|   Business


  |   Business


Can a renewed transatlantic alliance finally crack down on kleptocrats?

US President Joe Biden has been clear about his ambitious agenda for the first overseas travel of his presidency, an eight-day European trek from Cornwall to Brussels to Geneva. Underpinning the journey, during which the American head of state has met with G7 leaders, European policymakers and NATO allies before closing with an in-person showdown with Vladimir Putin, is Biden’s determination to rejuvenate the transatlantic alliance which was left on life support during Donald Trump’s tenure as the “leader of the free world”.

The relationship between the US and Europe has already drastically improved, even before Biden’s European odyssey—one German analyst described Biden as “a U.S. president almost tailor-made for Europe”. After the show of transatlantic unity, though, the true test will be whether Biden and his European allies can tackle some of the most serious issues facing both Europe and the US. One of these is certain to be addressing international kleptocracy, given Biden’s longstanding determination to stamp out corruption and shine an uncomfortable beam on dark money. Could the rebirth of the European-American friendship spell serious trouble for those who have gained from corrupt means?

A global issue requiring global solutions

Europe will likely coalesce around Biden’s proposal for a global tax overhaul, though the details still need to be hammered out—UK Chancellor Rishi Sunak, reportedly joined by some EU countries, is pressing for financial services firms to be excluded from the reform. But while the proposal of an international base corporation tax rate might chip away at the issue of tax havens—many of which are either in Europe or are overseas territories of the UK—this is just one element of the dark money nexus which the revitalised transatlantic partnership needs to address.

One idea that has been floated has been for the creation of a Global Kleptocracy Initiative, drawing on the transatlantic alliance to fight kleptocracy and corruption in the name of strengthening democracy. For one thing, while both the US and the Europe have made encouraging reforms recently—with bipartisan support, the US Congress overrode Donald Trump’s veto to pass the National Defense Authorisation Act making it harder to register anonymous shell companies in the US, while the EU has been revising its anti-money laundering (AML) directives and approved the creation of an AML watchdog—kleptocracy is a global issue which must be attacked at the international level. The backers of the Global Kleptocracy Initiative have also argued that tackling the problem together could be a golden opportunity “to strengthen ties between the United States, Europe and the United Kingdom at a pivotal moment in the transatlantic relationship”.

A titanic problem on both sides of the Atlantic

Unravelling kleptocratic networks won’t be easy, because international corruption is big business—just look at the remarkable scale of fines handed out over recent years. In February 2020, a French court announced that Airbus had agreed to pay a record $4 billion in fines for alleged bribery and corruption spanning at least 15 years. The European aerospace giant reached the plea bargain with prosecutors in Britain, France and the United States after admitting to ‘endemic’ corruption, including apparently using a network of agents to pay bribes to officials in at least 20 countries to secure large contracts.

Swiss pharmaceutical company Novartis, meanwhile, paid out a staggering $1.3 billion in fines in 2020 following a series of scandals in which the firm was accused of kickbacks, bribery, and price fixing. Apparently, the company had set up an illegal system of inducements to encourage doctors and medical professionals in the US, South Korea, Greece and Vietnam to use its products, but was eventually caught by US authorities.

Safe havens for miscreants must be eliminated

Simply fining corporations won’t be enough, however. The transatlantic partnership must also turn their attention to foreign fraudsters who have found sanctuary simply because their victims are from countries out of favour with Western policymakers. Russian businessman Sergei Makhlai, for example, has been living in exile in the US with his illicit fortune and his liberty under no threat from US prosecutors.

Makhlai is half of a father-and-son crime duo who swindled billions from Russian ammonia giant, TogliattiAzot, over several decades. The pair used their control of the company to sell the ammonia it produced at below market rates to a linked company which then sold the ammonia at a higher market rate with the Makhlai’s and others pocketing the difference. With the authorities closing in, Makhlai junior fled to the US, while Makhlai senior lives out his own exile in the UK. The pair have been sentenced in abstentia to nine years in prison and authorities from Russia to Switzerland to Ireland are yet to unravel the extent of their misappropriations. The West’s political tensions with Russia, however, mean that the Makhlais face no prospect of extradition and their fortunes have not been touched by US and UK authorities.

Daunting challenges for the renaissance of the US-Europe friendship

These cases highlight both the sheer scale and global nature of international corruption. If the Biden administration and European policymakers can get to grips with it, significant returns could be yielded for the global economy. The global cost of corruption is estimated to be in the range from $1 trillion to $2.6 trillion annually. In addition, much of it from the developing world.

With this in mind, Biden’s anti-corruption drive makes perfect political sense for the new president. He has sought to restore American democracy at home and American leadership abroad, while securing national security in a world of rapidly changing geopolitics; tackling international corruption and kleptocracy can serve all of those goals. It also makes the perfect first target for the renewed European-American partnership to attempt to tackle—the beneficiaries of illegal dealings around the world should be on notice.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes

  • Market Data

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.