MIAMI, FL — Over the past few years, according to allegations from American investigators, a billion-dollar money laundering ring has stretched from Panama to Hong Kong to Malta, roping in lawyers and realtors and parking millions of dollars in luxury real estate properties sprawling across southern Florida. The allegations about the ring, which first came to light last year via a federal complaint out of U.S. Homeland Security Investigations, have now seen American investigators reportedly accuse the family members of a foreign leader of pillaging their populations. And as the Miami Herald has noted, U.S. authorities are now investigating that foreign leader directly.
But the alleged scheme didn’t originate in a right-wing thugocracy like Russia, or an oil-soaked dictatorship like Kazakhstan or Azerbaijan. It didn’t begin in a totalitarian nightmare like North Korea, or a theocratic stranglehold like Iran.
Rather, as journalists and investigators and witnesses alike have all uncovered, the alleged money laundering ring began in a country that claims to be socialist: Venezuela.
Venezuela, of course, has become known for any number of human rights depredations over the past few years, from mass starvation and hyperinflation to fraudulent elections propelling the aforementioned corrupt foreign leader Nicolas Maduro to the nation’s highest office, and leaving the country’s democracy on life-support. And now, with the United States, Canada, Germany, France, and a number of other democracies announcing that they will recognize the Venezuelan opposition as the official leaders of the country, the country has become the latest hot-spot pitting liberal democracies against dictatorships and illiberal oligarchies.
But even with the news of Maduro’s autocracy in the news, Caracas has somehow largely escaped the associations we have with modern kleptocracies. Maduro, despite overseeing the implosion of Venezuela’s democracy, isn’t painted as a rapacious strongman like Russia’s Vladimir Putin, or an oleaginous dictator like Azerbaijan’s Ilham Aliyev. The modern conception of a kleptocracy — as an outright dictatorship, as a haven for the elite to steal with impunity — still hasn’t attached itself to Venezuela.
But that should change, and the quicker the better. The allegations about the billion-dollar scheme — reaching at least $1.2 billion, to be specific — could be a perfect case-in-point for lumping Venezuela in with regimes like those in Equatorial Guinea or Kazakhstan as kleptocracies extraordinaire.
According to American prosecutors, Venezuelan officials raided the coffers of PDVSA, Venezuela’s state-run oil firm, swiping millions of dollars from the company’s holdings. Those officials then used and abused the country’s official foreign-exchange rates to spiral that money into the billions — with the country’s population none the wiser.
Of course, that money, as with the ill-gotten gains in other dictatorships, couldn’t stay local. It had to be moved to safer harbors. Thankfully, a global laundromat was more than happy to help. As U.S. authorities have described, Hong Kong shell companies and Maltese investment firms, working alongside nationals from Portugal and Colombia, helped clean the money and ready it for investments elsewhere.
And Venezuelan officials didn’t have to look far: As American investigators detailed, South Florida, especially its real estate sector, was more than happy to soak up that stolen boodle, inflating real estate costs and putting a big fat smile on the faces of luxury realtors. As Oliver Bullough detailed in “Moneyland,” his recent dive into the world of modern kleptocracy, Venezuela has been the biggest source of foreign funds in Miami’s property scene for years, outpacing Russia, China, and Saudi Arabia alike.
Things would have stayed that way, too, if American prosecutors hadn’t gotten involved. But thanks to U.S. Homeland Security Investigations and the Department of Justice, we now know all about these allegations of mass thievery — and about how modern kleptocracy transcends political dispositions, and takes advantage of industries like the U.S. luxury real estate sector to succeed.
Thus far, a number of Venezuelan officials and others have been identified in the DOJ’s formal complaint. Numerous Florida properties have already been frozen as part of this Venezuelan network with tens of millions of dollars (and potentially far more) already seized from financial institutions. Just last month, American authorities linked another seven luxury Manhattan condos to a Venezuelan media mogul close to Maduro. One banker, a German national, has already been sentenced to 10 years in prison after pleading guilty to commit money laundering in Miami as part of the ring; another American financier has been arrested and is awaiting extradition from Sicily.
But the formal U.S. complaint also lays out a trio of others who were key players in the ring: the three step-sons of Maduro, who allegedly helped plunder hundreds of millions of dollars. In the time since the allegations first came out, the United States has placed sanctions on Maduro’s wife directly — and as Bloomberg recently reported, the United States is investigating Maduro himself for his role. The Organized Crime and Corruption Reporting Project also revealed last month that its Bulgarian partner had identified a Bulgarian lawyer “as the owner of a bank account allegedly used to launder hundreds of millions of dirty dollars on behalf of” Maduro.
Of course, it’s not just Maduro and his step-sons. Venezuela’s former treasurer Alejandro Andrade, for instance, also pleaded guilty in the United States to taking a staggering $1 billion in bribes — and watched his Florida mansion, horses, and luxury vehicles all seized as a result. (If you have hundreds of thousands of dollars burning holes in your pocket, you can bid on some of the Florida-based showhorses purchased by Andrade, who also served as the bodyguard of Maduro’s predecessor, Hugo Chavez.)
All of these guilty pleas and seized assets paint a clear picture. Maduro’s regime, as these allegations lay out, illustrates how modern kleptocracy — looting a country, using shell companies to move the money, and parking it in Miami high-rises — is not simply a right-wing phenomenon. There’s a reason, after all, that the IMF identified Venezuela as the country with the second-highest rate of wealth stashed offshore, as a percent of GDP, of any country in the world, beating out even Russia.
Along the way, the revelations have highlighted the key role the United States plays in these kleptocratic systems — as well as the kind of leverage the United States maintains over these networks. Just this week, the House Financial Services Committee will hold a hearing to discuss some of the mechanisms for cleaning up the same systems that have allowed Venezuela’s elite — along with those in dictatorships across the world — to launder their loot in the United States.
Kleptocracy-watchers! House Financial Services Committee will consider the following on Wednesday:
1) Introduction of a US beneficial ownership register
2) Big changes to the US AML system
3) Whistleblower rewards in kleptocracy cases
Read bills here: https://t.co/7rYMMg1YF1
— Nate Sibley (@NateSibley) March 11, 2019
The United States, of course, remains one of the premier destinations for crooks and criminals looking to open anonymous shell companies, in states like Delaware, Wyoming, and Nevada. Many of those anonymous, untraceable companies then turn around and launder kleptocratic cash through American real estate. While there have been some recent improvements in the transparency of the American real estate sector, the Unites States still remains a massive sieve through which dirty cash flows — and a massive blight on efforts to unwind the types of kleptocratic networks ransacking places like Venezuela.
Or put another way: While Maduro and his cronies stripped Venezuela’s bank accounts bare, America was overjoyed to partake in the profit-taking bonanza.
Now, of course, Western democracies like the United States and Canada are barreling toward an inflection point with Maduro and his cronies. It’s unclear how, or when, the confrontation will end.
But it’s clear that cracking down on these massive kleptocratic networks presents a separate means of easing tensions. Not only does it allow the United States to seize these potentially pilfered profits — and clean up the U.S. real estate industry in the process — but it squeezes the Maduro regime that much more. The United States doesn’t need to invade the country. It just needs to target the bank accounts, Miami properties, and kleptocratic networks exploited by these corrupt Venezuelan officials — all of whom have shown how modern kleptocracy works, and how modern kleptocracy crosses the political spectrum.