This article is about the term for systematic corruption and thievery by the state or state-sanctioned corruption. For a state with ties to or aid from organized crime syndicates, seeMafia state.
Kleptocracy (fromGreekκλέπτηςkléptēs, "thief", orκλέπτωkléptō, "I steal", and-κρατία-kratía fromκράτοςkrátos, "power, rule"), also referred to asthievocracy,[1][2] is agovernment whosecorrupt leaders (kleptocrats) usepolitical power to expropriate the wealth of the people and land they govern, typically byembezzling ormisappropriating government funds at the expense of the wider population.[3][4] One feature of political-based socioeconomic thievery is that there is often no public announcement explaining or apologizing for misappropriations, nor any legal charges or punishment levied against the offenders.[5]
Kleptocracy is different fromplutocracy (rule by the richest) andoligarchy (rule by a small elite). In a kleptocracy, corrupt politicians enrich themselves secretly outside therule of law, throughkickbacks,bribes, and special favors from lobbyists and corporations, or they simply direct state funds to themselvesand their associates. Also, kleptocrats often export much of their profits to foreign nations in anticipation of losing power.[6]
According to theOxford English Dictionary, the first use in English occurs in the publicationIndicator of 1819: "Titular ornaments, common to Spanish kleptocracy."[7]
Kleptocratic rulers often treat their country'streasury as a source of personal wealth, spending funds onluxury goods and extravagances as they see fit. Many kleptocratic rulers secretly transfer public funds intohidden personal accounts in foreign countries to provide for themselves if removed from power.[6][2]
According to L.K. Samuels, one reason governmental bodies subscribe to theft-prone policies is to lay the groundwork for the socialization of labor and property, thus permitting kleptocrats to make a populace "subservient to an institutionalized authority."[8] JournalistPaul Greenberg, in writing in 1989 against the idea of the United States sending substantial foreign aid toPoland, argued that the country was emerging from "40 years of a Communist thievocracy that has obliterated not only economic progress but also the idea of a modern economy."[9][full citation needed]
Contemporary studies have identified 21st-century kleptocracy as a globalfinancial system based onmoney laundering, which "depends on the services of the world's largest banks and expert financial professionals".[10] TheInternational Monetary Fund has suggested it could be a consensus of estimates, that money laundering made up 2–5 percent of the global economy in 1998.[11][12][13] Kleptocrats engage inmoney laundering to obscure the corrupt origins of their wealth and safeguard it from domestic threats such as economic instability and predatory kleptocratic rivals. They are then able to secure this wealth in assets and investments within more stablejurisdictions, where it can then be stored for personal use, returned to the country of origin to support the kleptocrat's domestic activities, or deployed elsewhere to protect and project the regime's interests overseas.[14]
Kleptocrats abuse the freedoms found in Western countries by transferring funds out of a kleptocracy and intoWestern jurisdictions for money laundering and asset security. Since 2011, more than $1 trillion has leftdeveloping countries annually in illicit financial outflows. A 2016 study found that $12 trillion had been siphoned out of the kleptocracies ofRussia,China, and developing economies.[15] Westernprofessional services providers are taken advantage of by kleptocratic Russians and Chinese, exploiting legal and financial loopholes in the West to facilitate transnational money laundering.[16][17] The kleptocratic financial system typically comprises four steps according to one opinion.[18]
First, kleptocrats or those operating on their behalf createanonymous shell companies to conceal the origins and ownership of the funds. Multiple interlocking networks of anonymous shell companies may be created andnominee directors appointed to further conceal the kleptocrat as the ultimatebeneficial owner of the funds.[19]
Second, kleptocrats violate Western laws when they illegally transfer funds into the Western financial system.
Third, financial transactions conducted by the kleptocrat in a Western country complete the integration of the funds. Once a kleptocrat has purchased an asset this can then be resold, providing a defensible albeit illegal origin of the funds. This is known as money laundering and is illegal throughout the Western world. Research has shown that the purchase ofluxury real estate is a particularly favored method, especially by Chinese and Russian kleptocrats.[20][21]
Fourth, according to a British newspaper,[which?] kleptocrats may use their illegally laundered funds to engage in reputation laundering, hiringpublic relations firms to present a positive public image andlawyers to suppress journalistic scrutiny of their political connections and the origins of their wealth.[22][23]
In a 2011 forensic study of grand corruption cases, theWorld Bank found the United States was the leading victim of illegal incorporation of entities involved in money laundering schemes.[24] TheDepartment of Treasury estimates that $300 billion is laundered annually in the United States in violation of US law.[25]
This kleptocratic financial system flourishes in theUnited States by illegally abusing the United States' liberal economic structure for two reasons.
