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Central Asia’s Offshoring Machine: From the US to Ukraine, via Kyrgyzstan

 
 

Perhaps it was just a matter of time before members of U.S. President Donald Trump’s campaign would be tied to Central Asia’s offshoring machine. Given the raft of off-putting financial allegations already surrounding the American president — from post-Soviet monies propping Trump’s businesses to the numerous questionable characters in Trump’s immediate orbit — the fact that Trump’s former campaign manager, as we learned this week, is now connected with Kyrgyzstan’s money-laundering industry is but the latest shady domino to fall.

As The Diplomat’s Catherine Putz summed up, a new series of documents unearthed in Ukraine have tied Paul Manafort, Trump’s former campaign manager, to a Belize-based shell company, Neocom Systems Limited, in pursuit of funneling hundreds of thousands of dollars to offshore accounts during Manafort’s time in Ukraine. The New York Times reported, “The invoice billed a shell company in Belize, Neocom Systems Limited, for $750,000 for the sale of 501 computers.” While Manafort has disputed the allegations, the document matches information from a prior ledger detailing alleged payments from Ukraine’s erstwhile Yanukovych regime to Manafort.

But the shell company in question wasn’t simply set up and shut down for a supposed one-time payment. Rather, it’s one Kyrgyzstan’s Central Bank had prior connected to AsiaUniversalBank (AUB) — one of the primary entities Kyrgyzstan’s former Bakiyev regime used to ransack the country before Kyrgyzstan’s 2010 revolution. A 2012 report from Global Witness detailed how the Bakiyevs’ claque — including the former president’s son, Maxim Bakiyev, who currently remains ensconced in his British mansion — almost certainly wrangled AUB to launder hundreds of millions of dollars via British and New Zealand banks, among others. (Wrote Global Witness, “In the most egregious example, the shareholder of one U.K. company was a Russian man who had actually died some years before the company was registered.”)

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This, of course, would be by no means Manafort’s first brush with kleptocracy — after all, he helped whitewash the image of three of Transparency International’s top four global kleptocrats, including the Philippines’ Ferdinand Marcos. However, the new allegations, as Putz wrote, help remind that Central Asia is “not nearly as isolated from global matters as is assumed[.]” After all, the region has provided not only the largest U.S. case ever brought pertaining to the Foreign Corrupt Practices Act — a case that saw Kazakhstan President Nursultan Nazarbayev outed for all forms of fun bribery — but one of the largest cases the U.S. Kleptocracy Asset Recovery Initiative has ever seen, relating to Uzbekistan’s former first family. Indeed, with the new accusations facing Manafort, we can add Kyrgyzstan to the list of Central Asian states playing an outsized role in bribery and offshore allegations swirling in Washington, tossing that much more cold water on the notion that Central Asia is some form of geopolitical backwater.

Manafort’s Central Asian ties appear to now extend even further than Kyrgyzstan. Documents seen by the AP show that Manafort, in the mid-2000s, also proposed extending his work to Uzbekistan and Tajikistan to “undercut anti-Russian figures through political campaigns, nonprofit front groups and media operations.”

The allegations surrounding Manafort allow us to dive that much further back into the murky world of shell corporations and offshore banking, in which Central Asia, and the broader Asia-Pacific, continue to play an unappreciated role. Unsurprisingly, the company tied to Manafort and Bishkek alike — the Belize-based Neocom Systems Limited, established in 2005 and currently listed as inactive — shares the same address as several of the shell companies named in the 2016 Panama Papers leak, as CNN reported.

All told, nearly a year after the Panama Papers leak, it appears that little has changed in Central Asia’s approach to combatting offshoring. Not that much was expected, of course — but with information pointing to the massive wealth squirreled away by the ruling family in Kazakhstan, there was some hope Astana (and other regimes) would at least pay lip-service to battling offshoring. Eleven months later, however, those pushing transparency have been left predictably disappointed.

Likewise, Manafort’s dealings allow us another glimpse at the United States’ placement as a global offshore haven — a reality that undercuts Washington’s anti-kleptocratic efforts elsewhere, including its campaigns against grand corruption in Central Asia. As Global Shell Games, the most substantial shell company survey to date, found, U.S. incorporation providers performed worse than any other jurisdiction globally in terms of transparency surrounding company formation — worse than even Belize, and far worse than traditional offshore havens like Panama and Jersey. In all, only two Asia-Pacific jurisdictions cracked the top 25 in these transparency rankings: Vietnam and Uzbekistan. China and Indonesia, meanwhile, joined the United States in the bottom 25. For good measure, the United States remains third in the Tax Justice Network’s Financial Secrecy Index, joining other Asia-Pacific jurisdictions like Hong Kong, Japan, Panama, the Marshall Islands, Malaysia, and China in the top 25.

Despite the Panama Papers revelations — and the increasing recognition of the United States as a global leader in shell company formation, as well as other means of offshoring — Washington still, somehow, remains without a beneficial ownership registry. (Much like Belize, in that sense.) The latest revelations surrounding Manafort, Kyrgyzstan, and the American president are likely to do little to spur a beneficial ownership registry in the United States in their own right, but they do help connect one more thread from offshoring — and power — in the United States to the murky, disconcerting world of Central Asian offshoring, a network that will almost certainly continue until Washington wakes up to the methods of financial secrecy swirling its own backyard.

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