Since the 1980s, inequality has been growing everywhere on Earth, except in Western Europe but otherwise in Russia. The communists became oligarchs and the oligarchs became state employees of the Putin’s government. Rising inequalities is a global issue as is money laundering. Helping decreasing the latter we can make the world more fair.
When it comes to the most common inequality indicators Russia doesn’t really stand out in the world, and its imbalances are still below the levels in places like the Persian Gulf and Africa, as well as the United States. Income inequality mainly captures the differences in salaries paid to the rich and the poor. It also based on surveys conducted in each country and rich people in Russia tend to conceive their wealth.
There is another measurement of inequality, however, where Russia’s situation is dramatically worse: the distribution of property in Russia is more unequal than in any major economy in North America, Europe, or Asia, according to the World Inequality Database (which does not index countries in the Middle East, Africa, or Latin America). Since 1997, millionaires and billionaires have owned a greater share of the national wealth in Russia than they have in the United States, according to the authors of “From Soviets to Oligarchs: Inequality and Property in Russia, 1905–2016”.
Anders Åslund, a researcher and author of the book “Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy“ estimates that the men working with the Russian President extracted about USD 195-325 bln to offshore accounts. He also claims that Vladimir Putin himself has a worth of USD 100-160 bln to his name in other people’s accounts. How is this process possible, since Russia is under sanctions and number of people from the Russian regime were under scrutiny? Publication of Panama Papers has shown that Putin’s childhood friends have enormous assets in tax havens. Most of those money being extorted from state owned enterprises and basically from the Russian people.
Russia as a tsarist like state, according to Åslund, is not a safe place to keep your money, the property rights of anybody could be violated as the case of Mikhail Khodorkovsky reminds us. Affluent Russians prefer to keep their money in safer Western countries in anonymous companies.
In 2015 the European Parliament and the European Council adopted the Fourth Anti-Money Laundering Directive. It requires all enterprises and entities in European Union countries as well as Iceland, Lichtenstein, Norway and Switzerland to reveal their beneficiary owners. They must be registered in a centrally held registry in each country. This also applies to those reside in another country. This is slowly adopted by member states. Yet after two years since it should be enforced in each member state Germany and France and six other countries failed to do so.
The UK has made great strides in its anti-money laundering legislation but the UK transparency is actually less because of the possibilities of peculiar business legislation and possibility not to disclose the owner of real estate. Another issue is the problem of Isle of Man and other members of the Commonwealth which benefit as hubs for money laundering because of individual regulation.
Another country which is at odds with inequality are the United States. They also provide a possibility of not disclosing the owner of real estate. This made the US and UK the main directions of offshored Russian wealth. The EU acts and this is great but it should push the agenda of international transparency further decreasing the chances that anybody can launder money in the West.
With international transparency standards and implementing the fourth and fifth anti-money laundering directives EU can truly help the Russian society and as well as Ukraine, being partially occupied by Russia. More transparency creates fewer inequalities in the world because the ultra-rich Russians distort the West as they do the East.
The vast holdings of anonymous Russian wealth in the West amount to a major national security concern. After the recent Russian interference in the US and other Western elections people know that Kremlin can act ruthlessly. We however have another tool in our shed, because Kremlin and probably Putin himself cannot do anything without the US and EU financial system. We can cut them off and decrease worldwide inequalities just by saying one thing: tell us who you are. Prohibit anonymous owners of companies and land everywhere. You might end changing Russia just with this one and simple policy.
