Empires of Anonymity: A Conversation with Casey Michel

Picture of Turkmen president Berdymukhamedov

By Mariel Kieval

Why don’t you go ahead and tell me a little bit about your background and briefly introduce yourself?

Thanks to Crude Accountability for everything—not only the event last week, but all the work that you and your colleagues do specifically on Turkmenistan. Hopefully you were there to see me in the talk last week really singing the praises of Turkmenistan: A Model Kleptocracy, the report that fills this massive gap in our understanding of certainly Turkmenistan and post-Soviet transnational corruption and kleptocracy. I was a Peace Corps volunteer in northern Kazakhstan, which was my exposure to the post-Soviet world and certainly to Central Asia, to say nothing of the kind of governance structures. I went to graduate school for Russian and Soviet studies, and ended up getting interested in writing on and investigating transnational corruption, which is what we now understand to be kleptocracy—how these regimes access Western financial systems and enablers, how money moves, how it’s hidden and laundered.

My main project today is the book called, AMERICAN KLEPTOCRACY: How the U.S. Created the World’s Greatest Money Laundering Scheme in History. It’s about how the US has transformed into this financial secrecy haven that has provided the tools for oligarchs and elite members of these kleptocratic dictatorships, especially in the post-Soviet space, to hide and launder their money, and what it means for the rest of in these Western polities. It’s one thing to say that it’s happening, but in order to actually affect the change, we need to understand why it’s important to affect that change because it affects everything from national security to wealth inequality to electoral legitimacy, and everything that flows with it.

In your opinion, why have international organizations been letting Turkmenistan off the hook when it comes to corruption? How can we make sure that we actually enforce the anti-corruption policies that are in place?

Western jurisdictions, companies, and financial services industries have spent years doing exactly that, not just for the Turkmen government, but for governments similar to the regime all around the world. This is a story of how they are willing to work with some of the most heinous regimes in the world. It’s hard to find a government as outright unabashedly dictatorial and brutal as the Turkmen government, which illustrates the fact that if these companies and these services are willing to work with the Turkmen government, there’s nobody that they’re not going to work with. From the industry side, they don’t want more regulations. They certainly don’t want more government oversight. Their common refrain argument is, we can regulate ourselves. But they continue to work with the Turkmen government. That is simply proof that any kind of self-regulatory mechanism is a nonstarter, and that increased governmental oversight, and certainly increased penalties, are an absolute must in terms of actual policy solutions to cleaning up these sectors.

During the report launch event, it was mentioned that policies used by the US and Europe to combat corruption abroad typically target middlemen. Do you agree with this assessment? How might we alter legislation to target the true source of kleptocracy in Turkmenistan?

The thing to keep in mind about kleptocracy is that it’s not something that happens domestically. It is not something that happens within the confines of a single country or even of a single regime. It is something that requires multiple countries, jurisdictions, and financial systems. It happens cross-jurisdictionally and transnationally. The phrase is ‘kleptocracy takes two to tango’. And that’s absolutely right. What we’ve come to understand of modern kleptocracy is exactly what the paper from Crude Accountability highlighted—that the Turkmen regime is taking advantage of these transnational, international, cross-border financial flows.

When it comes to policy solutions, there’s only so much that Western jurisdictions can do to pressure the Turkmen government to clean up its act domestically. There are certainly levers when you think of sanctions packages, and it’s easy enough to issue a statement. But if we want to have an actual effect, we need to clean up our own backyard, implement pro-transparency, and anti-anonymity legislation, and policies that shed light on the industries taking full advantage of these dirty money outflows from the post-Soviet space. These financial services industries are are what we call enablers. These are white collar service providers in the West who are setting up the shell companies and anonymous trusts, who are benefiting from the sales of anonymous real estate. These are especially the lawyers that are making sure that all of these financial flows are still perfectly legal, but still perfectly anonymous.

The report goes to great lengths to highlight the role that Deutsche Bank in Germany has, which is just a wickedly corrupt organization. It’s no surprise that when the Turkmen government needed a bank to look the other way for all their money to flow through, they went to Deutsche Bank. So Deutsche Bank is doing that, fine. But where are the German regulators? Where is the German financial regulatory apparatus and oversight? And beyond that, why hasn’t more been done to crack down on these kinds of European banks that are pursuing similar mechanisms elsewhere in other jurisdictions in Hungary or Bulgaria? The US, the West has to focus on cleaning up its own backyard, making sure to end these empires of anonymity that are the key tools, which the Turkmen regime has taken full advantage of.

You touched on real estate as a vehicle for money laundering. What is your opinion on Biden’s recent statement about ending anonymous real estate purchases? Do you think a policy like that is realistic?