First, the United States does not have a beneficial ownership registry, and kleptocrats take advantage of this privacy benefit.[26]
Second, kleptocrats take advantage of incorporation agents, lawyers, and realtors to unknowingly launder their money.
Currently,[when?] there are only around 1,200 money laundering convictions per year in the United States and money launderers face a less than five percent chance of conviction.[29]Raymond Baker estimates that law enforcement fails in 99.9% of cases to detect money laundering by kleptocrats and other financial criminals.[30]
Other forms of a thievery society that can induce a "culture of systematic fraud" have been described as "political and corporate kleptomania".[35] In this case, the plunder and looting enriches not only high government officials, but a narrow class ofplutocrats, who usually represent wealthy individuals and families who have amassed great assets through the usage of political favoritism, special interest legislation, monopolies, special tax breaks, state intervention, subsidies or outright graft. This type of economic system of political spoils is sometimes referred to ascrony capitalism.[36][37]
The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the welfare of the state'seconomy, political affairs, andcivil rights. Kleptocratic governance typically ruins prospects of foreign investment and drastically weakens the domestic market and cross-border trade. As kleptocracies often embezzle money from their citizens by misusing funds derived fromtax payments, or engage heavily in money laundering schemes, they tend to heavily degrade the quality of life for citizens.[38]
In addition, the money that kleptocrats steal is diverted from funds earmarked for public amenities such as the building of hospitals, schools, roads, parks – having further adverse effects on the quality of life of citizens.[39] The informal oligarchy that results from a kleptocratic elite subverts democracy (or any other political format).[40]
In early 2004, the German anti-corruptionNGOTransparency International released a list of ten self-enriching leaders in the two decades previous to the report. Transparency International acknowledged that they were "not necessarily the 10 most corrupt leaders" and noted that "very little is known about the amounts actually embezzled".[41]
In descending order of amount allegedly stolen (converted toUnited States dollars), they were:
Azerbaijan has been described as a kleptocracy for its use of oil revenue to enrich an oligarch class, including that of the ruling Aliyev dynasty.[46][47]
^Samuels, L.K. (2019)Killing History: The False Left-Right Political Spectrum, Freeland Press, p. 484.[full citation needed]
^Greenberg, Paul (November 12, 1989) "Invasion: Here Come the Debtors," Congressional Record: Extensions of Remarks, p. 31757,[full citation needed] as reported in theWashington Times, Nov. 20, 1989.[full citation needed]
^Sharman, J. C. (2017).The Despot's Guide to Wealth Management: On the International Campaign against Grand Corruption. Ithaca, New York: Cornell University Press. p. 1.ISBN9781501705519.
^"The Puppet Masters". Stolen Asset Recovery Initiative, The World Bank. October 24, 2011. Archived fromthe original on November 21, 2018. RetrievedJuly 19, 2018.
^Karim, Wazir Johan (2020).The Global Nexus: Political Economies, Connectivity, and the Social Sciences. London and Hackensack, New Jersey: World Scientific Publishing. pp. 170–171.[ISBN missing]
^"Crude Intentions: How Oil Corruption Contaminates the World".Oxford Academic. p. 132. RetrievedJanuary 23, 2024.During the price boom, Azerbaijan's annual oil revenues rose from $5.5 billion in 2007 to $23 billion in 2011. Fueled by these riches, Aliyev used government contracts, loans, and other channels to enrich his allies and build a robust and pervasive kleptocracy. These money flows did relatively little to develop the country's nonoil economy, and after the boom the country faced a major recession as a result.Years before his sons began shopping for jets, Heydarov worked as the head of Azerbaijan's customs agency, where—according to US diplomats— he built his influence and benefited President Aliyev through such means as creating import monopolies for certain products and allocating them to business people loyal to the regime.
^Rankin, Jennifer (February 1, 2017)."Council of Europe urged to investigate Azerbaijan bribery allegations".The Guardian.ISSN0261-3077. RetrievedJanuary 24, 2024.The parliamentary assembly of the Council of Europe (Pace) has been accused of turning a blind eye to corruption, after allegations that a former senior member was paid €2.39m (£2.06m) to engineer votes to protect the kleptocratic regime of Azerbaijan's president, Ilham Aliyev.
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