How Britain legalised money laundering | Oliver Bullough interview

We normally talk about hundreds of billions of pounds being laundered via the City of London every year. That's a lot of money. Globally, this sort of general estimate is somewhere between two and five trillion US dollars. London property, particularly at the top end, is starting to fall in price. Now, I'm not saying that that is because Russians aren't buying it anymore since 2022, but it's certainly an interesting coincidence. This idea that the financial system is woke, that it's being weaponized against, you know, patriots, right-wingers by a sort of essentially corrupt liberal establishment is really deeply embedded over there. That is a very dangerous thing. We really don't want that to cross the Atlantic at all. There's so much money involved and everyone is, you know, in on the game apart from everyone else.

So, part of the problem with money laundering is that criminals aren't very good at filing, you know, tax returns, paying for work, and so on. So, we are forced to just, as it were, slightly guess from trends, extrapolations, and so on. But, you know, we normally talk about hundreds of billions of pounds being laundered via the City of London every year, which is, that's a lot of money. These are really significant sums of money, but, you know, globally, this sort of general estimate is somewhere between two and five trillion US dollars is being moved. And, you know, if you had five trillion dollars in a pile in front of you and you were to sit down and try and count them, you know, that would take one a second until you were done. That's about 150,000 years' worth of counting. It's a lot of money.

And to be honest, one of the issues that I have writing about this, and I think that a lot of people have thinking about it, is it's so huge to talk about the scale of global criminality, or even to talk about the scale of criminality in the UK, that you can kind of lose sight of the trees for the forest. But what money laundering is and why I think it's so important that we talk about it more and governments do more to tackle it is the support industry for almost everything that's bad in the world. You know, why is Russia able to buy the components for its drones that it can't make itself? Because of money laundering. Why are the drug cartels able to employ the armies of enforcers that kill so many people in Mexico? Because of money laundering. You know, why are terrorist groups expanding across North Africa? Why is the Taliban back in power in Afghanistan? Because of money laundering.

It is the absolute crime that underlies almost all other crime, certainly all acquisitive crime. No one steals something if you can't keep it. And money laundering is the process, the legitimizing of otherwise illegitimate wealth, that makes it possible for people to keep the money they've stolen. So, you know, mobile phone theft on the high street, underlying that is money laundering. You know, any crime at all that we talk about, and it's very frustrating to me when the government talks about, you know, oh we need to, you know, deprioritize, um, you know, tackling organized crime and instead have more bobbies on the beat, you know, more people, you know, it's the same thing. You know, the gangs that are snatching people's, you know, phones on Oxford Street or elsewhere, they're only doing it because there's organized crime as well. It's all one system and you can't think about one without the other.

Yeah, and also it wasn't that long ago when we were very happy to accept money from Russia. It was only the full-scale invasion of Ukraine in 2022 that suddenly changed everyone's minds and made us realize that this was a terrible kleptocracy and we needed to sanction everyone.

Well, and going back even further, I mean, it is extraordinary looking back now at the sheer number of things we ignored, of, you know, real, I mean, they're not even red flags, you know, like someone jumping up and throwing a red banner right in your face and ignoring it and saying, 'No, we need to do business with these people.' I mean, you know, there was the murder of Alexander Litvinenko, you know, in London with the deadliest substance known to man in 2006, and afterwards that was then still the New Labour government saying, 'Oh, no, Russia's too important for us to fall out with over this.' You know, then, you know, what, four years later the coalition government comes to power and David Cameron's off to Moscow, you know, drumming up business. You know, this is, you're doing business with an organized criminal gang, basically, an organized criminal gang that is murdering people and stealing stuff. And if that money is coming here and buying, you know, property and so on, that's money laundering.

And so there is so much to this question of why it is that governments are unkeen to do something about this. You know, but underlying it all really is the fact that it's complicated and it's hard work and it's hard to understand and they would just rather it went away. But unlike, you know, well, actually, probably like all major crises, they don't go away just because you don't want to look at them. You know, they just get worse, and so the more that we don't think about money laundering and the crisis that it's enabling, the harder it's going to get to do something about it.