I am a 100% in support of his statement, specifically as it pertains to barring the kinds of anonymous real estate purchases we have seen flourish in every single transnational kleptocratic network. Real estate a wonderfully stable industry. It’s a hard asset that is likely not going to depreciate. And if you do need to sell it, the market is still going to be there. And you can likely find another buyer, especially another potentially kleptocratic buyer. The key again to that is anonymity. For years across the developed world, purchasing anonymous real estate was stupidly easy. All you had to do was take 15 minutes to set up an anonymous shell company, attach a bank account to it, and have the financial flows go through there. You can even have additional layers of secrecy on top of that. If you had a lawyer involved, they could implement things like attorney client privilege for that. Because of the ease of these mechanisms, the real estate industry in the US and elsewhere has blossomed into the key kleptocracy industry over the last 15 or 20 years. This is an industry that has exploded as a destination for dirty money flowing in from around the world. And we’re not just talking about places in Malibu or Miami or Manhattan. We’re now talking also about commercial real estate, steel mills, and manufacturing plants. We have to end the ability of anonymous shell companies to purchase this. We have to end the ability of lawyers being able to set up these real estate purchases on behalf of anonymous clients. This is a spoiler for the book—now that we’ve been ending anonymity in shell companies in the US and elsewhere, real estate is absolutely the next domino to fall. In 98% of the US, you can still purchase anonymous real estate, and we are only just beginning to learn what kind of damage and devastation that has meant for US communities, the real estate industry, and those who have to live under the regimes in places like Ashgabat.

Do you think that a policy like this would be difficult to enforce?

You can have as many laws and regulations as you want on the books. But those laws and regulations are not worth the paper that they are written on without enforcement and resources dedicated to that enforcement. Twenty years ago, the US passed the most sweeping anti-money laundering legislation ever seen within the Patriot Act, specifically dedicated to cleaning up the American banking sector. It required banks to no longer work with corrupt actors abroad, no longer set up shell bank accounts, no longer accept money from whoever, and also to set up these internal anti-money laundering mechanisms. These policies were successful insofar as they changed the narrative, they changed the dynamics of dirty money using specifically American banks as their primary go to. But a few years ago, we saw a leak of this large tranche of documents, Fincen files, that showed that we still had millions and billions of dollars in suspect money flowing through American banks. It might be less than it once was, but because of the lack of resources and enforcement at the governmental level, it was still not nearly as effective a regulation and regulatory oversight as it could have been.

Why do you think we have seen so few Central Asians being targeted by the Department of Justice through the Global Magnitsky Act?

I don’t think the Central Asian figures were at the top of anybody’s list of whom to target. I wouldn’t be surprised at all, if, in the next few years, we do begin seeing more Central Asian figures targeted for Global Magnitsky. The most cynical response to that is that the US simply wants to remain on good relations with governments in the region for purely geopolitical reasons. I prefer to say they’re going to get to them at some point, and they just have bigger fish to fry right now. But there are some absolutely fantastic candidates for listing under Global Magnitsky. Certainly, all of the figures that feature prominently in the in the Crude Accountability report on Turkmenistan, whether it is members from Berdymukhamedov’s family or former officials from the Niyazov era. If the American authorities really want to target the biggest factors of why Central Asia has become such a bubbling stew of elite level corruption, they can go after some of the oligarchs, like Nursultan Nazarbayev, the former president of Kazakhstan, who in so many different ways really created the playbook for what we now understand and now recognize as these kleptocratic dictatorships.

Beyond that, it’s not just the repression, the brutality, the lack of free and fair elections. It’s how Nazarbayev accessed Western financial flows to move and launder his money using things like Swiss bank accounts. He also tried to pressure Western governments to lift investigations into his finances. You have Nazarbayev hiring folks like Tony Blair to try to create this image of Nazarbayev in the West as this great statesman, as this this benevolent figure, when in reality, he is the one that is overseeing a decades’ long dictatorship in Kazakhstan. If the US really does want to prove that Global Magnitsky can be as effective as it should be, that’s who they need to go after. Because that is going to send shivers down the spine of every other high-ranking member of every other regime.

If you could make one policy recommendation to the US government related to American financial institutions and their involvement in corruption, what would it be?

At the highest level of ending anonymity in the industries that have proven themselves to be the greatest friends of the kleptocrats around the world. The basic rundown is ending anonymity in shell companies, trusts, real estate, private equity and hedge funds, the art market, auctions, and luxury goods purchases. If you could end anonymity in all of those sectors, it would go a massive way in cleaning up what we now understand as kleptocracy. Beyond that, continuing to staff up the regulatory bodies and resources that are already in existence that specifically monitor illicit financial flows through Western banks and financial institutions. Increased regulatory requirements for lawyers would go a significant way to make sure that they are not involved in setting up the shell companies or the real estate purchases for this specific benefit of laundering millions of dollars of dirty money. There’s a whole basket of proposed reforms, but ending anonymity, beyond all, is the key.

Is there anything I didn’t touch on that you would like to bring up?

The report that came out from Crude Accountability and Tom Mayne was one of the final dominoes to fall in our understanding of how Turkmen, and more broadly post-Soviet, corruption and hypocrisy operates for years and years. Both the Niyazov regime and the Berdymukhamedov regime have tried to make it a black hole by not publishing financial information, personnel information, and corporate information. For years, those of us who study kleptocracy in Central Asia and the post-Soviet space focused on Kazakhstan, Azerbaijan, and Russia. Nobody paid any attention to what was going on in Turkmenistan. We had no idea whether they were as isolated and as autarkic financially as the Berdymukhamedov regime claimed they were. Now we know that’s not the case at all. I just want to commend everybody at Crude Accountability again for filling that much-needed gap. We can now say, it turns out that the regime, well it’s just like all the other regimes that are following similar kleptocratic patterns. It was absolutely a wonderful report, and I’m sure we’ll be talking about it for a while.

Check out the full conversation on our Youtube channel.

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 first book—AMERICAN KLEPTOCRACY: How the U.S. Created the World’s Greatest Money Laundering Scheme in History—centers on America’s transformation into the world’s greatest offshore haven, and what that means for the rest of us.