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Is the US pulling ahead in the global fight against corruption and what does this mean for investigative journalists?

Article by Susan Coughtrie and Casey Michel

March 24, 2021

Is the US pulling ahead in the global fight against corruption and what does this mean for investigative journalists?

This week Unsafe for Scrutiny’s Project Director, Susan Coughtrie, spoke with Casey Michel, a US based investigative journalist, and author of the upcoming book American Kleptocracy, to get his insights into recent, promising anti-corruption developments in the US and what impact he expects these to have on the global fight on corruption as well as the work of journalists like him who play a critical role in uncovering it.


Susan Coughtrie (SC): President Biden’s entry into the White House appears to have come hand in hand with renewed interest in the US stepping up its efforts in the global fight against corruption, with his administration declaring it a ‘core national security interest’. What do you think have been the driving factors behind these latest developments?


Casey Michel (CM): From my vantage point, there are two primary drivers behind this increasing interest in and focus on addressing, corruption, kleptocracy and the enablers that allow it to operate. The first, specific to the American context, is our experience under the previous president, Donald Trump. We have witnessed how these corrupt, kleptocratic networks, which initially helped propel Trump into power, took full advantage of having a figure like him in the White House. It was, speaking frankly, a horrible four years – dispiriting, depressing, and inordinately challenging – but a silver lining was it brought all of these concerns around dark money networks and the tools they use, such as anonymous shell companies and real estate purchases, to the fore. It forced so many Americans, and their allies, to closely examine the links between transnational corruption and the potential dismantling of the broader liberal democratic project, including national security and electoral security. That is the legacy that we are seeing the Biden administration’s reacting to now, having witnessed what could potentially happen if we continue to ignore these corrupt, kleptocratic elements operating within our society.


The second driver is the broader growing international awareness of kleptocracy and transnational corruption over the past few years. Both through the release of large scale journalistic investigations, such as the Panama Papers and Paradise Papers, as well as a number of reports coming from high level bodies, including the United Nations and the European Union. Awareness has grown as to the magnitude of these offshoring systems used by kleptocratic networks as well as the wider societal impact they can have on, for example, wealth inequality or geopolitical instability. What we have seen on the American side of things is a kind of microcosm of what has been taking place internationally – including examining the kinds of policy proposals that are going to be required to unwind the impact these networks have already had.


SC: The passing of the US Congress of the Corporate Transparency Act (CTA) on 1 January 2021 has been described by anti-corruption campaigners as ‘historic’. Amongst other measures, the CTA introduces requirements that will put an end to the practice of anonymous shell companies operating inside the country. As someone who has written extensively about corruption facilitated through shell companies in US jurisdictions, what impact do you think this legislation will have? Is it as positive as it sounds?


CM: This is a remarkable piece of legislation and it is difficult to understate just how important it is. There has been an effort to ban the formation of US anonymous shell companies since at least 2008, with a very clear through line of bi-partisan support, however for a number of reasons it did not happen. The US for years and years has been the capital of anonymous shell company formation thanks to states like Delaware, Nevada and Wyoming, which sold anonymous shell companies to anybody who wanted them – drugs or arms traffickers, oligarchs or dictators’ families –  all and sundry could get an anonymous American shell company in 15 minutes for $100, if that. So thousands and thousands of these anonymous shell companies were being created every single year, and it was impossible to track back who is running them, who is profiting from them, who was taking advantage of them, but now because of this legislation it will.


This is an instance of the US following others’ lead. The UK for example passed similar legislation a few years ago, which means you can go to Companies House’s website and plug in the company you want and find information about who the person of significant control (PSC) is for it. The American variant is not going to be public, its entries are only going to be accessible to American law enforcement authorities and other foreign governmental officials or bodies that file the proper paperwork to request information. So journalists like myself, or researchers are not going to be able to access information, but that is fine for right now. We will get there at some point, some day. The fact of the matter remains that, at long last, the US is no longer the global capital of anonymous shell company formation.


