Latest: Corruption and Money Laundering

G20 can take big steps against global corruption by cracking the shell game.

TO the Ukrainian demonstrators who stormed his palatial residence in February, former president Viktor Yanukovych’s private zoo, vintage car collection, hovercraft, golf course and handwritten receipt for $US12 million in cash were stark and obvious indicators of his corruption.

When many countries met in London last month to figure out how to recover the money stolen by Yanukovych’s regime, the sums at stake ran into the billions. Less obvious, however, was the network of shell companies used to acquire and hide the ownership of the presidential palace. Companies set up in Austria and Britain to hold the property were administered by lawyers and frontmen in London and Liechtenstein.

While the names of the kleptocrats change — this year Yanukovych, a few years ago Gaddafi and Mubarak — certain elements stay the same.

Not just the opulent mansions and luxury cars, but the use of shell companies as a means to acquire and hide stolen wealth.

When the leaders of the G20 group of countries meet in Brisbane this year, they have a special role to play in finally reversing this destructive trend, worldwide. The G20, G8 and various governments have made combating such opaque shell companies an international priority since the Arab Spring. But research published in a book co-authored with Michael Findley and Daniel Nielson, Global Shell Games, indicates that so far, this campaign has been ineffective. The sort of untraceable shell companies commonly used to give and receive bribes, bust sanctions, launder money and evade taxes are easily available online for a few hundred dollars.

What is it about shell companies that make them so useful for hiding dirty money?

Here another corrupt Ukrainian leader, Pavlo Lazarenko, is instructive. Lazarenko is accused of stealing $200m as prime minister, and was convicted of money laundering in California in 2006.

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