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Tuesday, January 23, 2024

Grey zone – Zimbabwe

 

A copy of a 10 billion Zimbabwean dollar note on a mug in Victoria Falls (Paul Cochrane)


I am finally publishing a Money Laundering Bulletin (MLB) article on Zimbabwe that came out in 2022 (behind a paywall) that I have held off uploading as wanted to go in and out of Zim without any problems (I did so over Christmas and New Year). Why the hesitancy? The evening before interviewing a former politician off-the-record I unusually did not turn on my VPN, then spent a few hours online reading about my source and financial crime in Zim. The next morning my non-encrypted account, Gmail, informed me that there had been an attempt to steal my password, the activity was indicative of a government, and that “this happens to less than 0.1% of all Gmail users”. Coincidence?


Grey zone – Zimbabwe

Money Laundering Bulletin, 6 August 2022 

Rich in natural resources but yet emerging from decades of economic mismanagement, Zimbabwe has turned a corner in tackling money laundering, according to the Financial Action Task Force. Paul Cochrane, in Pietermaritzburg (South Africa), finds not everyone so convinced.

Zimbabwe was taken off the Financial Action Task Force's (FATF) grey list in March (2022), but major issues still abound claim critics of the move - from corruption to large scale gold smuggling - while a controversial law on NGOs may be misused to go after political opponents, they argue.

Inflation and corruption 

The southern African country is facing chronic economic problems, even though the International Monetary Fund (IMF) has (so far) been predicting economic growth of 3% for this year (2022). Annual inflation is running at 192% (as per July 2022). Also, the resurrected Zimbabwean dollar currency has lost 99.3% of its value against the US dollar since 2019. And even Zimbabwean government estimates put gold smuggling at US$1.8 billion a year, draining revenue from one of the country’s key natural resources. Corruption is widespread, with allegations made by Zimbabwean civil society organisations that the country’s political and military elite are linked to black market sales of gold and diamonds, another key domestic resource. The country ranked 157th out of 180 jurisdictions in the 2021 Transparency International Corruption Perceptions Index.

Performance measurement

In early 2019, FATF and the Eastern and Southern Africa Anti-money Laundering Group (ESSAMLG) issued a mutual evaluation report (MER) follow-up that ruled Zimbabwe non-compliant with six FATF Recommendations and partially compliant with 14. (1)

It therefore came as no surprise that Zimbabwe was placed on the FATF grey-list in October 2019 for strategic deficiencies in its anti-money laundering (AML) and countering the financing of terrorism (CFT) regime. 

Perhaps surprising, though, was that FATF removed Zimbabwe from its grey list less than three years later, observing that since its last MER report, “Zimbabwe has taken initial steps towards improving its AML/CFT regime, including by establishing a legal framework to collect beneficial ownership information of legal person and arrangements.” That came through a new Companies and Other Business Entities Act covering beneficial ownership issues (2), mandating beneficial shareholding disclosure to the government's Companies Registry. 

The southern African country also issued a second National Risk Assessment report in 2020. In the same year it released a Strategic Plan for fighting money laundering, terror financing and proliferation financing, which included a government commitment over the following five years to proactively identify ML/TF threats and implement risk-based approaches to AML and CFT.

Zimbabwe had previously, in 2018, amended the national Money Laundering and Proceeds of Crime Act to be in line with FATF recommendations: the judiciary are now also empowered to issue unexplained wealth orders on property worth at least US$10,000 (5).

Too soon to tell...

So, there have been legislative reforms, but with FATF’s new policy focusing more on effectiveness than technical compliance with its standards, reflected in the grey-listing of the United Arab Emirates (UAE), Zimbabwe’s removal from the ‘increased monitoring’ list this March (2022) has raised some eyebrows. “I was surprised it was taken off so quickly because it seems too fast to identify the effectual changes, as opposed to bringing in lawyers to update the laws. Our investigators are currently working on a project that calls into question the level of compliance with FATF standards,” said Denisse Rudich, a senior policy advisor at The Sentry, a US-based investigative and policy organisation, told MLB.