SC: One of the problems that has faced the UK has been implementation and enforcement. There have been criticisms of Companies House, which is currently going through another review, but at least there has been a level of transparency. Do you have concerns about that from the US point of view, given that it is going to be a closed book and as a journalist you are not going to be able to check that what was promised is being done?


CM: I do, and not least because if there is one lesson to be taken from the UK example from the past few years, it is that enforcement is just as key as the actual passage of legislation. There are any number of journalists who have done fantastic work looking through just how porous the UK system of beneficial ownership information collection remains. At the end of day, even though the legislation exists, even though there is information on file, that does not mean that it is accurate and it does not guarantee that the person listed is the beneficial owner or the proper address has been given etc. Enforcement for any comparable pieces of legislation is always going to be a concern and even more so in the US now that it is private and there is not the possibility to have journalists like myself, researchers or major media outlets looking through as a non-governmental check to make sure that information is accurate. So the US has taken one giant step forward, there is still more work to do, but the US is moving in the right direction. If anything under the new administration the momentum will only continue and this legislation is an excellent platform upon which to build.


SC: What effect do you think the US’s renewed anti-corruption efforts are going to have on the country’s foreign policy? Particularly when dealing with countries in which the political elites have reputations for laundering their money in the West?


CM: From my end, there are two responses to that. There will be a restoration of American leadership on issues such as good governance, pro-transparency and anti-corruption reforms that the US has put forth for decades. For example, we are now four and half decades after the Foreign Corrupt Practices Act was passed in the US, which really set the bar for legislation that we see elsewhere, whether that is the EU or the UK. On the one hand, this low hanging fruit – American leadership in this space should never have been abdicated – on the other hand the current administration’s efforts in this area are likely to be welcomed by many abroad. The flip to that, is how is it going to affect American foreign policy with those who have benefitted under the last four years? The short answer is I do not know, and I am excited to see. However, what comes to mind is the numerous instances of oligarchic figures in places like Ukraine, Russia, Malaysia, Indonesia and Turkey using the tools of financial secrecy to wheedle their way into the levers of American power, that is to say access those close to or in fact in the White House. Influencing American foreign policy decisions over the past four years followed the line of ‘the deeper your pockets, the easier it is’. And to a certain extent that is true for every administration – but there were elements which made it grotesquely and ludicrously easy for those with dirty money, those involved in kleptocratic networks, who will not be able to achieve the same level of success as they did over the last four years.

One of the figures that I am writing about in my book, which will come out later this year, is a Ukrainian oligarch called Igor Kolomoisky. Widely considered the most powerful oligarch in Ukraine – who has a very lengthy and sometimes concerning relationship with the Ukrainian President Zelensky. Ukraine has been going through fits and starts of ‘de-oligarchisation’ for years and years now, encompassing two revolutions. Obviously the previous administration did not care one bit about that, but in just the first two months of the current administration sanctions have been introduced against Kolomoisky. It was very much a shot across the bow to convince Ukraine that now is the time, the US is here to support you, in order to take the necessary steps to remove the remaining influence of the oligarchs in the country. So that is already one manifestation of the kinds of new policies out of the current US administration, which certainly I and many others who work in this space are very grateful for.


SC: What have the biggest challenges been for you as a US-based investigative journalist uncovering financial crime and corruption? Do you anticipate those becoming more or less challenging in light of the recent developments?


CM: Fortunately I have never experienced or had to deal with any serious threats to my safety and security, and much of that has to do with the fact that I am based in the US. Although I know that journalists have died in the EU in the past few years, working on similar topics, so it is not anything that I take for granted. Particularly  given the way the last US President had no qualms about whipping up his supporters to incite violence and threats against the personal safety of journalists.


