Good evening and welcome to the Bali. My name is Jort Kelder, and tonight is a night that is part of our series, The New Oligarchs. And tonight's subject is the money that makes oligarchy possible. We're diving deep into the dark economy because every day millions and millions of euros in stolen money are laundered through shell companies. And that money buys apartments in London, New York, yachts, even entire football clubs. And over the past decades, an international system has been built to move money around, and national tax authorities are largely powerless against it.
To help us understand what is happening, I am joined by two investigative journalists. Oliver Bullough, who is a Welsh journalist and author who writes for The Guardian and The New York Times. He wrote Moneylands, that some of you might have read, about the crooks and kleptocrats that rule the world. And this year he published this book here in Dutch, Dirty Money, or How Money Laundering Won, is the subtitle in English. After that we're joined by Tom. So I'll speak with Oliver for a little bit and then we're joined by Thomas Bollen. He is a Dutch financial economist and journalist for Follow the Money who writes about banks, the monetary system and crypto. And his book, Genoeg geld, maar niet voor jou — enough money, but just not for you.
Small household message. There is a live stream tonight. So if you want to ask a question at the end of this program, please wait till I come towards you with a microphone because otherwise the people cannot hear you who are watching in great numbers. And this is also a small warning because that question that you ask at that moment, it will be on the YouTube channel of the Bali for eternity. Just a small reminder, no one's ever gotten famous because of a question, but you never know. So Oliver, would you please join me? Give him a warm applause.
It's an incredible book. I didn't know anything about it. Maybe I heard you speak in Tbilisi about this, and I'm naturally not very interested in economy or in math because I don't understand it. But then I went to a panel that you were part of, and it was about what is happening in Ukraine, in Russia, in Eastern Europe. And you said very clearly, also in that panel, you have to look at what is going on with the money. And you said it so convincingly that I read this book, and it was incredible. So, thank you. But you did not start in reporting on financial matters either. You were a war reporter for a bit. You lived in Russia.
Yeah, I moved to Russia when I finished university. I'd always been very interested in Russia, which was very confusing to my family.
It was just interesting. Yeah. I'm from a farm in Wales, and no one else was interested in Russia, so I didn't really have anyone to talk to. But I was, so I moved to Russia thinking in 1999. I felt like I'd kind of missed the party, you know, that the whole post-Soviet party had ended and it was all going to be stable and peaceful and democratic and everything. But about two weeks before I got there, a man called Vladimir Putin became prime minister.
And then president, and then prime minister again, and then president again. And he's still there now. And so actually I kind of got to see that. I got to see the whole Putin experiment from the very beginning, which was really depressing to be honest. You know, I had gone to Russia thinking that it would be an opportunity to see the development of democracy and freedom and everything, and instead, you know, the first big story I was reporting on was the Chechen war, which was, that was the second Chechen war, the second post-Soviet Chechen war, which Putin launched in 1999 shortly after he became prime minister. And it was horrible, I mean really, really horrible, and that went on and on and on, and there was a lot of grim things.
So I wrote a first book about southern Russia, Chechnya and the region around Chechnya, which is a stunning, amazing, very misunderstood part of the world, which has a very tragic and bloody history. And then I wrote another book about alcoholism because my books are always really cheerful. Alcoholism and depression, suicide, all that kind of stuff. And then yeah, and then Ukraine 2014 happened. Yes, there was a revolution in Ukraine in 2014, as you may probably remember, which was awesome because there was this amazing period after the president had fled when no one was really in charge, and if you were sort of sufficiently confident you could get away with anything. And the president had left all his palaces behind, so you could just go up and say, 'I'm from the revolution,' and the police would just say, 'Okay, you know, here you go, in.' And so it was quite fun. You got to sort of sit around, bounce on his bed and all that stuff.
But more importantly, journalistically speaking, was he had left business records behind and you could see his business records. So, you know, I'd always known there was corruption because people would come and take bribes off you all the time. It wasn't a surprise, but also of you personally. Oh, yeah. Of course. I mean, you know, that was just normal. If you wanted to go for a swim in a swimming pool, you had to bribe someone. If you wanted to go, you know, I don't know, just get stopped by the police and pay a bribe. It was just normal that you didn't have to commit a crime. It was just normal. You know, sometimes you wanted to come into the country, they'd just arrest you for some reason and then you had to pay a bribe.