However, Dr Prosper Maguchu, project manager at the Centre for International Cooperation (CIS), at Vrije University, in Amsterdam, the Netherlands, and the founder of the Zimbabwean AML Institute (ZAMLI), was pleased the country was removed from the grey-list: “If there were sanctions or a blacklisting, Zimbabwe would truly become a pariah state and the government would use it to their advantage, to shroud things in secrecy and be more unaccountable,” he said, “But there is there is still a long way to go. People are not being trained at financial institutions, nor designated professionals. There is still a need for a culture of compliance.”

Roselyn Hanzi, Executive Director of Zimbabwe Lawyers for Human Rights (ZLHR), said that although Zimbabwe is off the grey list more work still needs to be done to curb ML. “If we look at FATF’s Mutual Evaluation Reports, so many areas are supposed to be addressed, but it is not being done properly. The government is pushing the implementation of (FATF) Recommendations that it can manipulate to ensure their political survival,” she said.A general election will be held in Zimbabwe next year (2023). 

Legal risk

A case in point is the 2016 MER finding that of non-compliance with FATF Recommendation 8, on combatting the abuse of non-profit organisations: a proposed law, the Private Voluntary Organisations (PVOs) Amendment Bill, (7) has been criticised for not complying with international human rights standards, with the ZLHR expressing its concerns to FATF. (8)

Hanzi warned that if the law passes “it may target certain civil society organisations and political leaders with charges of money laundering.” Her ZLHR colleague Fiona Iliff said: “The Bill will have unintended consequences of severely restricting the operating space of civil society. This will affect civil society's oversight role in matters of economic governance and ensuring accountability for illicit financial flows. It is contrary to FATF Recommendation 8 which calls for a targeted and proportionate risk-based approach, in consultation with civil society, to identifying any organisations at high risk of money laundering or terrorism financing and imposing any additional measures on them.” FATF did not respond to MLB’s questions about the controversial bill.

Top shot

The government may have incentives to restrict private and voluntary organisations. The Sentry, based in Washington DC and well insulated from Zimbabwean regulation, released two detailed reports in 2021 on financial crime in Zimbabwe that were less than complimentary of the current Zanu-PF ruling party. One paper concerned “possible unlawful payments” from the Reserve Bank of Zimbabwe (the central bank) to companies controlled by Kudakwashe Tagwirei, an advisor to President Emmerson Mnangagwa, involved in a Command Agriculture government spending programme. (9) The second report focused on Tagwirei’s offshore business empire, with the billionaire operating more than 40 companies in the oil, mining, banking, logistics, transportation, and import/export sectors. (10)

The report prompted an investigation in Mauritius and a reshuffle of the leadership team of one of the companies mentioned, said The Sentry, while Tagwirei was sanctioned by the USA in 2020, and by the UK in 2021. “The operations of Tagwirei’s network are emblematic of larger, structural problems in Zimbabwe. A select group of politicians, the military, and businesspeople dominate government decision-making with little oversight or scrutiny,” said John Prendergast, co-founder of The Sentry, in a media statement.

Greenback to the fore

A major obstacle to curbing money laundering and financial crime is ongoing use of the US dollar in the country. In 2009, amid hyperinflation and the issuance of a 100 trillion Zimbabwean dollar note, foreign currencies were allowed as legal tender. In 2019, the Zimbabwean dollar was reintroduced to end dollarisation. However, the currency has since collapsed against amidst steep inflation. As a result, the informal foreign currency market is booming, with Zimbabweans preferring to use, and keep their savings, in US dollars, said Maguchu.

Just 17% of Zimbabweans receive wages or government transfers in a bank account, according to the Global Partnership for Financial Inclusion. “Zimbabweans don’t trust the government to put their money in US dollar [bank] accounts as the rules keep changing,” said Maguchu. So, cash is king. Informal dollarisation “means there’s a need to convert money on the black market, which is done in a similar way to the black-market peso exchanges in South America. Zimbabweans are selling fresh US$100 bills as most of the dollars are worn out and people are making a living fixing damaged notes. People are literally washing money,” he said.

