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2020-08-11 › Corruption and the Fruits of Kleptocracy: The Saga of the Karimova Sisters Continues


For every international pariah like Gulnara Karimova, there are far more kleptocrats who remain free and able to indulge in the high life.

The daughters of Uzbekistan’s late dictator, Islam Karimov, are back in the news, but for very different reasons. Last week, Lola Karimova-Tillyaeva and her husband listed three luxury properties in Los Angeles, California, valued at a combined $18.9 million – homes that they have reportedly never lived in. Meanwhile, the Financial Times reported allegations that Switzerland’s top law enforcement official, Michael Lauber, tried to improperly return $800 million of Gulnara Karimova’s frozen assets to the Uzbek government.

The sisters’ divergent fortunes are interesting as sensational tales, but they also illustrate how current mechanisms designed to counter money laundering and kleptocracy – systems of governance in which leaders systematically abuse power for personal gain – fall short.

The younger Karimova, Lola, and her husband Timur Tillyaev split their time between Los Angeles, Paris, and Geneva, where they own a $47 million estate. The couple’s wealth derives primarily from the Abu Sahiy trading complex, once owned by the Tillyaev family and which enjoyed a practical monopoly on imported consumer goods under the protection of the Karimov regime. Although Lola remains a free and wealthy woman, it appears her husband’s family no longer controls Abu Sahiy and the she has indicated that she cannot travel to Uzbekistan under the country’s new leadership.

Selling their excess property in Los Angeles may be intended to help compensate for a loss of revenue from Abu Sahiy. The couple are not, however, giving up the $33 million Beverly Hills mansion they bought in 2013 around the same time the Uzbek regime turned on Gulnara, as scandals surrounding international telecommunication firms exposed the far greater rapacity of the elder Karimova’s kleptocratic predation of nearly every industry in Uzbekistan.

Gulnara Karimova, once thought to be a potential successor to her father, remains in prison in Uzbekistan for extortion, money laundering, and other crimes. In March, she was handed a new 13-year sentence in addition to her previous sentences. The international saga of the spectacular wealth she accumulated during her father’s regime continues to drag on in international jurisdictions without her.

Under President Shavkat Mirziyoyev, Uzbekistan has sought to improve its image and open up to international markets in ways unimaginable under Karimov’s rule. It has also purged many members of the old regime, including Karimov’s family, as Mirziyoyev consolidated his rule. It is possible he may also be signaling that the extravagant corruption of his predecessor’s era is now unacceptable. Whatever the motivation, the Uzbek government has now made returning the ill-gotten wealth of Gulnara Karimova and her associates a key foreign policy objective. 

One of the difficulties for Switzerland, the United States, the United Kingdom, and other major financial jurisdictions that have seized or frozen Gulnara Karimova’s assets is whether it is appropriate on principle to return laundered kleptocratic gains to a “victim” country’s new, but arguably still corrupt and repressive, government. In May, Transparency International expressed concern over France’s restitution of $10 million of Gulnara Karimova’s illicit assets to Uzbekistan without a transparent mechanism to ensure that the money benefits the Uzbek population. This problem is also at the heart of the controversy surrounding Switzerland’s Lauber.

The allegations against Lauber assert that he unlawfully collaborated with the Uzbek government to determine that Gulnara Karimova is not the ultimate beneficial owner of Zeromax – a massive Uzbek conglomerate registered in Switzerland that went bankrupt in 2010 with reportedly billions of dollars of debt. Zeromax’s creditors have sought a portion of the $800 million frozen in private Swiss accounts that are linked to Karimova. The Financial Times reports the creditors’ lawyers claim that Lauber’s determination was a part of secret deal between the Swiss and Uzbek governments wherein Uzbekistan votes to maintain Switzerland’s position on the IMF board in exchange for the return of Karimova’s funds.

Meanwhile, the United Kingdom’s Serious Fraud Office extended a freeze on $29 million worth of Karimova’s luxury U.K. real estate in June. The funds used to purchase the properties were allegedly the proceeds of corruption and funneled through various shell companies. The case has been unable to proceed however, due to the fact that the British authorities do not have legally sufficient access to the imprisoned Karimova.

Gulnara’s story is far from unique. In Angola, the daughter of the country’s former president, Isabel dos Santos, is under investigation for corruption. Enabled by her father’s decrees, dos Santos became Africa’s richest woman. The unabashedly corrupt Teodorin Obiang, the vice president and son of the president of Equatorial Guinea, has also faced scrutiny in recent years, losing court cases in the United States, France, and elsewhere over luxury real estate, cars and memorabilia.

For every international pariah like Gulnara Karimova, there are far more kleptocrats like Lola Karimova-Tillyaeva who remain free and able to indulge in the high life from New York to Paris to Dubai. Even the most successful legal cases prosecuted in major financial jurisdictions cost millions in legal fees, face the complicating claims of creditors like Zeromax’s, and must confront the moral quandary of whether “victim” country governments can be trusted to use returned funds any less corruptly. 

After-the-fact enforcement in major financial jurisdictions may be necessary, but it has clearly failed to deter kleptocrats and the international networks of bankers, lawyers, consultants, and other interlocutors that launder corrupt gains across financial hubs and tax havens alike. There are also far cheaper and potentially more effective mechanisms that could be used to hamper the money laundering schemes of repressive regime insiders.

Preventative measures like targeted sanctions and the wonky solution to create beneficial ownership registries – a measure that was included in the U.S. House version of the National Defense Authorization Act for 2021 – could make it harder for kleptocrats to use international financial institutions to hide their looted assets beyond the reach of their home countries. Visa denials would also curtail jet-setting kleptocrats access to their luxury real estate and lavish lifestyles in places like London and Geneva. Deprived of opportunities to offshore their plundered gains, both kleptocrats and their wealth may be left more accountable in the long term to domestic political consequences produced by their corruption and repression.

Ian J. Lynch recently graduated with a Masters in Middle East, Caucasus, and Central Asian Security Studies from the University of St Andrews in Scotland. He previously led the development of girls’ education programs in Afghanistan. He tweets at @Ian_J_Lynch.

источник › https://thediplomat.com

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