But then what I think what I found really shocking was the way that what was clear in the business papers was that the corruption in Ukraine wasn't Ukrainian corruption. All of the money was held in shell companies registered in London or in, you know, the Caribbean, and the bankers were in Austria. The lawyers were in Liechtenstein. It was all totally international. And it was globalized, and that was that sudden... I mean, look, this wasn't a surprise to the Ukrainians. They all knew this, but I hadn't learned it. No. And I, you know, I suppose I'd grown up thinking, well, you know, we're British, you know, we're the good guys. Mhm. Yeah. And that changed. Yeah. We turned out we weren't. Which didn't come as a surprise to a lot of other people as well. I mean, we had an empire and stuff as well. It turned out...
And then about this, and especially about what the British did, you wrote Butler to the World.
Yeah. So yeah, Britain has a particular role as a big center of money laundering, not just Britain, but it's sort of what's left of the empire, the various islands in the Caribbean and elsewhere. And so yeah, that was, you know, I was quite rude about everyone in that book as well. And then people would write to me, you know, and say that they thought I was being very mean to them because they were working very hard and trying to solve the problem, and I kept criticizing them, and why couldn't I recognize how hard they were working.
And I thought that was really interesting after a while because the first person I kind of ignored, and the second, the third, but by the time it got to the tenth, I found it really interesting because, you know, these were people who work for governments. And when governments work really hard and try and solve something, normally, you know, they might not solve it, but they normally make it better. But the really interesting thing with money laundering and financial crime is that they haven't. It's just as big now. In fact, it's bigger because the world economy is bigger than it's ever been as far as we know. You know, the amount of money in the world, the share of the global economy controlled by criminals is exactly the same now as it was in the 1990s, despite the fact that we've been exerting a really astonishing amount of effort and with some really amazingly intrusive and kind of undignified powers being given to financial institutions to try and stop it, and it has completely failed to stop it. And I found that interesting. So that's the question I set out to answer in this book: is why, if we're trying to stop money laundering, have we completely failed to stop money laundering.
We're going to dive into that very deeply, but there's one question that I want to ask especially about Britain and maybe other... well, Britain and especially London for these oligarchs and for this money was particularly attractive, maybe more attractive than other European cities. And I wonder why. Why Britain?
Britain has lots of advantages, which, I mean, Britain is like a one-stop shop for oligarchs.
Well, it has everything you would want, really. So everyone speaks a language which is easy to understand. If you moved to, say, Finland, you would have to learn Finnish. If you move to Britain, it's just English. That's fine. Our lawyers are very good, very understanding, very accommodating. Our airports, you can fly anywhere. We have good houses, good schools, good universities, very enthusiastic politicians who are happy to take money from anybody. You know, just generally speaking, it's a very accommodating place.
So I mean, what it is, is because, you know, Britain obviously used to be the center of a world empire. So London is also just used to people being from everywhere. You know, it's a place which had... and it's really interesting if you look at the houses that oligarchs own in London, these big, big houses. It's not unusual for them to have a plaque on them saying that, you know, a viceroy of India used to live there. You know, it is very much in keeping with the empire. It's the same. The money flows from around the world into London. It just used to be a British Empire and now it's not the British Empire. But London does the same job. It doesn't care where the money comes from. And so it's just a very accommodating city. Everything is there.
And you know, there are other places that try to do the same thing. You know, obviously Zurich, but Switzerland, it's a bit boring. You know, no offense to Swiss people present, but you don't have the same kind of, you know, excitement, the nightlife, the bars. You know, Dubai tries to do it, but it's a bit hot. You don't have the, you know, it's not quite... you know, do you mean London's just got it all? Yeah. And also, you know, I think it's quite useful that it's next to Europe, but isn't actually Europe.
Mhm. Has it ever been Europe?
London? Yes. No, London's just London. London's never even really been England. It is actually, you know, London is, historically speaking, a separate jurisdiction within England. It has its own laws, its own parliament, its own legislation. It has a really interesting, very under-discussed, maybe for another time, historical situation.
So about this book and about the subtitle, How Money Laundering Won, and then in my head I always do like a little 'for now'... but you say money laundering won, and it's not a 'for now'.
Yeah, I mean, you know, you have to be... I mean, you need to be optimistic, but it can be very difficult. So when I was writing Moneyland, I was genuinely so shocked by what I was writing about that I thought I needed to hurry up to finish the book because I genuinely thought the problems would be solved before I could get the book out. You know, there's no way that people could be tolerating this situation.
If you say the situation...
