Kleptocracies are existential risks to democracy

In numerous parts of the world, kleptocrats continue to “use political power to appropriate the wealth of their nation”.2 Such great illicit wealth through corruption and criminality acts as a threat multiplier and is financing an array of conflicts, violence, market chaos, and global instability. Kleptocracy remains a pervasive threat to democracy, corroding the rule of law, fueling impunity, imperiling effective implementation of national sustainability, undermining poverty alleviation and economic development strategies, contributing to human rights abuses, and enflaming insecurity in many regions.

“When government officials abuse public power for private gain, they do more than simply appropriate illicit wealth. Corruption robs citizens of equal access to vital services, denying the right to quality healthcare, public safety, and education. It degrades the business environment, subverts economic opportunity, and exacerbates inequality. It often contributes to human rights violations and abuses, and can drive migration. As a fundamental threat to the rule of law, corruption hollows out institutions, corrodes public trust, and fuels popular cynicism toward effective, accountable governance.”3

According to Oxford Dictionary, kleptocracy is defined as the “rule of thieves”, or a “government by people who use their power to steal their country resources.” Across today’s geo-security landscapes, kleptocrats, tyrants, autocrats - and their enablers - exploit every opportunity to leverage power, and to enrich themselves through corruption, fraud, embezzlement, illicit trade, money laundering, and other forms of crime.

In a complex, more dangerous world, and with democratic backsliding in some corners, kleptocracy has been increasing around the world and “most countries are failing to stop corruption “:4

“As global peace has been deteriorating for 15 years, corruption has been both a key cause and result of this.”

As they embark on such criminality, in too many places around the world, kleptocracies further weaponize corruption, and contribute to increased inequality, insecurity, and instability. In democracies where kleptocracy takes hold, unjust power systems enable economies to spiral downwards into failed states, conflict zones, or terrorist- or criminally-controlled ungoverned spaces.

“… in too many places around the world, kleptocracies further weaponize corruption, and contribute to increased inequality, insecurity, and instability.”

For example, the current unjust war in Ukraine sheds greater light on how President Putin, Kremlin leaders, and oligarchs have not only pillaged Russia’s natural resources, but have used such wealth to finance other conflicts in Syria, Crimea, and malign influence in Central African Republic, Mali, Eritrea, and other African states through their mercenary group, the Wagner Group. Recent sanctions related to Russia’s invasion of Ukraine by the United States, the European Union (EU), and other countries, have targeted the assets of Russian kleptocrats including fine real estate, sports teams, hotels, private yachts, jets, and other luxury possessions, as well as their numerous banking accounts.

Professional gatekeepers and enablers have helped kleptocrats and corrupt officials to hide their assets and launder them across financial safe havens around the world through anonymous shell companies, opaque investments, and other legal mechanisms. Often, kleptocrats will work with enablers through offshore banking with shell companies or trusts that contain valuable real estate or other assets. These professional facilitators and enablers include bankers, lawyers, accountants, wealth managers, art dealers, investment advisors, real estate agents, trust creators, company incorporators, gold and diamond traders, money laundering firms, and other service-based providers.

Thus, power and illicit wealth are the lifeblood of today’s kleptocrats, enabling autocrats to loot their countries of staggering amounts of wealth, co-opt democracy, foment violence, undermine liberty, and curtail the freedoms of their people. They also help to corrode the rule of law, fuel impunity for criminals, imperil effective implementation of national sustainability and economic development strategies, contribute to human rights abuses, and enflame violent conflicts.

Corrosive capital, dark money, and illicit finance--particularly when related to authoritarian states--pose direct threats to democracies, societal stability, market security, and the global financial system. This is especially true when autocrats engage in illicit activities with criminal oligarchies, state-sponsored criminal groups, complicit enablers, and other threat networks to launder dirty money to finance malign actions that destabilize the national interests of Western powers, the stability of nation-states, world order, and the security of the international system.5

When corrupt ruling elites, their families, and business associates conspire with criminals, they manipulate weak governance structures to erode judicial independence and quash anticorruption investigations and the rule of law so that democracy cannot take hold.

Increasingly, autocrats and kleptocrats borrow from each other’s practices to sustain their power and illicit behaviors, provide an alternative governance model, and destabilize Western norms and values. These are existential threats to democracies. In large part due to the extraordinary efforts of investigative journalists, civil society groups, the G7, INTERPOL, and efforts by law enforcement and financial intelligence units, and exposés such as the Panama, Paradise, and Pandora Papers, we are more informed of the breadth and scale of brazen kleptocrats’ thievery. For example, we have learned of hundreds of billions of dollars that were stolen in Angola, Democratic Republic of the Congo, Equatorial Guinea, Haiti, Hungary, Indonesia, Malaysia, Nigeria, Nicaragua, Peru, Philippines, Russia, Venezuela, Ukraine, and many other countries. An interesting point among these kleptocracies is not only how often many of them will do business with one another, but how collectively they have also helped to create a community of enablers across secrecy havens, financial safe havens, and banking centers (e.g., New York City, Dubai, London, Hong Kong, Sydney, etc.).