A former Zimbabwe politician that requested anonymity said few controls were in place outside of banks to control the flow of dollars. “I can withdraw US$1,000 a day or US$10,000 a week from an ATM, but where does that cash come from? The official market is US$35 million a day, but the informal trade in US dollars must be 10 or 20 times the size of the formal sector,” he said. Foreign exchange businesses are operating “without controls,” he added. “You can move unlimited amounts of cash anywhere in the world.”


‘Mosi-oa-Tunya’ (‘The Smoke that Thunders’) / Victoria Falls (Paul Cochrane)

Drugs, precious metals and minerals

The former politician said the country has become a “paradise for people to move dirty money,” being a drug trafficking and money laundering route from Mozambique to South Africa, and a conduit for the smuggling of gold and diamonds. Zimbabwe generates around 75% of its US$6.3 billion’s worth of annual exports from minerals and precious metals such as gold, platinum and nickel, according to Reserve Bank of Zimbabwe (RBZ) figures. Gold exports were US$1.7 billion in 2021. The country’s sole buyer and marketer of gold - Fidelity Printers and Refiners (FPR) - received some 29.6 tonnes in 2021.

However, an estimated 3 million tonnes of artisanal gold, some US$157 million a month, is being smuggled out of the country, according to 2022 report ‘Zimbabwe’s disappearing gold’ by the Harare-based Centre for Natural Resources Governance (CNRG). The report noted that gold dealers submit less than 30% of Zimbabwean gold output to the FPR, “while the rest finds its way to South Africa, the UAE, and other Asian countries such as China and India”. (7) The government estimates between 30-34 tonnes of gold is smuggled to South Africa a year, equivalent to US$1.8 billion.

The CNRG report alleges: “Gold dealers, who are protected by ruling Zanu-PF party officials, use state apparatus to capture and control gold-rich areas throughout the country.”

There was an illustration, in 2020, when the president of the Zimbabwe Miners Association, Henrietta Rushwaya, was arrested at Harare airport for allegedly trying to smuggle six kilogrammes of gold to Dubai. She is still in office, having been reinstated in 2021.

To make this trade less controllable, Zimbabwe is a hub for gold both locally-sourced and from elsewhere in the continent. “At least 100 tonnes is being traded annually, around two tonnes a week, and 30 percent of that is from places like the Congo being smuggled south and legitimised here. There are gold transport flights to Dubai, with one private jet flying on a weekly basis with several hundred kilos of gold on each trip,” said the former politician.

As with AML in general, however, the Zimbabwean government has started to take action against gold smuggling and to clean-up the supply chain, having been warned of serious consequences, in this case by Dubai, warning that Zimbabwe could be banned from its valuable bullion market, said the former politician.

But, it would appear one step forward, two steps back: in July (2022), the Zimbabwe central bank launched a gold coin that can be used as domestic currency in a move to curb rampant inflation. Called the ‘Mosi-oa-Tunya’, which means Victoria Falls in northern Zimbabwe’s Tonga language (literally, and rather more poetically – ‘The Smoke that Thunders’). While buyers will officially only be able to trade coins for cash after 180 days, critics believe it could be misused. “The gold coin is yet another way to launder money,” said Maguchu.

Disappearing diamonds

Moreover, when it comes to the country’s US$800 million-a-year diamond trade, the sector is “totally opaque,” said the former politician. “We know US$25 billion’s worth of diamonds essentially vanished over the last decade, since 2012.”

The military allegedly controls nearly half of the output, he claimed. “It is shared among senior officers and keeps the army loyal to the powers that be. Formal salaries are low, and the lifestyle of these guys bears no resemblance to what they earn,” he added.

With a general election looming, illicit cash flows may surge. “People will try to get money outside before the elections as maybe the opposition will come to power. Any political event in Zimbabwe is connected to financial crime,” said Maguchu.

Zimbabwe’s FIU did not respond to MLB’s interview requests. 

