Casey Michel on American Kleptocracy

The new Cayman Islands is South Dakota

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I'm pleased to bring you this interview with Casey Michel, who is a writer and journalist covering transnational money laundering, illicit finance, and kleptocracy. His writing has appeared in Foreign Affairs, Foreign Policy, The Atlantic, and the Washington Post, among others. He's the author of the forthcoming book American Kleptocracy: How the US Created the World's Greatest Money Laundering Scheme in History. Our conversation took place on October 28, 2021, and has been edited for clarity and flow.

Ruth Ben-Ghiat (RBG): Can you give us a working definition of kleptocracy?

Casey Michel (CM): If you go back to the root of the word, it technically means rule of thieves. And so kleptocracy is when the ruling regime and its officials are dedicated to stealing from the people they govern and dedicated to the enrichment of their family members and their inner circles.

We're used to thinking about kleptocracy in national terms, but that's outdated, as I argue in the book. Today we need to talk about an international financial architecture, about transnational illicit financial flows. Kleptocracy in the 21st century means regimes are connected to transnational money laundering operations and depend on them to remain in power.

So exploiting the local population is just the start. And as we've seen so often, the partners and enablers of despots, and the architects of the offshore finance structures, are located in Western jurisdictions, in democracies.

But our ideas even about those offshore finance zones are often outdated. We may think of places in the Caribbean or the Mediterranean, small jurisdictions that don't have much economic activity and transform into jurisdictions which serve all your laundering and tax secrecy needs. And that's what American states like Delaware and South Dakota have now become.

RBG: Your book is important because when we think about kleptocracy, we still think of places like the Congo or Libya, ruled by despots who live off of their own people. Putin is in that vein. For most of us, South Dakota would not come to mind, and yet that's where kleptocracy operates today. I also find this interesting because the US has always propped up right-wing authoritarians, and this is a way of continuing that.

CM: And it's not just governments on the right. We're talking also about the Venezuelas and the Nicaraguas of the world, all of them reliant on these same financial secrecy and offshoring pathways offered to them by the United States in places like Nevada or Wyoming or South Dakota. This has been going on now for decades. We're only just now beginning to realize all the different ways this situation threatens everything from national security to wealth inequality to domestic democracy, right here in the United States.

RBG: That leads into Donald Trump, who is a very interesting case, since the Trump Organization has long been suspected of being a money laundering operation for Russian and other criminals. So we had a president who is part of a network of kleptocracy enablers.

This is something entirely new for the American presidency both in terms of the scale of the criminality and because here is someone who poses as a hyper nationalist, but is in fact a mega-globalist with a business enmeshed in transnational money flows.

CM: To give some context, there are pro-kleptocracy services, industries that provide the kinds of anonymity and laundering services for people looking to move billions, and in some estimates, trillions of dollars out of their countries.

Western and American figures profit from the creation of these anonymous financial networks that launder dirty money, whether the gains come from narco trafficking, arms trafficking, human trafficking, or pillaging.

These Western enablers then allow that dirty money to come into Western jurisdictions, into the United States, to be hidden, transformed, laundered. Luxury real estate, as well as large residential and commercial holdings is key in this process, as well as private equity and hedge funds. To manage all of this, you have PR and consultancy firms, lawyers, and accountants that are working to manage and monitor these flows. And much of this is perfectly legal.

Trump is not just the first leader to emerge in the U S from this kleptocratic services industry; he's the first leader to emerge globally, at least in a Western jurisdiction, from the supply side of these services. Real estate is a wonderful case study. Where did Trump get his war chest from and money to build his brand? How did he launch himself into the White House? It was stemming directly from his work in the luxury real estate industry in the U S and elsewhere.

Few figures globally have profited so much as Trump himself from this evolution of luxury real estate, and yet due to anonymity we have only just the slightest idea which figures and regimes have taken advantage of Trump's services.

RBG: It's quite stunning to contemplate. At the same time, we're in a period of great progress in terms of revealing how kleptocracy works, through the Panama papers and now the Pandora Papers.

CM: The Pandora Papers, which are the biggest leak to date, confirmed so much of what we have come to understand about the broader offshoring world of product services and the transnational relationships behind them. One big revelation is the specific light they shed on the role of the United States and the place of South Dakota, a newer offshore haven, in that.  

Another is the role US law firms have as one-stop pro-kleptocracy shops for all kinds of clients and regimes. These law firms don't just represent you in court, they also serve as your PR representative --an attack dog to go after journalists if you need that.

Unfortunately, the American Bar Association has done all that it can to prevent any kind of oversight or due diligence regarding such law firms. And groups like the National Realtors Association have also pushed back against any kind of transparency or regulatory oversight for residential and commerical real estate transactions in England.  

RBG: Your book gives recommendations on how to combat kleptocracy, from ending anonymity for shell corporations to giving government enforcement agencies more staff and power. Given that we have the new Congressional Anti-Kleptocracy Caucus, a bipartisan initiative, how hopeful are you that things will change?

CM: Some might find my response a bit jarring given the scope and scale and magnitude of the issue, but the short answer is that I am optimistic. Even just in the last six to nine months there is unprecedented momentum to clean up the broader offshoring sector. The Corporate Transparency Act, Act passed on the very first day of 2021, over Trump's veto, is the biggest piece of anti-money laundering legislation and reform the US has seen at least in two decades. And the new Congressional Caucus gives me optimism.

We need these reforms because authoritarianism today cannot exist without the offshoring world. That this offshoring world is centered in the US also gives me hope because it means we can actually do something about it.