A Remittance of Sins in Exchange for Money: Reputation Laundering’s Centrality to Kleptocracy

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Let’s talk about religion. And specifically, indulgences. In return for certain activities – such as prayers or pilgrimages – a Catholic believer can receive an indulgence, which reduces punishment or erases it outright.

Indulgences emerged in the eleventh and twelfth centuries when the idea of purgatory took hold. Initially they were promised to combatants to encourage their participation in crusades to free the Holy Land, but they soon started to be given in exchange for monetary compensation. There are partial indulgences, which reduce the purgatorial sentence by a certain amount of time, and plenary indulgences, which eliminate all of it, until another sin is committed.

Reputation laundering is akin to this: the bigger the donation, the greater the redemption.

This parallel is not my original idea, but a thought shared with me by a respondent who took a completely different position on the issue of reputation laundering than I do. In his own words, commenting on a recent philanthropic donation to a prestigious UK university that was in the news: “Is it possible to become a billionaire [in said country] without partnering with a minister or general? No, of course not… But that is their culture – their laws – their problem – all we have to do here is cash the cheque”.

It thus shows that even the proponents of considering this process (i.e., large donations to UK institutions aimed at burnishing one’s reputation) as legitimate, are well aware of the fact that what it constitutes, in reality, is a remittance of sins in exchange for money. It also reflects a wider issue that my co-authors and I point to in our report ‘The UK’s kleptocracy problem’: if the original country is itself a kleptocracy, the activity in the UK is unlikely to have been deemed illegal.

In this policy study as well as in our forthcoming academic work, we show how this is true for Unexplained Wealth Orders (UWOs). When introduced in 2017, the UWOs were hailed as a landmark law able to crack down on money laundering in the UK. If exorbitant expenses are recorded, the burden of proof to demonstrate that the funds were acquired legitimately should be reversed onto those who have spent the money (the ‘reverse onus’ principle). But in fact, of the very few UWO cases brought forward so far, the only one in which perpetrators were pinned down was that of politically exposed persons (PEPs) who had fallen in disgrace with the government of their country of origin – the Hajiyev spouses, hailing from Azerbaijan.

The chronic underfunding of key institutions, including the National Crime Agency and the Serious Fraud Office, is one reason for the failure of the UWOs to bring money launderers to justice. The willingness of UK courts to accept explanations served as proper by the powers that be in the countries were the funds were acquired is another. In a case concerning Kazakhstan, the judge noted that “notwithstanding his criminality, [the defendant] had been a successful businessman”. What was wholly overlooked was that the defendant was part of a small number of businesspeople with close links to the ruling family, and that such ‘criminality’ included credible allegations that he had tortured and killed his rivals. As the quote above shows (“it is their country – their laws – their problem”), the same dismissiveness in relation to the origin of wealth is widely applied in relation to reputation laundering (“all we have to do is cash their cheque”). If strides are to be made in the UK’s fight against kleptocracy, this has to change.

Reputation laundering is crucial to kleptocracy because its ultimate success relies on the perpetrators being hidden in plain sight, by rebranding their unpalatable past. The risks are not to be taken lightly. As with money laundering, and its consequences for skyrocketing wealth inequality, the reach of tainted money used to burnish reputations can distort intellectual inquiry, public opinion, and even political choices – in cases when kleptocrats cozy up to our politicians and royals.

The toolkit used by those who attempt to burnish their reputations – be it individual ‘kleptocrats’ or whole countries – has expanded and has been refined with time. Authoritarian governments have long used a range of repressive tactics to suppress criticism at home, while progressively transnationalising their methods of repression in line with globalisation.

In the report, we highlight several areas of activity that are enabled in the UK – we mention for instance the role of PR firms, wealth managers, and private investigation companies. Crucial is also the role of UK courts, through libel actions and ‘SLAPP suits’ (Strategic lawsuits against public participation) which are used to stymie critical voices. Free speech organisations have rightly sounded the alarm bell, for SLAPPs are, as they write, “used to drain their targets of as much time, money, and energy as possible in order to bully them into silence”.

Our research in this field has focused on the procedures in place for universities to vet philanthropic donations: we found that, while some improvements were made in the wake of the LSE’s ‘Ghaddafi scandal’, over a decade ago, there are still very considerable shortcomings.

The huge increase of private gifts to universities over the past decade (a considerable amount of which comes from China) is compounded by the marketisation of the higher education sector, whereby universities are increasingly pushed to look for funds from private donors.

What should happen to turn the tide? More stringent and better implemented regulation is vital. In the case of philanthropic donations to universities, charities and think tanks, transparency regarding gifts and donors (glaringly missing in the UK) is a necessary place to start. But something else is needed, too. A change in norms. The problem will not cease to exist, and neither will it be stymied considerably, until we come to realise that reputation laundering is, in fact, just as ethical as the selling of indulgences.

Note: This blog draws on research published in ‘The UK’s kleptocracy problem: How servicing post-Soviet elites weakens the rule of law’, funded by the FCDO’s Anti-Corruption Evidence Programme run by Global Integrity. It is based on the author’s talk delivered at the report’s launch at Chatham House.

Tena Prelec is a Research Associate at the Department of Politics and International Relations (DPIR), University of Oxford, and at LSEE-Research on South Eastern Europe, LSE. Her current research focuses on issues of good governance and anti-corruption, with a specific focus on how transnational kleptocracy is enabled by the global financial architecture.