NOTES:

1)https://www.fatf-gafi.org/media/fatf/documents/reports/fur/ESAAMLG-Follow-Up%20Report-Zimbabwe-2019.pdf

2) SI 246 of 2018 (Amendment of Money Laundering and Proceeds of Crime Act and Exchange Control Act) Regulations.

3) https://www.fiu.co.zw/wp-content/uploads/2020/11/Consol-NRA-2020.pdf

4) https://www.fiu.co.zw/wp-content/uploads/2020/11/Strategic-Policy-2020-2025-Consol-Final-Feb-2020.pdf

5) https://www.fiu.co.zw/wp-content/uploads/2019/06/MLPC-Act-amended-to-July-2019.pdf)

6) [Chapter 24:31] of 2019

http://www.esaamlg.org/userfiles/Zimbabwe_detailed_report.pdf

7) Private Voluntary Organisations Amendment Bill (Chapter 17:05) gazetted on November 5, 2021.

8) https://www.zlhr.org.zw/wp-content/uploads/2021/11/ZLHR-Position-Paper-on-Amendment-of-Private-Voluntary-Organisations-Act-PVO-in-Order-to-Comply-With-Recommendations-Made-by-Financial-Action-Taskforce-FATF.pdf

9) Legal Tender? The Role of Sakunda and the Reserve Bank of Zimbabwe in Command Agriculture.

 https://thesentry.org/reports/zimbabwe-command-agriculture/

10) Shadows and Shell Games: Uncovering an Offshore Business Empire in Zimbabwe. https://thesentry.org/reports/shadows-shell-games/

11) Zimbabwe’s disappearing gold. The case of Mazowe and Penhalonga. https://www.cnrgzim.org/_files/ugd/e33f9c_c5efdb731bef475fbab6c05672b37fdc.pdf?index=true

Tuesday, November 14, 2023

Delist drive – South Africa’s anti-money laundering regime

 Money Laundering Bulletin, 6 September, 2023

  


South Africa needs to enhance the capacity of its its financial crime units, including the ‘Hawks,’ which targets organised crime, economic crime and corruption. (Paul Cochrane)

 

Unimpressed by the slow rate of improvement in South Africa’s anti-money laundering regime following its mutual evaluation in 2021, the Financial Action Task Force sought to force the pace in February this year [2023], putting the country under ‘increased monitoring’, so on the ‘grey list’. Paul Cochrane, in Pietermaritzburg, checks on the response across the months since.

South Africa, added to FATF’s grey list this February (2023) (1), is overhauling its AML regime to escape this negative assessment and better address financial crime and terrorist financing in the continent's largest economy. The country’s financial intelligence unit (FIU), the Financial Intelligence Centre (FIC), is confident about progress and optimistic” it will be removed from the Financial Action Task Force (FATF) grey-list before its next mutual evaluation review, expected next year (2024).

Action list

The last mutual evaluation report (MER), in 2021, found South Africa compliant with three of FATF’s 40 recommendations, largely compliant with 17 recommendations, partially compliant with 15, and non-compliant with five recommendations, on targeted financial sanctions – terrorism & terrorist financing; politically exposed persons (PEPs); non-profit organisations (NPOs); new technologies; and reliance on third parties.

While FATF acknowledged progress in addressing shortcomings in its February (2023) note on the grey-listing, eight areas of strategic deficiency still required work; they included demonstrating a sustained increase in outbound mutual legal assistance requests; improving risk-based supervision of designated non-financial businesses and professions (DNFBPs); ensuring access to accurate and up-to-date beneficial ownership (BO) information; sustained increase in law enforcement agencies’ requests for AML/CTF financial intelligence; a sustained increase in investigations and prosecutions of serious and complex money laundering and terrorist financing (TF); enhancing identification, seizure and confiscation of criminal proceeds; and effective implementation of targeted financial sanctions.

I am optimistic we will exit the grey list, and I believe that as a country we now understand what needs to be done,” said Xolisile Khanyile, FIC director (until 1 September 2023), and current chair of the Egmont Group, to MLB: “We are not doing this just to pass a FATF test, but to ensure we have systems that are effective, and a regime that is really working and is functional.”