The challenges I face are twofold – access to information and legal pressure. Firstly, these kleptocratic networks rely on secrecy and anonymity and have built in defences to throw off investigative journalists like myself and other researchers, whether in the American context or elsewhere. That is a structural challenge in and of itself, which is not going away any time soon despite the new legislation. Secondly, there are the legal threats and pressures, underpinned by lawyers as well as reputation management and PR companies who work in tandem for their clients, which have only been increasing in recent years.


SC: As part of FPC’s Unsafe for Scrutiny project we have been documenting cases of journalists facing vexatious legal threats emanating from the UK, sometimes accompanied by smear campaigns and forms of harassment orchestrated by reputation management companies. Do you perceive a parallel in the US?


CM: Yes, this is a manifestation of a pattern that we have seen in the UK already. Obviously there are different legal structures and different elements at play, but at a 10,000 ft. level there are similar dynamics that are moving in a very concerning direction. There are structural issues within the media, the decreasing budgets, decreasing willingness to push back against some of these figures, increasing concerns, understandably about being taken to court and not being able to succeed, or even to bankroll the defence of some of these pieces of coverage. A few months ago I submitted a story to an outlet and the editor got back to me to say this is great, nothing is factually incorrect, but we are just going to cut a lot of the case studies, which I had included, because we don’t want to deal with the lawyers that are going to be involved with this. It was a quick look into the internal discussions that take place in American media regarding concerns about threats from lawyers working at the behest of these transnational oligarchic and kleptocratic figures. Most concerning is that they do not even have to file lawsuits or email or call the media. They have done it enough already that the editors are now less willing to go through with publishing these details, which are accurate and pertinent but would cause problems.


There is every reason to think that if there is not a very concerted effort to stop the direction the US is going in, we will end up in the same position that the UK is in right now, pertaining to these legal threats, pertaining to these backroom conversations that prevent information from ever even being published, let alone being published and then seeing a lawsuit thereafter.


SC: Do you think it is the internal financial considerations and the declining revenues that is the missing element stopping media from fighting back or is it something more than that?


CM: I think the resourcing is one of the primary, if not the primary, issues; it’s certainly not illogical to foresee the constraints for news outlets and journalists, and why there is going to be a greater reticence to fight some of these threats. At the same token it’s almost a reinforcing dynamic, in so far as the less that these outlets are willing to fight back the greater the temerity, the greater the aggression these figures, networks, lawyers, and PR teams will employ to push as far as they possibly can. They know that these outlets’ backs are up against the wall. This is the thing: They do not even have to file the lawsuits, they do not even have to go to court, all they have to do is make a phone call, email or whatever it might be or as I experienced a few months ago – they just have to have their reputations already in the editors’ minds to convince the outlet to say, ‘Well, the article is perfectly accurate but we just do not want to deal with these lawyers, with these figures, we do not want to tangle with them, so we are going to forego including some details in there.’


SC: Whereas those figures on the other side who want to hide their wrongdoing are presumably well resourced and motivated?


CM: Absolutely, there is no limitation on their funds. This is why what you and your colleagues, as well as some of the other civil society organisations, are doing is so necessary to raise awareness that this dynamic is at play. As well as highlighting what the logical extension and outcomes of this dynamic will be. This is the beauty and the horror of the last four years in the US, is that it has allowed the current administration to propel itself and these anti-corruption reforms forward. But it is just by the hair of our chins that we dodged far more bullets than we would have ever anticipated. We came so close, far closer than I think we are really aware of, to just how dark things could have gotten if Trump won re-election. To say nothing of whether he wins in four years time or not. When you have high level people in the US administration declaring the press ‘the enemy of the people’ and Supreme Court Justices saying we need to revisit basic First Amendment protection for the press. All this tilts that balance even further in the favour of those corrupt figures.


SC: What else would you like to see change to improve the safety of investigative journalists investigating financial crime and corruption based in the US or elsewhere? For example, do you think greater recognition of their work in official initiatives, like the sanction regimes, provides a form of protection?