Well, the situation, it was so easy for oligarchs to steal money, to launder it, to spend it, you know, to move it around the world, to bully journalists, to buy governments. It was just, there's no way this could be allowed to continue. This is going to stop. But it didn't stop, as it turned out. So I mean, so that was supposed to be the only book because obviously the problem would be solved as soon as I published the book and anyone read it and everything would be great. But it is difficult to remain optimistic on the third book, sort of describing different aspects of the same problem. So, you know, so this book is a history of the world's efforts to stop money laundering, which begin in 1970 and go on up to the present day, and essentially how those efforts just continue to consistently fail. How criminals continue to be cleverer, nimbler, more imaginative, more entrepreneurial than everyone trying to stop them.
Mhm. You don't write about the crimes, I think, what is done with this money so explicitly that it's sort of perverse, but you do name it. It's human trafficking, it's wars, it's drug wars. So the things that are being done with this money are horrible.
Yeah. I mean, if you think about any crime which is committed for profit, so, you know, I mean literally anything, you know, corruption, kleptocracy, the cartels, terrorism, it's, you know, all of it relies on money laundering. Money laundering is the process by which you take money which is of criminal origin and you move it around and make it look legitimate so you can spend it. You know, that is the process which supports all crime and all criminality, and it's, you know, a growing and, to be honest, one of the reasons I called the book How Money Laundering Won is because it is now cheaper to launder money than it's ever been. It's incredibly easy. I mean, the techniques which are available to money launderers, you know, if you can imagine a way of laundering money, I mean, with, you know, my particular favorite example of this is when the first ever anti-money laundering operation was launched, which was in Miami in 1980.
If you've seen the TV show Miami Vice, if you haven't seen the TV show Miami Vice, you should. If you haven't seen it, then if you have seen it, then basically it's almost exactly a documentary. It is a ludicrous television show, but it was a ludicrous time. There was so much drugs money flowing through Miami at the time that it was distorting absolutely everything. And they had the first ever police investigations to stop banks just taking this money, as much money as they wanted. And some of the things that the criminals came up with, a way around this problem, were really kind of amazing and almost, I mean, very funny. So I mean, my favorite example is they took over the Puerto Rico state lottery. So that essentially, if you won the lottery in Puerto Rico, let's say you've won a million dollars, they would come to you and say, 'You can have a lottery ticket to take to the bank of a million dollars, or you could have slightly more money in cash, and you give us the lottery ticket.' And then the mafiosi would take the lottery ticket to the bank and pay it in. 'What's the origin of your funds?' 'I won the lottery.' And they just kept doing this for ages until the same guy won the lottery three weeks in a row. And then everyone was like, 'Hang on a second. This isn't right.' And you know, but that's, you know, it's, you almost have to be admiring of the imagination.
Do you know what happened to this man?
Well, I, you know, I think he was okay.
Yeah. I think he did all right out of it. You know, it was... but, you know, that's kind of how money launderers think. It's like they spot vulnerabilities, and the vulnerabilities can be, you know, very obvious or very subtle, but it is a constant process of trying to think of ways to sort of make your money look legitimate.
Before I ask you to read something and Thomas to join us, you said you have to be optimistic. Why do you have to be optimistic?
Optimism, particularly at the moment, is a revolutionary act. I mean, there's no point in being pessimistic. Like, if you're pessimistic, even if you win, you lose. And you know, so no, I mean, you have to hope for the better world. I mean, I have a friend in Ukraine, Daria Kaleniuk, who is an incredibly brave anti-corruption activist, you know, a woman of steel. And I remember talking to her once about this, saying, you know, it's very hard to be optimistic in Ukraine. Yeah, of course. And she just said, you know, look, we are at 2% right now, and my ambition is to get to three. You know, and like, the thing is, we are in such a bad situation when it comes to money laundering, that I mean, maybe even 2% is ambitious, you know, but like, but then if you think about the gains, if you get from two to three, then we're improving where we're at by 50%. If you think about it like that, you know, you can make a very small gain have a massive difference in terms of the amount of victims you can save, you know, and so that I think, yeah, being optimistic, you have to be optimistic because otherwise you just give up and then you've surrendered the world to the, you know, the Donald Trumps of this world.
Thomas, will you join us and will you read just this little bit? And I think it just gives a good insight in how big this problem is. So yeah, this is talking about how the estimate of global money laundering, the size of the global criminal economy, is between two and 5% of global GDP, between two and 5% of everything.