You know, so much of that is about the fact that it is easy now to bring money out of the shadows and spend it in politics because it's so easy to move money via the sort of underground financial system. And it really worries me actually the lack of urgency that our government in the UK has got around reforming the rules about money and politics because it is so easy to, I mean, there are restrictions, but they are so easy to evade that, you know, it really wouldn't take much for, you know, an ill-intentioned actor to start funneling money into British politics to cause complete chaos.

I actually have, yeah. But I think I was about 15 at the time and it was like one of the most exciting places I'd ever been because I could afford things.

And this has been one of those sort of 'Chinese people like Bicester Village' stories that has turned up in journalism every now and then for about the last 20 years. And what's interesting about this was for me, you know, I was aware of this because I'd seen it, you know, in the newspapers over the years as a sort of something in the back of my mind that Chinese people like Bicester Village. It is apparently the second most popular tourist attraction in the UK for Chinese visitors after Buckingham Palace. And I don't kind of know where that statistic comes from, but you do see it around a lot. What's really interesting is talking to... So should I just let that sort of sink in?

But what's interesting talking to police officers about this is that it is just totally accepted in law enforcement that this is money laundering. That essentially you have a system of people who are essentially gathering money from British criminal groups where that money is then being often put into students' bank accounts because you can put it into lots of students' bank accounts. Those students are then gathering the money, it's being spent on luxury goods, and those luxury goods are then being exported to China. I mean, this isn't only a Bicester Village story. Obviously, this is all luxury shops. It's just visible in Bicester Village because there's so many luxury shops in one place.

And this is a really interesting outgrowth of the global criminal economy because we have been as a civilization supposedly tackling money laundering since the late 1980s. And what that has involved in practice is putting ever more regulations on financial institutions. Banks have to do an enormous amount of checks on money that they're moving through their accounts to make sure that it's not of criminal origin, and they have to fill out all these reports. There was a colossal amount of paperwork and labor involved. But there are no checks at all on the trade system. You can really move almost anything at all via the trade system that you like. There's no checks in the same way as there are on moving money.

So criminals quite reasonably have looked at the banks and said, 'Well, that's a hassle moving money via the banking system. We're just going to move value via the trade system.' So if you want to move value from the UK to China, yes, you could send it via a bank, but that's going to be checked three or four times before it gets there. Or you could just buy a Rolex, or other brands are available, and stick it on your wrist, fly to China, sell it at the other end, and hey presto, you've moved 500,000 or however much the Rolex cost from the UK to China without anyone being any the wiser.

And the joy of someone like Bicester Village or any luxury goods, so I mean, I don't want to beat up too much on Bicester Village, it's just a kind of obvious example, is that it is a place where the concentrated value is for sale. You can buy a handbag that costs a lot of money, stick stuff in the handbag, fly to China, sell it at the other end. And this is happening on an industrial scale all over the world, and it is a real example of the failure of governments to tackle the issue seriously in that they are constantly piling more regulations onto banks because they think, 'Well, money laundering must involve banks.' Without realizing that for criminals, they don't think about, you know, 'Oh, I must use a bank.' They just think, 'What's the easiest way to move value from one place to another?' If it's easy to do it by shipping luxury goods from Bicester Village to China, I'll just do it that way. Or I can ship used cars from, you know, Canada to the Middle East, which is how, say, Hezbollah has liked to fund itself.

You know, it is an astonishingly huge entrepreneurial world, which, you know, it can be overwhelming to think about it. I mean, one of the things I enjoyed doing in the book is just trying to break it down into little discrete sections. One of the most extraordinary, to my mind, one of the most amazing bits is trying to look at the role of cash. Cash money. I mean, everyone knows, I mean, it's just well known to absolutely everybody that if you want to buy a criminal product, you'd use cash. It's untraceable, you know, then you can't be seen in your transaction history or whatever. This is the obvious way to do it. And people, you know, want to work off the books, so they use cash. They want to buy drugs, they use cash. This is well known to everyone.

