Banks wrest from the wicked

The speed with which authorities discovered and froze kleptocrats’ assets tells us all we need to know about the true workings of geo-politics


Few would deny that freezing the assets of fallen or besieged dictators during the turmoil in Tunisia, Egypt and Libya was a good and important decision. The problem is that it happened so quickly that it is obvious the various governments knew all the time exactly where they could find the bank accounts, property and other investments acquired over many years by the kleptocrats.

They could hardly not have known, given today’s laws on money-laundering. Yet they did not swoop until the strongmen – Tunisia’s Zein al-Abidine Ben Ali, Egypt’s Hosni Mubarak and Libya’s Muammar Gaddafi – were either toppled or had behaved so outrageously it was no longer possible to keep up the pretence. Under pressure from their national governments, banks all around the world blocked assets with unseemly haste.

Indeed Switzerland, the long-time champion of secret bank accounts, jumped so fast that it was almost laughable. It took Switzerland four days to freeze Ben Ali’s accounts after he fled, but only a few hours to block those of Mubarak and no time at all to shut down Gaddafi’s. Astonishingly, the Swiss institutions moved even before the UN security council issued an order to padlock the assets of Libya’s sovereign wealth fund.

By then everybody was getting religion, possibly because they were shocked that the UN had actually done something instead of just talking about it. The European Commission ordered sanctions against all the dictators’ ill-gotten gains, including Libya’s gigantic oil-fed fund which among other things owns shares in Italian banks, two percent of Fiat and a chunk of Juventus football club, not to mention Switzerland-based Tamoil refinery. Not to be outdone, President Obama signed an order blocking $30bn of Libyan assets “under US jurisdiction” in the biggest such action ever.

What had happened in this global cleansing process was a belated and public recognition that all these assets belonged to kleptocratic regimes rather than bona fide governments. Nothing had changed, except that the names on the bank accounts were no longer in a position to complain.

Moubarak’s stash has been variously estimated at between $5bn and $70bn but, however much it is, Tutankhamun wouldn’t be ashamed of it. More importantly, the total sum isn’t what matters – rather, it is how he came by it (according to international watchdogs, much of it was paid by arms manufacturers in the 1980s in exchange for huge orders). While the kleptocrats and their cronies enjoyed the ride, the people suffered. As Middle East expert David Gardner points out, at the same time as the Mubarak inner circle was miraculously achieving stupendous wealth on modest official salaries, the number of Egyptians living on less than $2 a day drifted from 39 percent to 43 percent.

It wasn’t as though nobody knew what was going on. As far back as 2002, a UN report described a “sinister cohabitation between power and capital” in Egypt. Meanwhile, African dictators are still getting away with it.

The Ivory Coast’s ex-president Laurent Gbagbo, seeing the writing on the wall, hastily shifted $5bn out of Switzerland earlier this year. Yet something like $20-40bn a year is illegally siphoned out of developing nations such as the Ivory Coast into European accounts. So not a lot has changed since the 1970s when the billions of Haiti’s infamous Papa Doc Duvalier infamously ended up in Switzerland, triggering a protracted legal battle for restitution.

And yet there’s hope. The collapse of the dictatorships may have triggered a breakthrough: “We’ve made more progress in three weeks than in 15 years,” rejoices Daniel Lebegue, president of Transparency International France. Similarly, the Organisation for Economic Cooperation and Development’s corruption fighter Mark Pieth, who has been on the case for 20 years, has noticed a mounting nervousness in known offenders.
Regrettably, there are still kleptocrats everywhere.