You may be thinking that 2 to 5% of global GDP doesn't sound like very much money, but if you put it in the context of the world economy, you'll see that it is. Each year, everyone on Earth engages in economic transactions that total approximately $100 trillion, which means the criminal part is easy to work out: between $2 and $5 trillion. If the bottom end of the range is correct, that means the world's criminals are as wealthy as Russia. If, however, the top end is more accurate, they are richer than Germany. In other words, if the world's criminals had their own country, it would be somewhere between the 11th and the third richest nation on Earth. At the top end of the range, they're richer than anyone but China and the United States. At the bottom end, they're still wealthier than Saudi Arabia, the Netherlands, and South Korea. Every year, they can reinvest that money in their businesses, buy more influence, harm more victims, and we are failing to stop them.
Thank you. That's a lot of money.
Oh, yeah. So much.
Just to put that in perspective, if you had a trillion dollars, I sometimes struggle with numbers of like million, billion, trillion, and the difference between them because they all sound the same. If you had a million dollars in a pile in front of you on the ground and you settled down to count them one at a time, one a second, until you finished, it would take you about 11 days. If you had a billion dollars, it would take you slightly more than 30 years. If you had a trillion dollars, it would take you more than 30,000 years. Wow. It's a lot of money.
Thank you. You already said some examples, but maybe looking at money laundering and the way it's done now, you said your favorite example was from the lottery, but if you look at money laundering and how it's done now, and the both of you, can you name examples of what it looks like?
Thomas, go ahead.
Well, hi. Nice to be here. Well, I think that there's new kids on the block. So I would say in the crypto world right now a lot of things are happening, there are innovations, but maybe I think maybe you should start with some more old-fashioned stuff, and it's really your expertise.
Well, I mean, so talking about crypto, the standard way that criminals in the UK, ordinary criminals, will launder their money: they have cash, they've sold drugs, they've, you know, done whatever it is, you know, they've just got a bag full of cash. They will then take it to a broker who will exchange it for crypto. So it isn't old or new, it's old and new. And you take it to a broker and you exchange it for crypto. And with the crypto, you can buy more cocaine with it. That's it. It's very easy.
What do you do with the cash, though? What does the broker do with the cash? Who wants cash?
Well, in Britain at the moment, there are quite a lot of rich Russians who have been sanctioned who are now excluded from the financial system. They're very happy to take cash from you. So you hand the cash, the broker will take the cash, give it to a rich Russian who can then spend it on their, you know, living expenses. So you've found a way of making the criminals happy because they get crypto which was taken by cocaine. You've made the Russians happy. But how do the Russians then pay the criminals? You know, because the Russians now essentially owe the criminals some money. Well, they can just make that transfer in Dubai. So everything goes around happily, and you've got cash and crypto and Dubai, and it's all one scheme.
And they pay Dubai for the rent of their house.
Oh, I mean, they can pay with anything.
Yeah. It's all... you have to... it's all global, and it is, you know, everyone is in business with everyone.
You write: the decades of legislation, diplomacy, prosecution and compliance have therefore been a complete flop.
The best you can say for them is that in their absence perhaps the situation would even be worse.
So we have a, you know, the system that we have, which at the moment makes banks, financial institutions do an enormous number of checks on transactions. Just to give an example, by the way, I think this is quite funny. It's also very depressing. An example of the checks that that looks like. I received this email from a friend of mine the other day. He's called Richard Smith. He's a financial investigator in the UK. Richard Smith, for those of you who aren't British, is a very, very common name. I did look up on AI and asked it. It said that there were between 35,000 and 55,000 people called Richard Smith on Earth. That was Gemini. A lot of them.
Anyway, so here is a headline from last week from Variety magazine: Jodie Turner-Smith sued for allegedly enabling brother's sexual misconduct and drug dealing. And the first paragraph is: Richard Smith, the brother of actor Jodie Turner-Smith, was sued by three men and women for alleged sexual misconduct and drug dealing. There is a picture of Richard Smith. He is an African-American gentleman, quite bald, quite muscly, in his 20s, very handsome. My friend Richard Smith is in his 60s. He is not very muscly. He's a larger gentleman, and he's British and white.
Anyway, then on Monday, he receives this email: 'Dear Richard Smith, we hope this email finds you well. As part of our regular compliance checks under know-your-customer and anti-money-laundering regulations, we need to update your information. Can you confirm if you were ever associated with Mrs. Jodie Turner-Smith? If yes, please confirm the details.' There are 50,000 people called Richard Smith in the world. So every single one of them received an email just to check that they are not the man in the photograph. It is totally mad. Like, this is this huge automated gigantic machine, and every year this compliance system costs us, everyone, about 200 billion US. 200 billion US, to put that into perspective, would be enough money to solve world hunger, to provide clean water and sanitation for everyone on Earth, and have $50 billion left over. That's how much banks are spending trying to tackle money laundering, and not tackling money laundering, because they're spending all their time sending emails to Richard Smith asking if he's Richard Smith.
