Why has the momentum in Canberra stalled to clamp down on kleptocratic wealth? – The Guardian

As Vladimir Putin was preparing to send troops into Ukraine last month, the British prime minister, Boris Johnson, warned the UK will open up the matryoshka dolls of Russian-owned companies and Russian-owned entities to find the ultimate beneficiaries within.

Johnsons reflex was spot on, albeit overdue. Anti-corruption advocates have been calling for such measures for years.

To disempower autocrats, kleptocratic wealth must be controlled. Today, though, corrupt money finds a haven in strong rule-of-law countries. Kleptocrats believe these places will protect their assets, just as the law protects other assets. Sadly, theyve been right, at least until now.

Putins war has seen sanctions levelled against him and his elite supporters on both sides of the Atlantic.

We are coming for your ill-begotten gains, vowed US president Biden about Russias oligarchs in his State of the Union address. Were joining with European Allies to find and seize their yachts, their luxury apartments, their private jets.

The amount of wealth held offshore by rich Russians is huge, about equal to the wealth of the entire population inside the country.

Transatlantic cooperation will be reinforced by a Task Force KleptoCapture in Washington and a Kleptocracy Cell in London.

As part of the global effort, Australia has imposed sanctions on over 460 people and entities. And it has joined the US, Europeans, Canada and Japan in a Russian Elites, Proxies, and Oligarchs (REPO) multilateral task force.

But theres a snag in all this: you cant sanction what you cant see.

The assets of corrupt elites are largely hidden behind opaque legal structures the anonymous shell companies and secretive trusts that are the beating heart of an offshore financial system which has been thriving for decades.

Lawyers and other professionals in tax havens and financial centres have willingly supplied the corporate veil corrupt elites use to hide their assets.

The fight against ill-gotten wealth, from Russia and elsewhere, has to be a fight against financial anonymity.

Coupled with its sanctions, Australia should join with others in dismantling the rules and practices that have allowed corrupt elites to shelter their wealth across borders, including in Australia and other liberal democracies.

Corrupt wealth finds its way here from countries in our region and beyond. Structural reform and a shift in mindset is needed to systematically reveal and deter these financial flows which exploit our open markets.

Globally, the tragedy of Ukraine could mark a turning point in unmaking the infrastructure of offshore wealth that has emboldened tyrants, fuelled oppression and entrenched poverty in many societies. Moves by Washington, Brussels, and London in recent days to crack down on corrupt Russian wealth could be midwife to much-needed action to temper illicit finance more broadly.

Australia should play a constructive role in this project. But it does not have a register to ensure regulatory and law enforcement authorities and the public know who truly owns and controls Australian companies.

The government has previously signalled a commitment to this reform, including to comply with multilateral standards. As assistant treasurer in 2016, Kelly ODwyer said a register would make it a lot easier to expose wrongdoing or fraudulent conduct and much easier to disrupt illicit financial flows.

But momentum in Canberra has stalled, even as key partners like the US, UK, and Canada have converged on the importance of this move.

The Biden administration is pushing ahead plans to implement the bipartisan Corporate Transparency Act. His Treasurys proposed register has been widely welcomed and not just from activists and law enforcement. BHP, the mining giant, said it presents a real opportunity to not only reduce illicit fund flows into the U.S., but to also send important signals on the need to tackle global corruption.

The UK is starting to close loopholes which have undermined its register, Companies House, with reforms aiming to make the agency a custodian of accurate and detailed information.

Theres much at stake, even beyond geopolitics. Ownership transparency is linked to a fundamental governance question of our time: how to build productive and equitable markets in a globalised world. Progress on transparency would signal the kind of economy we want in Australia: inclusive, well-governed, fair, and oriented towards innovation and productive investment rather than rent-seeking. In other words, wealth creation for the many rather than rigged returns for the few.

Led by the Treasurer, the government can take three steps to embrace this world-making moment.

First, it should legislate a world-leading, public, beneficial ownership register. There should be robust verification procedures and powers to trace complex ownership claims. Australia can also reduce or eliminate the percentage threshold which defines beneficial ownership, ensuring it cant be gamed.

Second, agencies should be properly resourced to use the new register to deter and seize corrupt wealth. Enforcement is key. Agencies such as Austrac and the AFP must have capabilities to actually use the new register, including through dedicated anti-corruption expertise.

Finally, it is crucial that regulatory and law enforcement agencies receive a clear and strong political mandate to prioritise their anti-corruption work. Building on current sentiments at home and abroad, Canberra will have to muster the will to systematically fight transnational corruption, alongside investing in the instruments to do so, elevating it to a top-tier priority.

Much more needs to be done, including to trace the owners of real estate and luxury assets, and to require more transparency of foreign investors. But an effective register for Australian entities is necessary and would make a substantive international contribution.

Corrupt networks and the autocrats they empower are bringing countries and regions to their knees. The harms inflicted on Ukraine today call on us to recommit to a better global order, one that permits citizens to organise themselves as free peoples, without internal or external domination. Australia should seize the moment, and demonstrate that we not only get the kleptocracy problem, but that were serious about confronting it.

Vafa Ghazavi is a Carr Center Fellow at Harvard University and executive director for research and policy at the James Martin Institute for Public Policy.

View post:

Why has the momentum in Canberra stalled to clamp down on kleptocratic wealth? - The Guardian