But the oligarchy, let us remember, exists as worldwide phenomenon, not just a Russian affair. The Ukrainian conflict could become a starting point for confronting our entire contemporary global oligarchic empire.
Oligarchs around the world grow and protect their fortunes through a global tax avoidance network of financial consultants and shell companies. Historical data dumps like the Pandora Papers have given us disturbing insights into this secretive world of high finance manipulation, a universe where deep-pocketed tax cheats have penned, according to Global Witness estimates, at least 12,000 billions of dollars in offshore accounts.
Governments opposed to Russia’s invasion of Ukraine are now rushing to impose sanctions on the oligarchs most closely tied to Putin’s regime. They freeze their assets and deny them entry. But these sanctions are of limited use. They leave untouched the treasure troves of wealth hidden in global tax evasion networks.
Russia’s richest 0.01%, as University of California Berkeley economist Gabriel Zucman reminds us, have more than half of their wealth parked outside of Russia.
“Shouldn’t an effective sanctions policy” demand Zucman, “start by seizing these assets?”
Easier said than done, given the design opacity of global tax havens and the powerful interests within nations like the US and UK that have spent the last three decades allowing oligarchs who robbed the Russian people.
“Money doesn’t just move and hide,” says Spencer Woodman, analyst at the International Consortium of Investigative Journalists. “Russia’s flight of wealth has been supported by big banks and a global industry of professionals specializing in providing wealthy clients with front companies, trusts and other covert vehicles.”
Either we tackle these catalysts, or we let the oligarchs of our world – from Russia and every other corner of the globe – continue to build up their enormous reserves of wealth. And we must move with due diligence. This moment of indignation against Ukraine will pass. Our global oligarchy will close ranks, having perhaps sacrificed a handful of its Russian brethren, and seek to continue its tax avoidance activities as usual. We cannot leave them.
So where do we begin our offensive against the oligarchy? Woodman sees some immediate simple steps, such as getting Congress to pass the “Facilitators Act,” legislation pending since last October that would require all Americans who facilitate the flow of assets into the United States, not just banks, to investigate how their foreign clients built their fabulous fortunes.
“If we force banks to report dirty money but allow law, real estate and accounting firms to look the other way, it creates a loophole through which crooks and kleptocrats can navigate a yacht,” the rep notes. Tom Malinowski (DN.J.), a co-sponsor of the legislation.
Our end goal should be systematic transparency throughout the global financial system, through a cooperative effort to create what the Independent Commission for the Reform of International Corporate Taxation calls a “global asset register.” This GAR, the commission says, “would prove a vital tool” against “illicit financial flows” and attempts to avoid taxes on “legitimate income and profits”. With a global asset registry in place, governments could more effectively levy “appropriate taxation to reduce the negative consequences of inequality.”
Western political leaders have yet to commit to such a registry. But some lean a bit in that direction. Last Monday, British officials released a “much delayed economic crime bill” that will force anonymous foreign owners of British land and property to reveal their identities.
President Biden, meanwhile, talks tough.
“We join our European allies in finding and seizing your yachts, your luxury apartments, your private jets,” he promised in his March 1 State of the Union address. “We come for your ill-begotten gains.”
But any seizures are likely to be little more than more token gestures unless, journalist Edward Ongweso suggests, we shut down the global networks of tax havens that allow the global elite to hide their wealth in offshore hubs. And any successful shutdown decision, he adds, will have to understand and overcome the political reality that elites everywhere have little interest in “setting precedents that could come back to hurt them.”
In other words, we won’t be able to eliminate Putin’s oligarchic cronies unless we directly attack the wider global oligarchy. What could this withdrawal entail? Imagine a crackdown on the oligarchy that combines an attack on global tax havens with “solidarity tax” initiatives that redistribute wealth from the oligarchs to refugees or pandemic victims or some other category of people in need.
Efforts in this direction could have broad political appeal. Indeed, Rep. Malinowski has just introduced new legislation that would allow the Biden administration to confiscate the Russian oligarch’s wealth and apply it to Ukraine’s reconstruction efforts.
The trick to moving forward in a broader and bolder way? Timing, says British economist Faiza Shaheen.
Our current window, she reminds us, “will only be open for a short time.”