And it is an absolutely infuriating system, but it isn't actually... I mean, you can kind of joke about it when it's bad like that, but actually it's very, very serious because you have particularly people who are Muslims, who have distinctively Muslim names, who share a name with someone who is named in an article about terrorism. They don't get an email asking them if they are that person. They just lose their bank account instantly. And this happens to hundreds of thousands of people every year. It is a very, very bad and very expensive and a complete failure of a system because it's not stopping money laundering and it's not stopping terrorism.
Let's go a little bit into compliance. But first, Thomas, would you agree that these decades of legislation haven't really done anything?
The what we came from is that you could walk into a bank in Mexico with a big bag of cash and just hand it over and say, 'I'd like to deposit it at my bank account,' and then the money could go around and be spent. And that is like the easiest way to go forward if you have illegal money, and then you just put it on a bank account. And I think that's still like the trick. If you have illegal money, you want it to be in the banking system, and especially in European or US banks, so you can just spend it, buy a nice house in London, do something with the money. And our banks just complied with the criminals and just provided their services and profited from it, and there was nothing that was being done, and they would do it. And also the Dutch banks, for example, Rabobank, they were really doing this literally for the Mexican drug cartels as recently as 2013.
So this was the status quo. And I think it has improved. You cannot walk into a... No, that's true. ...into a bank and say, 'Okay, I've got a million dollars. Here it is. Transfer it.' But well, the goal is to catch all this illegal money, and I think it's still possible if you are... and there we probably will discuss some new ways to go around this, to launder the money. But so the measures are not really solving the problem, but they did do something: that some banks who did absolutely nothing against this are now at least vetting their customers, and yeah, there are loopholes in the system, but we got some improvement.
What is up with the banks? Why did they do it? Just to get rich?
Well, the way it used to be in the good old bad old days was the relationship between a banker and their client was like between a doctor and their patient. It was, you know, it was confidential. They just took your money and that was it. You know, the hero of this book, if there is a hero, is a Texan congressman called Wright Patman, who was the first guy who said that that shouldn't be the case. You know, that actually banks should have a responsibility to check where the money comes from. You know, but quite a lot of bankers didn't really want to have to do that because it's quite expensive and also takes time and it costs them profits.
So I mean actually, you know, I spend a lot of time talking to bankers who talk about the checks they do, and they do do a lot of checks now. You're absolutely right. The problem is that banks are only a small part of the economy. You know, there are lots of other ways of moving value around the world that don't involve using a bank, and all of that stuff is completely uncontrolled. So if you are a criminal, you just don't use a bank. You just, you know, move your money in crypto or you move your money in a shipment from Rotterdam or whatever.
Yeah. I think that the banks in the past, they knew about the criminal money, but they just didn't care. And right now they do get a fine if they get caught. So at least there's some change. But yeah, I agree with... the system that we've put in place is now, it's got all these minor rules. So you have to vet a customer who's taken out 5,000 euro in cash or do a transaction to a country which is on a list of bad countries. So if you're Iranian or Palestinian, you cannot transfer your money outside of the country. You're immediately flagged. So it's a lot of side effects, very negative side effects, catching the wrong people.
And on the other hand, there's still a lot of big players who still can use the system and they still are able to hide their money. And there's always these smaller banks that you can go to, and then they bank with the bigger bank, and then the bigger bank says, well, they were vetted by the smaller bank, so it's not our obligation anymore to do that as well. And that is really a big loophole. So you can, as long as you comply and you do all the vetting, you can say I did my job, and you flag it and you send the information to the regulators, and then you let the transaction go through, and there's nothing... you can still profit from that as long as you flag it.
But this is quite a strange system, right? This whole compliance system, because in the Netherlands we have a saying that the butcher should not judge its own meat, which is a good saying. It's a good saying in this case because why can banks do that? Why do we look at it?
All the principles with which we tackle international money laundering were drawn up in the late 1980s in a hurry by some people who didn't know what they were doing.
So they decided there was a summit, a G7 summit in Paris in 1989. They decided to do something about financial crime, but they didn't know what to do. So they drew up these principles, which are still the principles that everyone follows today. And yet, like I say, they were badly informed. But a key thing was that at the time the American system was that you had to report every transaction. So there was this colossal volume of paperwork which was supposedly being read by the law enforcement agencies. And the Europeans, particularly the British, thought this sounded like a lot of work. So they said to the banks, instead of reporting every transaction, just report the suspicious transactions, so we can only see the suspicious ones.