The Prudential Authority (supervisor of financial institutions) as well as the Financial Surveillance and National Payment System departments of the South African Reserve Bank (SARB, the central bank) are responsible for overall AML/CFT and counter proliferation finance (CPF) supervision of banks, life insurers, mutual banks, co-operative banks, authorised dealers with limited authority, and clearing system participants. According to the SARB, “FATF has acknowledged the Prudential Authority has made the most progress in terms of the application of a risk-based approach to supervision.” (3)

Legislative groundwork

In the wake of the MER, and in a move to prevent being grey-listed, the South African cabinet, at the end of 2022, adopted a national strategy on AML/CFT, and passed the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022. (4) Five Acts were thereby changed – the Trust Property Control Act (1988), Nonprofit Organisations Act (1997), Financial Intelligence Centre Act (2001), Companies Act (2008), Financial Sector Regulation Act (2017) – primarily to introduce beneficial ownership recording and disclosure requirements. The mandate of the FIC was also expanded to enable more effective monitoring and detection: a State Forensic Capability (SFC) unit was created, to specialise in forensic accounting and financial analysis, and assist law enforcement in complex money laundering cases. It has also been given more comprehensive powers to impose fines, such as on DNFBPs for not filing risk and compliance returns to the FIC.

FIU – a broader remit

The FIC has been allocated “substantially more funding,” said Khanyile, to achieve its expanded role, which includes more sectors registering with the body, such as trust and company service providers, credit providers, estate agents, attorneys, trust advocates, high-value goods dealers, money and value transfer services providers and gambling entities.

The FIC has been allocated ZAR265.3 million (US$13.8 million) over the next three years. On the supervisory side, there are 42 new positions in the FIC, half to be appointed this year and the remainder in 2024, said Christopher Malan, executive manager of compliance and prevention at the FIC: “We have the funding and the recruitment programme, and largely on our way to get people in, but we are finding there’s a tightening in the market. We are not going to be poaching from our peers, so we have to find a way to bring people in,” from the private and public sector.

Talent and workload

Steven Powell, executive, forensics, at law firm ENSafrica, in Cape Town, also pointed out the shortfall in skills: “A problem I foresee is that we don’t have enough expertise in the country to fill all the gaps, such as forensic experts and forensic accountants,” he said.

A particular challenge for the FIC, set by a 2022 government order, is the expansion of obliged entities to include high-value dealers (HVDs), especially in precious metals in a country with generous endowments of gold and platinum. The rule says dealers are required to register with the FIC, develop a risk management and compliance programme (RMCP), implement customer identification and verification processes, and conduct customer due diligence, appoint a compliance officer, and regularly train employees on FIC compliance. The order also set a transaction reporting threshold of ZAR100,000 (US$5,380). (5)

The number of accountable institutions has gone off the charts. It’s a challenge as smaller businesses don’t have the budget or people for a compliance programme, while the ZAR100,000 threshold is quite low,” said Powell.

Beneficial owners – obliged to register

Meanwhile, the Companies and Intellectual Property Commission has set up a beneficial ownership register, with companies having until 1 October (2023) to file BO information.

It is quite a critical issue as, if you look at United Nations Convention Against Corruption (UNCAC), we are also found to not be compliant with the standards on beneficial ownership,” said Khanyile.

But the creation of a BO register brings its own challenges: “The proof will be in the pudding: once we collect the information, are we able to sanction people that are not giving the correct beneficial ownership transparency information on companies and trustees?” asked the FIC director.

Pieter Smit, executive manager legal and policy at the FIC, who has also been serving as its interim director since 1 September 2023, noted that setting up beneficial ownership registries has taken other countries years, while South Africa will have to do so within 24 months – although he is hopeful of success: “There is confidence that we can achieve the timelines for the FATF review,” he said.

Lawyers now under arms-length supervisor

To improve supervision, the legal profession’s AML/CFT regulation has moved from being under the country’s Legal Practice Council (LPC) to the FIC. “The legal fraternity has seen this change already, with the FIC having started inspections, and checking to make sure law firms have RMCPs and compliance officers in place. This is a good thing,” said Powell.

