Prof Jason Sharman (pictured) has worked as a consultant for the World Bank, the Financial Action Task Force and the Asia Pacific Group and also with a variety of groups in the private sector. At yesterday’s Jersey Finance conference in London, he painted a bleak picture of the West’s crusade against money laundering and corruption.

Sharman, the new Professor of International Relations in the Department of Politics and International Studies at Cambridge University, has just published The Despot’s Guide to Wealth Management: On the International Campaign against Grand Corruption. At the conference he talked to Geoff Cook, the head of Jersey Finance whose job it is to promote the jurisdiction.

The book contends that there is a public consensus that it is morally wrong for a state to host money stolen by an official of another state. It also presents the reader with a ‘before’ picture and an ‘after’ picture of the advent of global money-laundering controls.

From Abacha to the Bribery Act

Sharman told Cook: “The ‘before’ one is not that long ago, maybe the mid-to-late 1990s. Say that you were the leader of Nigeria and you'd stolen a lot of oil wealth, that money would be unlikely to stay in Nigeria or whatever the victim country happened to be. It would probably cross borders and go to one of the world's established financial centres perhaps, such as London, Switzerland or New York. Twenty years ago this was viewed with indifference (both morally and legally) in the place where that money ended up. If someone stole money from Nigeria and it ended up in London, that was the problem of the Nigerian Government. Now, in the last ten years, we've had a big change, for it's no longer regarded as acceptable in either legal or moral terms to host the proceeds of corruption.

“I think the campaign against grand corruption or kleptocracy is a little like the compliance work against money laundering or, indeed, the campaign to stop tax evasion. We have a lot of new rules that we know about, but we know little about whether those rules are doing any good.

“There are variations in commitment to the fight against corruption. There are those who've got religion and there are governments that are going through the motions. Whatever you could say about David Cameron, I think that his campaign to counter corruption and the proceeds of corruption ending up in Britain was sincere and heartfelt. I think that, perhaps ironically, Switzerland has been one of the jurisdictions that has taken its duties very seriously, although perhaps belatedly. The United States is also genuinely committed.

“I think that, beyond those three (and certainly if there were three financial centres that you'd want to get on board with this campaign it probably would be those three) the commitment enters the realm of window-dressing and keeping up appearances rather than a genuine commitment to changing things.”

Cook recalled that the Abacha money-laundering case affected Jersey 19 years ago and prompted a welter of AML reforms on the island, with the financial intelligence unit joining the Egmont Group, and sharing information with others. He mused: “We like to think we are in that group where we're really going after this stuff but it's jolly hard. Even if you find somebody and you find somebody you've got suspicions about, the burden of proof and the cross-border collaboration involved certainly gets quite complex. And the burden of proof in one jurisdiction and who has territorial rights in terms of prosecution and those sort of things, so...just logistically it can be challenging, can't it?”

Sharman agreed and thought that the case of Abacha was a good one: “He was a military dictator who took over Nigeria in 1993, he lived an outrageously profligate lifestyle, he died while cavorting with two prostitutes in 1998, his wife fled with 38 suitcases stuffed full of cash, or tried to flee from the airport in Nigeria, and very soon afterwards there was a campaign to see where this stolen loot had ended up. Abacha used to instruct his soldiers to drive a truck to the central bank, load the truck up with cash from that bank and then bring it back to his palace compound, where it was shipped abroad or wired abroad.”

Limitations of the system

Cook asked Sharman about the limitations of the globe's current AML/ABC regime: “Where do you think the weak points are? My sense is that in your book you are measuring and chronicling huge efforts, but you're not really identifying...apart from one or two egregious cases like that when there's been some success...on the broader front, it doesn't seem to be delivering an outcome that's proportionate to the investment being expended.”

Prof Sharman agreed: “Yes, and I think to that degree it's a little like the struggle against money laundering. Before 1986 there was no such crime, then it was criminalised in the US. Now we have this elaborate system of international rules. We have governments that pass lots of legislation. We have a huge and growing compliance industry. But are there fewer illegal drugs being sold now, compared with the early 1980s?

“The United Nations has estimated that, at best, maybe 1% of criminal funds get detected and perhaps one-fifth of 1% of those criminal funds get confiscated. So, as you say, there's this great mismatch between the amount of effort (or, at least, seeming effort) that's being put in, the expense of the system that we have to try and counter this financial problem, and the results that we see at the other end.”