So the problem is that, I mean, it's a good idea, right? You would think. The problem is that the word suspicion implies that you are honest and you see something dishonest and you are suspicious of it. If you are, however, dishonest, you're not suspicious because you know it's dodgy and you don't care. And that was the problem with the system that we created. It's essentially, like you say, it's like saying to the butcher, report bad meat. Yes. Assumes that the butcher is honest. If the butcher is dishonest, he's not going to report the bad meat. So we have a system which creates a huge amount of paperwork for the good guys.
And no real bad consequences for the bad guys. And you see this all the time whenever there is a big anti-money-laundering investigation, for example Danske Bank in Estonia or HSBC in Mexico, you will always see a quote along the lines of one banker has emailed to another banker, because they can never resist writing things like this in an email: 'We shouldn't bank for this client, but they're so profitable that we will anyway.' You know, and that's the problem, is essentially that you get to the point when there might be a fine, but there's so much money available that you say, sort of, let's do it anyway.
It's just a business risk, so you just calculate how big is the fine, and then you say, well, it's still profitable, and we probably won't get caught because we only know about the situations where they really did some bad stuff, yeah.
And they were caught, and then if you're caught, you don't go to court, you settle beforehand, and then you just pay the fine, which is an acceptable loss on the whole business. So it's still profitable to continue.
But would you say this is still happening also with Dutch banks?
Well, right now, so we had settlements with ING and ABN. They settled in 2019 or... because they were caught. So ING, I think, paid 75 million and ABN 485 million. And Rabobank, they rejected the settlement, so it's actually going to court. And it's not proven that they laundered money, but at least they didn't do the checks and balances, the checks that were required. So this should have flagged something as suspicious, and they didn't.
And we don't know the exact content of the cases that the prosecution has right now, but it is going to court. So it's interesting because now for this Rabobank case, I think we will see at some point what these cases were that they didn't flag.
Because we don't know where that money came from.
Well, the cases now are about that they didn't comply with the rules of flagging.
So not about... because in previous cases it was clear, okay, it's Mexican drug money that you've laundered.
Then they settled and kept going with certain things. But every 10 years there's a new scandal, and I'm sure there will be a next scandal where a big bank is being caught servicing clients that they shouldn't have been servicing.
Or maybe a big crypto company.
Yeah. So one of the things you do in this book that I find very important is you point out the inequalities, because in this system not everybody is treated the same and not everybody suffers to the same extent. And you already mentioned, for instance, the Muslim charities who just get debanked, who cannot open a bank account anymore, who are flagged as such after 9/11, who were constantly flagged for being suspicious, even if it was a foundation to help Afghan girls going to school. But you're right, there's also a huge inequality in the way we deal with countries and whether or not they have their compliance and their anti-money-laundering regulations in order. And for that, you fly out to the Marshall Islands, that I have to admit I didn't know them.
You haven't heard of the Marshall Islands?
No, but I'm really bad with topography. So...
The Marshall Islands, for, in case there's anyone else who hasn't heard of them, it's a small country. Actually, it's a very large country, about halfway between the Philippines and Hawaii. I say it's very large because it covers a very large area of ocean, about the size of Mexico. But the actual surface area of the whole country is about the size of Washington DC. It is a very... it's just a small number of islands over a very large expanse of ocean. And there is nothing there. Really, I mean, with no disrespect to the Marshall Islands, it is a very sleepy place. The main thing that has ever happened there, and it was very terrible, was that that's where the Americans tested their atomic bombs on Bikini Atoll. This is why bikinis are called bikinis. They're named after Bikini Atoll. And the consequences of that have been terrible and are persisting to this day.
And so the Marshall Islands has some very, very many challenging problems which take up most of its government's time. And the reason I went there, however, is that in the 1990s the Marshall Islands became associated with money laundering. It was blacklisted by Western countries for having been involved in money laundering. It wasn't involved in money laundering. The reason it wasn't involved in money laundering is because there's no money in the Marshall Islands, really. You have to have money to launder money. It's not, you know, without it, it just doesn't work. But they hadn't passed the right pieces of legislation, mainly because they were busy with things that actually mattered to them. It was a little bit asking them why they hadn't got legislation against winter sports. They don't have that in the Marshall Islands. So they didn't think of doing it. But it didn't really matter.
