Natalie Duffy and Nate Sibley write: The word “kleptocracy” often conjures Cold War imagery of despotic tyrants in poor, faraway places. And it is true that many of the world’s most corrupt countries are in Africa, Asia and the Middle East.
But a kleptocracy is no longer a corrupt political system in a few poor nations: It is a sophisticated global network whose members include world leaders and powerful business people. Kleptocrats send money around the world with the click of a button, aided by unscrupulous professionals with the expertise to launder it through anonymous offshore companies and secure it in luxury assets in the West. According to the International Monetary Fund, as much as 5 percent of the world’s gross domestic product is laundered money, and only 1 percent of it is ever spotted. Illicit cross-border financial flows have been estimated at $1 trillion to $1.6 trillion per year. A 2012 study put the total private wealth held offshore at up to $32 trillion and suggested that, since the 1970s, elites from 139 low-to-middle-income countries had parked as much as $9.3 trillion in offshore accounts.
Some of the money is hidden right here. As the driving force behind global economic reform for the past three decades, the United States has played an important role in the rise of the globalized kleptocrat. America has become one of the leading secrecy jurisdictions. Delaware, South Dakota, Wyoming and other states do not require disclosure of corporate ownership, meaning that kleptocrats aren’t parking their assets just in exotic locations like the Cayman Islands or the British Virgin Islands anymore.
U.S. real estate then provides an attractive conduit for securing and legitimizing the laundered funds. A New York Times investigation revealed that, of the properties purchased for more than $5 million in Manhattan in 2014, more than half were bought by anonymous companies that disguised the buyers’ identities. [Continue reading…]