At a panel discussion attended by international diplomats, financial service providers, former government officials and BBC World Service journalists, Oliver Bullough and Anthea Lawson, Deputy Campaigns Director at Global Witness, discussed the global reach of Ukrainian dirty money. Anne Applebaum, Director of the Legatum Institute’s Transitions Forum, moderated the discussion, which took place the evening that Ukrainian separatists attacked a Malaysian airliner, killing 300 people.

Such events illustrate, Applebaum argued, how localised unrest can often lead suddenly and unexpectedly to collateral damage with far greater implications on the world stage. 

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Bullough used statistics from Transparency International’s latest Corruption Perceptions Index to show that Ukraine has experienced levels of corruption on par with the Central African Republic, with whom it shares the 144th place in the Index, alongside Nigeria and Papua New Guinea. 

The new head of Ukraine’s tax police, Bullough explained, estimates that the losses caused by embezzlement and tax evasion in Ukraine amount to approximately 30 billion USD every year.  Ukraine’s GDP is about 170 billion USD: almost a fifth is lost to the Treasury.

“The consequences of this theft from the budget affect absolutely everyone,” Bullough continued, citing conversations with Ukrainians to argue that a system has developed in which honest people are forced to take bribes to function in society. “It’s as close to a failed state as a European country can get,” he concluded.

“Corruption on this scale simply cannot happen unless you’ve got somewhere to put the money,” Anthea Lawson argued, “and the money is not staying in Ukraine.” The warehousing of corrupt money in London bank accounts, she continued, is not simply a “side-effect” of the lamentable situation which this report describes, “it is precisely what is allowing it to happen”.

In Ukraine, “everyone knows that Yanukovich owned his palaces via UK companies”, Bullough claimed. The author argued that if the West is not seen to be undertaking disciplinary and preventative measures amid its own financial institutions, faith in the European model of governance, as a beacon of transparency in the post-Soviet space, could dwindle. 

After September the 11th 2001, Bullough argued, the West became good very quickly at excising terrorist money from its financial systems. “It’s important to start looking at this as a national security issue”, he claimed, “and we have all the tools to deal with this”. Despite the immediate costs of a system overhaul, the West needs to consider what the long-term costs of inertia will be. “If Ukraine continues to fall apart,” Bullough concluded, “who is eventually going to have to pick up the pieces?”

Read Looting Ukraine: How East and West Teamed up to Steal a Country by Oliver Bullough

Follow the conversation on Twitter: @LegatumInstInModernRussia#LootingUkraine or read the live updates on Storify

This report was published in partnership with the Institute of Modern Russia and was also launched at the National Endowment for Democracy in Washington, DC on 28 July 2014.

About the Speakers
Oliver Bullough is an award-winning journalist and author. He has written for newspapers and magazines in Britain and America, including the Guardian, the New York Times and the New Republic, and previously served as a Reuters Moscow correspondent. His most recent book The Last Man in Russia and the Struggle to Save a Dying Nation is published by Penguin. Oliver travelled to Ukraine in the spring of 2014 as part of his research for this report.

Anthea Lawson is Deputy Campaigns Director at Global Witness, where she heads the anti-corruption campaign and is an expert on the relationship between the international finance system, corruption and poverty. She previously worked as an investigator and campaigner on human rights and the arms trade for other NGOs, including Amnesty International and the International Action Network on Small Arms.

Anne Applebaum leads the Legatum Institute’s Transitions Forum. She is also a columnist for the Washington Post and Slate, and the author of several books, including Gulag: A History, which won the 2004 Pulitzer Prize for non-fiction. Her most recent book, Iron Curtain: The Crushing of Eastern Europe, 1944-1946, won the 2013 Cundill Prize for Historical Literature and was nominated for a national book award in the US. 

Further Reading

  • Punishing Russia for the MH17 Tragedy Will Not Help Ukraine, by Oliver Bullough, 20 July, The Guardian - View
  • The Malaysia Airlines Crash is the End of Russia’s Fairy Tale, by Anne Applebaum, 19 July, Washington Post - View
  • British Journalist Believes That the West is "promoting" Corruption Yanukovych, featuring Oliver Bullough and Anne Applebaum, Voice of America - View
  • Press Release - Looting Ukraine: How East and West Teamed up to Steal a Country, 17 July 2014 - View
  • Lab Report: Ukraine, Democracy Lab, January 2014 - View
  • Russia: A Postmodern Dictatorship? by Peter Pomerantsev, October 2013 - View