And the reason I went there is because it was an amazing example of the hypocrisy that we have created in this system whereby money laundering happens in big Western countries because that's where the money is. It happens in London. It happens in Amsterdam. It happens in Zurich, in Paris, in New York, in Miami. But all of these countries are at the table and they get to discuss who gets punished, and they always decide collectively not to punish each other. Which is nice, but they're very, very good at punishing other people. So you get someone small... I mean, there was another country, it's not even a country actually, it's a jurisdiction attached to New Zealand called Niue, which was too remote even for me to go to. You have to fly all the way to New Zealand and then quite a long way back to get there. That only has one bank. Money laundering with only one bank is like trying to mix records together with only one record player. It isn't possible. And yet they got blacklisted anyway because they haven't got money laundering legislation.
So it is an absolutely infuriating system whereby if you have these minor technical compliance failures, like you haven't ticked the right box, you get punished, whereas if you are essentially letting colossal amounts of money through all the time, then you don't. I mean, so that was the Marshall Islands, and I mean, it's a kind of tragic story to be honest.
And what happened after they got in trouble?
Well, if you get blacklisted, it basically means no one will transact with you anymore. So, you know, it has some very serious, you know, development issues, and it meant that no one would transfer money without these very expensive, extensive checks to make sure it was not of criminal origin. So the problems, all the problems that they already had, which were very severe, also has a very severe health crisis, all of those just became much worse. It didn't actually help stop money laundering at all. It just made it much harder for ordinary people to do anything.
And is this then something that is done by the Financial Action Task Force?
The Financial Action Task Force, the most important body that no one's ever heard of. Yeah, it sets all the rules around money. And it is essentially a club of the richest countries in the world, mostly.
Yeah. How do you look at this task force?
I don't know that much about it. I read Oliver's book, and I think that's the first time I heard about this task force.
Well, it is. Yeah. I mean, it's kind of amazing. No one elected it. It was created, it wasn't even intended to be permanent. It was created temporarily in 1989, and yet it's still going.
Mhm. But yeah, I think that's... but it's a recurring pattern that we stumble upon. We start a really nice club, and only the countries here in Europe and the US can be on its board, and then we don't get punished.
Exactly. So it's actually really interesting at the moment. So the way the Financial Action Task Force works is it has what they call mutual evaluations, when they go out and check all the other countries for whether they are doing the right thing or not. And then they go and say, you're not doing the right thing with this, you are doing the right thing with that, and, you know, and everything is, you know, very kind of formal. They have their mutual evaluation team has just been in the United States. Now there is absolutely no question at all that the United States is significantly worse when it comes to tackling money laundering than it was last time there was a mutual evaluation. Everything has gone very badly downhill in the last two years. And yet it is inconceivable that they could blacklist the United States. You know, if they did, I mean, I don't know, Donald Trump would probably declare war on somebody. You know, and I mean, wouldn't normally stop him anyway. But, you know, and this is sort of the mark of the problem with the whole organization, that essentially it's unable to tackle the people that actually matter.
And that's also something you write about. Well, this is sort of the theme of the book, and you set up regulations, and somehow they never seem to really tackle the people that they should be tackling.
Yeah. So, I mean, it's essentially an issue with the fact that no one wants to actually do the work, because if you are the person laundering the money, it's actually quite profitable. It's a good business model to be a money launderer. It's bad for everybody else, but it's good for you personally. So if your country is laundering the money, you don't really care. I mean, you think it would be better if no one did it, but if anyone's going to do it, it should be you. And that's essentially the issue right there. And you see it across the board. It has its impacts everywhere.
Yes. Because it's bad for... like we did, maybe we didn't care, but well, we are at the point now, I think, in history where we also notice. You notice in London, you notice in Amsterdam. You wrote a whole book about how the difference between the people who don't have money and the super rich is changing. So we can't... and then there's the war in Ukraine. We can't really ignore this problem anymore as we should, right? So there should be some action.
I mean, I would hope so. I mean, I'd hope so. But we are a very long way away from having the urgency required. I mean, the European Union has just created AMLA, an anti-money-laundering agency across the entire union, which will unite everyone's efforts together, which is good. It will start operating in 2028. It was founded, I think, maybe three years ago, so no one's in much of a hurry.
You know, in 2016, they decided that the 500 euro banknote was bad because it was being used by criminals, which it was. We can maybe get on to cash. Large denomination banknotes are super useful for criminals because it means you can put lots of money in a very small space. 500 euro banknotes were very, very useful for that. After the terrorist attacks in Paris in 2016, they decided they were making it too easy for terrorists and criminals, so they were going to stop printing 500 euro banknotes. They finally stopped printing them in 2019. So three years later. So they'd still, having decided this was helping terrorists, it took them three years to actually do anything about it. So this is essentially that no one ever has the urgency. No one thinks of this as being really important. It's just like a kind of dreary process to go through.