It appears to be a fact entirely lost on central banks that this is happening. You know, at the same time that we are all of us using cash less and less in everyday life. You know, only fewer than 10% of transactions in the UK now involve the use of cash. And the transactions that we do use cash for tend to be really quite small. So, you would think since people weren't using cash that there would be much less demand for cash and therefore the Bank of England would be printing far less cash. On the contrary, the amounts of cash in circulation, British pounds in circulation, went up 10% just last year to hit a new record high. It hits a new record high every month. That isn't unusual. Same is true with US dollars. They hit a new record high every month. The euro the same, hit a record high in December.

There is a tidal wave of cash being printed by all the world's major central banks going out there somewhere and yet we're not using it. You can see in all the transaction monitoring that central banks do, and they say, 'Well, it's a paradox.' That's what they say, 'It's a paradox. People aren't using it. They must be sticking it under their mattresses.' But it's very obvious to me and very obvious to all the law enforcement sources I have that this is just a sign of the vitality of the criminal economy. There is a giant criminal economy. People happily using cash totally unscrutinized, unmonitored.

And the really important message is that the tool being used to facilitate this criminal economy, which is predating upon all of us in all the world, is being printed by our government. It isn't, you know, at the same time they will talk about how desperate they are to crack down on crime and, you know, how there's going to be more investment in police officers while they are printing as much money as they can get off their presses. I mean, literally in the US they're building a whole new factory to print money because they can't do it quick enough. It's because there is this demand for money, and why do they so like printing money? Because printing money is very profitable.

I mean, I'm not going to deny that, you know, cash is very, very important for particular segments of the population. Particularly people living on a really restricted income who struggle to budget. If you take out your cash at the beginning of the week, then you know how much money you've got, you can see it, and that's totally fine. It is obviously really important for certain particularly vulnerable and older people who don't like using...

But what's particularly interesting about that, and that is obviously true in the United States and the European Union and everywhere, that fact is there are particular segments of society who really need cash, and I would not in any way say there shouldn't be cash. But what they don't need is 50-pound notes. Or what they don't need is 100-dollar bills, 200-euro notes, or God forbid a 1,000-franc note in Switzerland, which is worth, you know, almost 1,000 pounds. You know, these huge banknotes that you never see. I don't remember the last time I saw a 50-pound note.

100-dollar bills, which is by far the most popular or the bill that is printed most by the Federal Reserve in the US is a 100-dollar bill. Even though if you were to go into a Starbucks in the US and try and pay with a 100, they'd ask if you had anything smaller. But 80% of the value of the dollars they produce are in the form of 100-dollar bills. You know, these are...

These are not being used by our grannies. These are being used by organized criminals.

And that is, you know, there is no contradiction between my saying we need to change the way we produce cash and, you know, politicians saying quite reasonably we need to protect the role of cash because it's vital to vulnerable people. Both of those things are true. We just need to stop printing these very large banknotes because it's obvious why large banknotes are more popular with criminals. Because if you have a suitcase full of 100-dollar bills, you can carry five times more value than if you have a suitcase full of 20-dollar bills. I mean, that's just mathematics.

So, you know, but there is no reason why we should be printing 100-dollar bills in the US or 50-pound notes here, except for the fact that it costs about 10, 12p to print a £50 note. So, every time one rolls off the presses at De La Rue, that's £49.90 in pure profit right there for the government. It's a very useful earner.

This has been a form of earner for governments ever since they've been governments. If you look back into Anglo-Saxon England, there are kings we only know about because they produced coins. They loved producing coins because it was profitable to produce coins. But at least a coin had gold in it, right? At least it was an expensive thing to do. But if you're printing 50 on a piece of paper, it costs almost nothing to do. And yet it's worth £50. It is a great earner for governments. But if you were to net out the profit that they make and then look at the harm that the crime enabled by that currency causes, then you would immediately conclude that this is a stupid trade. It would be far better not to do either and to recognize that by prioritizing that profit, they're causing a massive amount of harm, far more harm than they're gaining in money.