He added that other positive developments were underway, such as enhancing the capacity of the South African Police Services' Directorate for Priority Crime Investigations (DCPI), known as the ‘Hawks,’ which targets organised crime, economic crime and corruption. More generally, on SA AML/CFT, while there is increased private sector participation, and support from the national President Cyril Ramaphosa, “the jury is still out as to when we will see the fruits of the improvement,” Powell noted.

Michael Marchant, head of investigations at Open Secrets, a Cape Town-based non-profit investigating economic crime linked to human rights violations, said the biggest question is the capacity of government bodies to tackle serious crimes in the wake of the hollowing out of investigative organisations over the past two decades, particularly under the presidency of Jacob Zuma (2009 to 2018).

In 2008, for instance, the Directorate of Special Operations, commonly known as the Scorpions, a specialised unit of the National Prosecuting Authority (NPA), was dissolved. High profile cases related to state capture – where private interests benefitted from government contracts and corruption worth an estimated ZAR1.5 trillion (US$101 billion) during Zuma’s second term (2024-18), as estimated by investigative news outlet Daily Maverick) – have languished in courts, as a result, claimed Marchant. (6)

Prosecutor redux

Marchant is hopeful that a formalised NPA unit, the Investigative Directorate Against Corruption, proposed this year in the National Prosecuting Authority Amendment Bill, will be enacted, and speed up major corruption cases (7). It will allow for a slew of new resources, similar to what the Scorpions was before it was disbanded. If that kind of unit can go around attracting the proper skilled individuals in the field, and there’s a better resourced FIC, then we can really start to see progress and successful prosecutions. However, the Investigative Directorate will have to be fully independent and shielded from political interference,” said Marchant.

Target switch

Khanyile said the focus must shift towards tackling complex crime including third party money laundering, trade-based money laundering and broader money laundering cases. “The work around money laundering investigations in complex organised crime cases and high-risk predicate offences is probably the longest timeline we have to work with. We are starting from a place where capacity needs to be built and then deliver the results we are looking for,” she said. “We need digital transformation and training people on how to do financial investigation, and how to prosecute complex cases. We must ensure the whole value chain is well oiled to deal with these cases and that there is law enforcement collaboration to own these cases so that there can be successful investigations and asset removal.”

Terrorist financing – little to show

South Africa was criticised in the latest MER for its weak record on terrorist financing prosecutions, with FATF noting that only one person had been tried on such charges since its last MER, in 2009.

Smit said there have been non-financing terrorism convictions, adding that cases are “currently underway”. A South Africa Anti-Money Laundering Integrated Task Force (SAMLIT) report on terrorist financing has recently been finalised, but is not being circulated “as it is quite sensitive,” he said. SAMLIT, an expert working group, which includes private sector members, has also released a report on financial flows associated with the illegal wildlife trade. (8)

Offshore and inbound

Cross border AML/CFT is another concern for FATF, which wants to see the FIC improve information sharing with law enforcement in the country and externally. Smit said South Africa is seeking greater international cooperation, particularly in state capture cases as in its request for extradition of the Gupta brothers – closely linked to Zuma - from the United Arab Emirates (UAE) to face trial for money laundering, among other offences.

We are actively following up to make sure requests do not lie on a desk in another jurisdiction. The UAE is not the only one, there are quite a few other jurisdictions,” said Smit. There is also renewed focus on the country being “a haven to launder proceeds of crime generated elsewhere,” he said. “Understanding South Africa as a destination country is also receiving more attention.”