The printing of cash is a very interesting chapter in this book because you ask, why are we printing all that...
Cash when everybody is paying with their cards and their phones?
Yeah, it's super interesting and kind of amazing. So if you look at every country on earth, some countries use cash more than others. Like the Netherlands, about 20% of transactions are in cash. Fewer now, but Germany is still a lot more, and Spain, Austria is still a lot more. The UK is like the Netherlands, it's very few. The US is similar. But everywhere the proportion of cash being used in day-to-day transactions is falling because it's much more convenient to use your phone or your card or whatever, buy things on Amazon, all that stuff. And yet central banks are just printing more and more cash all the time. The amount of euros in circulation is at a record high. It's 1.6 trillion euros, which is, you know, that's a lot of money. Dollars, two and a half trillion dollars. It doubles every decade despite the fact that cash usage is falling all the time. Pounds, again, these are all record highs. Pounds at a record high.
And it's really interesting because it isn't just the fact that more banknotes are being printed, but the actual banknotes that are being printed is changing. So you can see this with dollars really starkly that now by far the most common banknote that's being printed is a $100 bill. 20 years ago the most common banknote was a dollar bill and then a $20 bill, but now it's a $100 bill. And yet if you try and use a $100 bill in a shop in America, people will look at you and ask if you've got anything smaller. They're actually quite hard to spend. So they're clearly being used by someone else, and central bankers call this the paradox of banknotes and just say, 'Gosh, isn't it strange?' But it's very obvious where they're going. They are going to criminals who are using them because they are wanting to pay for things and you can just use a shipping container full of banknotes to buy things with. I mean, I talked to police officers who told me that essentially there are in Rotterdam warehouses that are entirely full of banknotes, you know, and essentially if you want to pay for a shipment of cocaine you can just say, 'There you go, those banknotes are yours now.'
Which is interesting because this is going back to, you know, quite an old form of money. Anyway, sorry.
What do you think, Thomas? You are...
I'm a big fan of cash. So I don't agree with Oliver on this point. This is where I'm most critical on this point of view. Not necessarily on the big banknotes. I think like the 500 euro bill, yeah, it's probably being used a lot by criminals. So I don't deny that this is happening, but I think cash is really serving an important role in our financial system. First of all, we need something apart from the banks. Just look at all these people who are now not able to transact because they're blacklisted, not because of illicit transactions, but because they come from a country which is blacklisted and people cannot do business because they have the wrong last name. So you need something apart from the banking system, and I think only for that reason that's already why we need cash. But it's also you have privacy for small-scale transactions, which is nice. You don't need to use a bank in between. There's nobody taking a transaction fee because if you pay with a card, you might not see it, but the shop has to pay a fee every time. And that's why banks love us to just go electronic and not use cash at all. So I think for those reasons, cash is very important, let alone old people. It's good for budgeting if you don't have a lot of money. So cash is a great thing. So we should keep it. I do agree that...
I just put out, I completely agree. You're saying this like I don't agree with you. Yeah. I just don't like the big banknotes. Yeah.
Just the big banknotes. I can live with that. But I think we should also, and that's really the point in my book, distinguish between cash and bank money because bank money is private money. It's commercial banks who create it and who earn from it, and cash is the only public money that we have right now, and the profits from cash are going to the state, and I think that's the way it should be for a larger part of our money system. And right now because we pay so much electronically, we are all shifting to bank money and we're using that. So I think we should look for new ways of introducing cash, but then in a more digital form, and I think that's where we stand right now, and it doesn't have to clash with Oliver's initiative of removing really just large denominations.
Because this is something that I really don't understand. So who decides on how much cash is being printed?
If you want it, the central bank will give it to you. So they just, if you want it, they will sell it to you. So if you have 50 euros in your bank account and you want a 50 euro note, then you can have it. That's all.
But they're printing more and more and more money.
Yeah. Yeah. So people are wanting, taking out more and more of it.
Yeah. And that's, but it's being criminalized now a bit because you cannot just go to the bank and take out €4,000 in cash. You are being flagged. You have to make an appointment if you want to withdraw a lot of money. You can take out €250. So I think it's really quite restricted, and I think there's a good side to that for the obvious reasons of money laundering, but I think there's also a bad side of it that everything has to stay within the banking system, and that's where a lot of the bad things are happening as well. So I'm more in favor of creating something new.
And what would that look like?