Yeah, he was. He had difficulties with... It was a slightly sort of niche version of debanking because technically he was debanked by Coutts, but they also offered him an account at NatWest, which is the same company. So, it wasn't exactly like...

But I mean, I am, you know, it is, I mean, we can, I mean, I can be rude about Nigel Farage in lots of ways. But actually, I'm very sympathetic to him here. I think it was wrong that he was threatened with losing his bank account because they didn't like his political views. I don't think that should be taken into account when someone offers you a bank account or not.

Yeah, and also it's just sinister. You don't want that being in anyone's calculations. But I think what...

But what I want to add to that is a way, yes, and if you will, to Nigel's story is that there is a massive debanking problem in this country. Like a genuinely colossal one. There's a chapter in the book in which I focus initially on a small charity focusing on ethnic Somali Britons which is near my house and then expand out to talk about the problem faced by Muslims more broadly, not just in the UK but around the world.

There is a huge problem with Muslims who lose their bank accounts, Muslim charities losing their bank accounts, charities that are focusing on helping Islamic countries losing their bank accounts because of the rules that are intended to fight terrorism. These are often people without much money in their bank account. They're not buying the kind of expensive services from a bank like mortgages that banks like selling. It's not really worth the bank's while if there's any kind of possible suggestion that this person might be even tangentially involved in terrorism or even have the same name as someone who's tangentially involved in terrorism. They just close the account. There's no appeal. There's nothing. This is an epidemic and it comes with great shame because if you lose your bank account it feels terrible and also if you talk about it then no other bank's going to give you an account.

And this is what was particularly annoying about the story of Nigel Farage, and though I did genuinely sympathize with him as a person because it's a bad thing to happen to anyone, is that this happens to thousands and thousands and thousands of people in this country every year who are never talked about. They never get any kind of coverage. They never get any help from our political class. But because he was well networked in the media and in politics suddenly it was a massive scandal. Everyone talked about it as if it was a unique case. It isn't. That was indicative of a massive problem which is about the way that checking for money laundering has essentially been outsourced to banks. But banks don't really know what to look for. They just know they're going to be fined if they don't find it. So they will always err on the side of caution. They'll just say, 'Well, just get rid of people. You know, this person isn't generating any fees for us. Kick him out.'

But had they been generating a lot of fees, and you see this with Russians as well since 2022 and the full-scale invasion, lots of Russians also losing their bank accounts. Not because they are oligarchs, but because they once did business with someone in a company that was owned by an oligarch, which is, you know, a totally acceptable thing because they weren't sanctioned back then. But they would lose their bank accounts anyway. Meanwhile, the actual oligarchs, they're doing fine. You know, they've just moved their accounts to Dubai, and they're living, you know, very happily indeed. So you don't achieve anything.

You may have noticed that by debanking British Muslims, we have not defeated terrorism. You know, the Taliban are back in Afghanistan. You know, terrorist groups are doing very well across the Middle East and North Africa and Central Africa. And yet we are just kicking...

out a load of ordinary Muslims who have done nothing wrong at all. They just happen to have the wrong name. And so the true story, the important story of the Nigel Farage de-banking episode for me is that the mechanisms we have to try and tackle money laundering and particularly terrorist finance are incredibly disproportionate. They're discriminating against groups of people who are already excluded from a lot of our economy. And if they are intended to be including people and fighting terrorism, they're doing precisely the opposite. They are, instead, angering people who we really want to be, you know, integrated into society.

Now, the chapter which is about de-banking specifically of Muslim communities, which is in the book, was excerpted yesterday in The Guardian. And the guy who's the main figure in that particular story, who runs a small charity near me, who since he was in the article, he just WhatsApped me yesterday evening. He said 30 more people who he's worked with wrote to him yesterday and said, 'Oh, that's happened to me, but I never told you about it.' So, even him, who is like in that community, very deeply embedded in it, it happened to 30 more of his friends, and he didn't even know. Because no one wants to talk about it because it's so shameful. And this is the side effect of the system that we are supposedly creating to fight terrorism. It's really bad, and no one ever talks about it.