NOTES

1 - https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2023.html 

2 - https://www.fatf-gafi.org/content/dam/fatf-gafi/mer/Mutual-Evaluation-Report-South-Africa.pdf.coredownload.pdf 

3 - https://www.resbank.co.za/content/dam/sarb/publications/media-releases/2023/fatf-feb-2023/The%20SARB%20reaffirms%20its%20commitment%20to%20fight%20AML.CFT.CPF%20following%20the%20FATF%20announcement.pdf 

4 - https://www.treasury.gov.za/legislation/bills/2022/[B18-2022]%20General%20Laws%20(Anti-Money%20Laundering).pdf 

5 - https://static.pmg.org.za/Annexure_A_2022_03_09_Consolidated_Amendments_to_Schedules_for_approva.pdf 

6 - https://www.dailymaverick.co.za/article/2019-03-01-state-capture-wipes-out-third-of-sas-r4-9-trillion-gdp-never-mind-lost-trust-confidence-opportunity/  

7 - https://www.justice.gov.za/legislation/bills/202308-NPA-Bill.pdf 

8 - https://www.fic.gov.za/Documents/SAMLIT_IWT%20Report_November2021.pdf 

Recharge – fresh start for the SFO (Serious Fraud Office)

Fraud Intelligence, 23 September 2023

Some attritional legacy cases shut down in time for the new director’s arrival, as well as an imminent expansion of legal powers long sought, should set the UK Serious Fraud Office on a positive path. Paul Cochrane rings the changes.

Following the decision to close down two high profile investigations into mining majors Rio Tinto and ENRC (1), there have been broad calls for the UK’s Serious Fraud Office (SFO) to be reformed to better tackle complex cases. Proposals range from changing the disclosure regime and the investigative model to better funding and more cooperation with other enforcement agencies. The calls come as Nick Ephgrave, former assistant commissioner for London’s Metropolitan Police, enters post as the SFO’s new director at the end of September (2023). 

Mixed record

The agency has had a checkered 36-year history investigating and prosecuting serious or complex fraud and corruption cases: “The SFO is referred to by (satirical and current affairs news magazine) Private Eye as ‘the Serious Farce Office’, pretty much since its inception. It has a poor reputation as I don’t think there’s confidence that it is addressing serious fraud. That is not to disrespect the excellent people there, but the whole set-up is misconceived,” said Tristram Hicks, also a senior Metropolitan Police officer, financial crime expert and author of ‘The War on Dirty Money’. 

In August (2023), the department dropped a decade-long investigation into Kazakhstan-focused mining company ENRC due to “insufficient admissible evidence to prosecute,” as well as an investigation against Anglo-Australian mining company Rio Tinto over suspected corruption in Guinea, as it was “not in the public interest to proceed with a prosecution in the UK”; the case is ongoing in Australia.

On the flip-side, over the past five years the SFO has secured 29 convictions, eight deferred prosecution agreements worth over GBP1 billion (US$1.24 bn), and recovered more than GBP150 million (US$186.4 mn) in proceeds of crime (2).

External review

But three quashed convictions in the past two years, following the Unaoil bribery investigation, and the collapse of a case against three former executives at security company G4S has prompted heightened calls for reform. (3)

Of particular concern is that these cases followed criticism from the HM Crown Prosecution Service Inspectorate in 2012 carrying out the “first substantive inspection of the SFO” since it was founded, which concluded: “The SFO has some very capable operational staff, but the quality of casework handling, and the capability of the SFO to assure itself of this is significantly undermined by weakness in systems and processes… Recruitment, training and development need to be addressed, and given real impetus from the top... The SFO should review and update its disclosure guidance, design and mandate updated schedule templates, and ensure that all casework staff are trained accordingly.” (4)

A City of London Law Society’s (CLLS) corporate crime and corruption committee report on “The Future of the Serious Fraud Office” (April 2023) indicated that these lessons had not been learned, saying a conclusion can be drawn “that, for various reasons, the prosecution of serious economic crime in the UK is failing”. (5)

Kept short

A key observation in the CLLS report, echoed by other experts, is underfunding since the 2008 financial crisis. “The SFO budget of GBP70 million [US$87 million] is peanuts. The ENRC is alleged to have spent three times that amount on litigation to stop being a subject of a criminal investigation,” said a source familiar with the SFO and the National Crime Agency (NCA) who requested anonymity.

