essentially go on as before.”
Jeroen: I would love to record a podcast episode on the event, so we can talk for a longer time about this, but maybe one last question on this point. You are basically saying, “The government has outsourced it.” Is that because the government does not find it important enough because we are benefitting from it here, but the victims are not here? Is that what you are saying?
Tom: Yes. Until a year ago, it was a hard sell – this is what I have been working on for years, those massacres I talked about earlier, that I have worked on – to demonstrate that to be complicit in laundering kleptocrats dirty money to be complicit in the violence to which they rule, but you have to go around the world a few times and put a lot of pieces together to get that picture.
Jeroen: If the massacres had been in London, I think it would be quite high on the agenda, right?
Tom: Funnily enough that you should say that one of the massacres was in London, 7/7, in a sense. Obviously, not a kleptocratic massacre, but 7/7 and 9/11 meant that you had this huge focus on cutting down terrorist financing. But what happened was that essentially the industries, especially in the US under the patriarchy act, that were used by money launderers, non-terrorist money launderers, mainly real estate, got opt outs. There was nothing comparable to that in kleptocratic money laundering until two things happened. One in the States was Trump. I was one of the reporters who was working hard and publishing stories and publishing parts of books about how Trump is a kleptocrat. His whole business career, from the turn of the century, is about absorbing dirty money from the former Soviet Union and himself and his brand and his real estate projects being the laundry for it, and he governed like a kleptocrat. It is simply the way he operates about power as a means to self-enrichment. And you keep power so that the crimes you use power to commit, you cannot be held accountable for. In the US, there was this realization that transnational corruption, grand corruption, kleptocracy is a threat to the republic itself, it is a threat to democracy. That is why you see under Biden a lot of the national security team are kleptocracy experts. The UK has been much more blasé about that even though Boris Johnson has been a huge risk to these kinds of questions with his relationships with the rich children of KGB officers and so on. And the UK has essentially been relaxed about this, even suppressing parliamentary inquiries into these questions about how corruption begets Russian influence and so on. But the invasion into Ukraine is the second point. Where, finally, a much larger group of people in the public and policymakers make that connection between being wide open to corruption and having a huge national security weakness. So that does change things in theory. But in practice, what it has led to is just a huge proliferation of sanctions rather than a massive improvement in law enforcement, which is the key to what you really want. Sanctions are a flawed tool; it is necessary but flawed. They have this kind of prohibition effect of pushing more and more people into the underworld, and therefore creating more and more demand for enablers of that underworld.
Jeroen: Makes sense.
Tom: It makes sense, but nobody says it now. Sanctions must not be questioned.
Jeroen: When I am listening to you, it is very sad that things only potentially change a little bit when it comes really close to people themselves. Your examples of 9/11 and 7/7, but also with Ukraine, potentially things get changed because people feel like it could happen here or very close to us.
Tom: What is ironic with that is the consumer behaviour. Boycotts of certain prawns or clothes or coffee or even diamonds sometimes. But on the big ones, oil and industrial metals and so on, there is absolutely no consumer interest in where your oil comes from. You do not boycott oil because it comes from a kleptocracy. You know why? Because there is not any that does not, with tiny exceptions.
Jeroen: Maybe a couple of last things. I would like to get deeper into things with the podcast. Two more questions, more about you and about the financial industry. One about you: you do a lot of research; you can talk for a very long time.
Tom: I will be brief!
Jeroen: No, that is not what I am saying. You figure out very interesting and surprising things. How do you get information? What are your sources to write this book? It is very predictive as well, right? I am halfway, I will have read everything before I meet you in person, but about Russia it is very predictive. There are a lot of things in there, when I read it now, I was surprised it was published before Ukraine. But anyway, to the point, how do you get to this information? Because you cannot go everywhere yourself, I suppose?
Tom: I try to. Lately, I have been going to different places, but I was in Ukraine before the war, I was in Russia, I was in Kazakhstan. I was in Hong Kong, in Congo, Nigeria, I was in Washington. Reporting is quite simple, and it has been changed to some extent by the rise of the massive leak. But you cannot really understand even those huge links if you are not on the ground, or you have not been on the ground, I find. I had a good editor who wanted to get there and take it from there. So, there was that. I started off when I was in Chile at the very beginning of my career. I am just about old enough to have had a phase where the internet and mobile phones were a novelty, and you did the job without these things. Without sounding like a luddite, I think it’s important to remember that human to human source work is the key to journalism and an awful lot of it gets done now with a very minimum amount of that. Some hacker somewhere decides to hack some bank. It gets given to someone, gets given to someone, gets given to someone, and ends up with some journalists who have no sourcing relationship with the material. You can build up sources, sure. So basically, I am big on source work, developing new sources. And the wonderful and mysterious part of journalism is how you try to find your way, often through serendipity. They put a flag in their stories, they write a few things about an area, what they think is important. And you try to attract people who have access to information about how power works and how it is abused and who would be willing to share it. And it is a funny, old, mysterious, and random game in its most simple ways. You get somewhere with a couple of phone numbers and then just get them on the phone.
Jeroen: The real journalism, not just journalism from behind your pc.
Tom: Yes. People like Eliot Higgins at Bellingcat, they do magnificent work. It is tremendous. I feel that underground source work is so important. That is when you go to what Donald Rumsfeld would call the unknown unknowns. So, it is through developing sources just in a sense of, “That is a person who is in a position to have access to information that could hold the powerful to account.” Just on that basis alone and not knowing where it is leading you. It’s important to spend some time going down those roads, even though it can annoy your employers. Because a lot of journalism starts with, “Let us just do something else about person x or oligarch y.” The best journalism comes out of just following a lead that seems interesting but confusing. And by definition, you do not know where it is going to go. That is how something like Watergate happened, for instance. Or the phone hacking scandal in the UK. There are dozens of examples of that, but what it requires are journalists who would wander around, asking stupid questions. It is quite simple, really.
Jeroen: On the podcast interview in Brussels, I would love to talk with you about what it does to you. Because I am sure you get sued all the time, or you have been in trouble with people who dislike what you write.
Tom: We can talk about that.
Jeroen: But now a very different question for this pre-event interview, otherwise it is getting too long. Is there anything you would recommend to the Compliance industry, anything they could do? Because I know a lot of these people have very good intentions, they really want to contribute to fighting money laundering and all the predicate offences underlying those things. Is there something you could say to them?
Tom: Two things, briefly. One: I think you have got to see the political side of this. If I were in that position, I would be tempted to say, “This job is impossible.” And it is deliberately impossible. Because you are asking me to police a system in which my adversaries have every advantage. They have the most incredible arsenal of disguises available to them. Why is it that my job is so hard? I would agree with you, there are a great many people of good faith and valuably using their abilities. But ultimately, you are losing course now, if you look at the shift, the way power is shifting from democracies to kleptocracies. And that is because the responsibilities of states have been outsourced to them in a way where they cannot win. And the second thing: leak stuff to me.
Jeroen: You will get loads of leaks now!
Tom: Journalism only happens if there are sources.
Jeroen: Wonderful! Tom, we are very much looking forward to having you at the Leaders in Finance AML Europe event. Thank you so much, Tom!
–> This is a pre-event interview in the run-up to the Leaders in Finance Cyber AML Europe event on 29 June 2023 in Brussels.