Well, so it's interesting that you say that because actually it hasn't so much happened in this country, but in the United States, particularly under the Biden White House, there was a lot of concern about the use of cryptocurrencies for laundering money, quite reasonably because cryptocurrencies very often are used for laundering money. In fact, for some cryptocurrencies, that's their primary purpose. And a lot of the companies and the individuals that lost their bank accounts as a result were well networked into the right-wing ecosystem over there, very much on the right of the MAGA movement, if that's possible to imagine. And they managed to present this actually as a political campaign against them, as if they were being de-banked because of their political views, rather than de-banked because of their involvement with crypto. And it's become a real rallying point for a particular part of the right-wing in the United States. They call this Operation Choke Point 2.0 for reasons that I won't go into, but they talk about it a lot. Trump talks about it a lot. And this idea that the financial system is woke, that it's being weaponized against, you know, patriots, right-wingers, by a sort of essentially corrupt liberal establishment is really deeply embedded over there. And that is very pernicious and a dangerous thing. We really don't want that to cross the Atlantic at all.

And because the problem is with the Nigel Farage example is that, you know, you can criticize Nigel Farage for lots of things. But he's actually right in that particular case. What happened to him was wrong. It is sinister, and it shouldn't have happened. And it is very hard to defend something that's wrong. And so, you can say, you know, I want to tackle money laundering. You can say, I want to tackle terrorist financing. These things are incredibly important, and they are. But you don't tackle it by excluding ordinary people who've done, you know, nothing criminal from the financial system. That really isn't a way of dealing with it. But that is essentially the side effect of what it is that we have.

You know, there's this saying, the purpose of a system is what it does. You know, you can listen to what people say, but the thing to do is to look at what something does. Now, we have a system which has been established. It's very elaborate and very expensive. You can get into how expensive it is to tackle money laundering globally and nationally. But if you look at what it actually does, I mean, it is completely failing to stop money laundering. There is, as far as we can tell, just the same proportion of the economy is criminal now as it was, you know, 30, 40 years ago. But it is loading an enormous amount of paperwork on private companies. It is excluding very large numbers of already marginalized people from the financial system. And essentially failing in its core purpose while also making life worse for lots of other people. And it's a privatization of...

Well, I mean, so what's particularly annoying, you're absolutely right. I mean, fraud is a huge growth industry and a massive, massive problem. What's to my mind quite annoying about the way that we often talk about fraud is you address each individual case. You try and, you know, look at every individual case. The advantage of looking at it from a money laundering perspective is you would step back, and you'd go after the system that makes fraud possible. You say, this is where the money goes. This is how the money is laundered and legitimized. If you could break the system that supports fraud, then you wouldn't have so much fraud.

It's a bit like, you know, if you look at it from a legitimate business perspective, you wouldn't have shops on the high street if there were no banks, right? Because it wouldn't be possible for them to operate, to buy things from other countries, to engage in everyday operation without a formal financial system to support them. It's the same with criminals. They have an informal financial system that supports them. And that is this giant enabling operation that underlies absolutely everything, including fraud. And all acquisitive crime is supported by that. But the resourcing of the fight against this is really poorly done. There's very little money being spent tackling this.

And so you have financial institutions and other, you know, professionals who move money, lawyers, accountants, and so on, who if they see suspicions, they are obliged to report their suspicions to the authorities. And they do so in colossal quantities because they're very worried about being fined if they miss something. So, hundreds of thousands of reports come in every year in the UK into an agency that has no people to read those reports. They don't have enough people, so they just pile up. So, you have this avalanche of paperwork, it's almost like a spam attack on the, you know, financial intelligence unit where they just sit there and no one can look at them, which is crazy.