CM: I have been involved in some of the conversations from the civil society side with US government officials about sanctions list and I do frankly think that is an absolute boon to the scope of Global Magnitsky, and the efficacy of sanction programmes like this, to have journalists and civil society involvement. That input is absolutely a benefit to what these programmes stand for and how they should be successfully implemented. Certainly anything that can increase the scope and capacity of those conversations, of that flow of expertise and flow of recommendations to government bodies is something I could absolutely get behind.


In terms of recognition, the reports that FPC has already issued, including the survey findings etc., regarding this topic are a necessity. When you think about it, especially on the American side, and I’m sure on the British side as well, these media outlets are already showing themselves less than willing to push as far as they should, uncover as much as they should and stand by as much as the findings as they should. There is no reason to think that outlets will then also highlight how many pressures they are facing, how many threats they are facing. Those considerations are working on two different trajectories, at which point civil society needs to step into the breach. Someone else other than the media needs to detail and analyse and publicise these issues facing them, so that policy platforms can be implemented. Civil society has a different role from journalists, but at the end of the day they are moving in similar directions and can work in tandem with one another.


SC: The UK has previously sought to position itself as a global leader in tackling corruption, however arguably it now appears to be falling behind. The most recent FinCEN Files investigation, released in September 2020, brought to light that the US Treasury refers to the UK as a ‘higher risk jurisdiction’ – do you perceive any changes in the US – UK relationship as a result of this apparent widening gap in anti-corruption efforts?


CM: In the short term no, I do not think that this is going to shift anything in terms of the core pillars of the relationship. There was concern amongst some of the anti-corruption reformers regarding Brexit, which was that unmoored from EU regulations the UK would undercut some of the existing anti-corruption and pro-transparency protocols. Certainly some developments in the past few months in the UK feed directly into those concerns.


In the long term, and a lot can change in a decade or two, my sense is the relationship is strong enough to weather any number of crises. One potential fault line that could emerge however would be over the overseas territories. The British Virgin Island (BVI) beneficial ownership registry is supposed to be coming, as is the Caymans registry, but they’ve punted it down the line already and if the rest of the world continues creating beneficial ownership registers and BVI and Caymans are still lagging– at what point does the US or Brussels or whomever come forward and say enough is enough and this will begin impacting trade policies.


A key message to get across to policy makers – to say nothing of the broader public in the West – is the falsity of the notion that corruption, kleptocracy and authoritarianism, and the realities and trajectories that make them happen, take place over ‘there’ – i.e. in Azerbaijan, Kazakhstan, Russia. But in reality, it is the Western service providers, the Western enablers – lawyers, PR firms, non-profits, company service providers – that are propelling these networks and are allowing these corrupt influences to integrate themselves into Western politics, British politics, US politics. We need to upend these antiquated notions that it is something that is happening elsewhere, because it’s not. It is right here and it’s been here for years and years, but thankfully in the US we are starting to see some change.


Casey Michel is a writer, analyst, and investigative journalist working on topics ranging from kleptocracy, illicit finance, and foreign interference to developments in the post-Soviet space and dark money financing networks. His upcoming book American Kleptocracy will be published in October 2021 (available for pre-order here). Michel is also a member of the Advisory Council for the Hudson Institute’s Kleptocracy Initiative, where he helps co-host the “MAKING A KILLING” podcast on corruption and kleptocracy.


Michel will be speaking at the Foreign Policy Centre’s upcoming event on 20 April –  Investigating Corruption: US versus UK – A Widening Transatlantic Divide? – alongside Tom Burgis, Investigations Correspondent at The Financial Times and author of Kleptopia: How Dirty Money Is Conquering the World’, Dr Sue Hawley, Executive Director of Spotlight on Corruption and Dr Tena Prelec, Research Fellow with the Department of Politics and International Relations at the University of Oxford, and part of the Global Integrity Anti-Corruption Evidence Project.


Full details of the event and registration is available here.


This interview was produced as part of the Unsafe for Scrutiny project, which is kindly funded by the Justice for Journalists Foundation.

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