Dr Susan Hawley, executive director of Spotlight on Corruption, a British nonprofit organisation, points out that the SFO “cannot set its own pay levels so it can’t attract the best lawyers. A lot of City lawyers say they can’t afford to work there, when they’ve become addicted to big salaries.”

Furthermore, analysis by Spotlight on Corruption showed that the head of the SFO’s advertised salary is “half that of the head of the Financial Conduct Authority (FCA) and significantly less than the (head of the) NCA,” said Hawley.

A bigger issue is that the SFO’s “failure to win cases” may lead to lawyers “not wanting the SFO on their CV [resume],” she added. The SFO itself has admitted that out of its 500-person staff, it has “permanent vacancies of around 20 to 25 percent, largely back-filled by agency workers.” (6)

Existential question

On top of its perceived failings, ongoing speculation that the SFO could disappear into another agency has been off-putting to potential candidates: “This probably reduces the number of candidates that go forward for the top jobs, but also at any level, as they don’t know if their job will be secure should a merger happen. Working for the SFO should be regarded as one of the greatest jobs in criminal law, tackling the most serious and complex fraud at a time when fraud is so prolific,” said Louise Hodges, chair of CLLS corporate crime and corruption committee.

The CLLS is against merging the SFO into another body, as there is “a place for a well-resourced and well-motivated fraud investigation agency that deals exclusively with the most complex and serious kinds of fraud and corruption,” argued Hodges.

The well-connected source quoted earlier is also against any merger of the SFO with the NCA: “It would be an unmitigated disaster as the NCA is predominantly managed by the police, who are used to dealing with local or regional cases not national or international issues.”

At issue for Hawley is whether law enforcement agencies are working together effectively: “Are these different agencies joined up enough, or permanently in competition mode? Can the SFO for instance access NCA surveillance and use undercover officers for corporate crime work?” she asked.

Lawyers in control?

A further criticism of the SFO has been the use of the ‘Roskill model’, which embeds investigators with prosecutors, led by a case controller. The result has been too much influence for lawyers, the source believes: “They might have knowledge of what the court system is, but they don’t know how to collect evidence. Take the average copper, they spend umpteen months training and two years' probation just walking the beat, so lawyers need training to understand what they’re doing. Over the past 30 years I have known two SFO lawyers that were investigators first, then lawyers, and they’re head and shoulders above the average as they have an understanding of both career paths.”

Hicks pointed out how well regional organised crime units’ asset recovery teams, which bring together multiple agencies and are police-led, have worked in England and Wales. “The SFO can learn from that success, of police-led investigations and the prosecutors acting as a legal advisor,” he said. “Investigators think about getting to the truth whilst prosecutors think about all the legal barriers in the way, so often investigators will be much more audacious with the law than a prosecutor.”

The CLLS’ Hodges thought the Roskill model was a “sensible one”, with the problem being turnover in staff. “It goes back to the need for a well-skilled, motivated and well-resourced work force that stays in situ for a period of time to have continuity in a long running case,” she said.

Disclosure – ever more demanding

The rules of disclosure have proved a thorny issue for the SFO, which has repeatedly called for overhauling current legislation, in part to better handle digital data, with the amount of material for a standard hearing enough to “fill up 22 London buses,” said outgoing director Lisa Osofsky in a 2022 speech.

Under the Criminal Procedure and Investigations Act (CIPA) of 1996, UK prosecutors must share with the defence any material that could assist the defendant or undermine the prosecution (7). The CPIA Code of Practice and the Attorney General’s Guidelines on Disclosure were published in 2020 and updated in 2022 (8).

The government is also reviewing disclosure as part of a new strategy to combat fraud.

And while the SFO has clearly struggled with evidence management in its complex cases, Hodges argued the current disclosure sharing system “has the right balance”. She told FI: “We all appreciate there is an increase in both the volume of data and the different types of data to grapple with, but that doesn’t change the basic premise that the framework we have in place is designed to achieve a fair trial in the adversarial system we have,” she said. “Many of the disclosure failures have been about the way that the disclosure test has been applied, not the test itself.”

Hawley however, said there is a need for a “proper review” of the disclosure system. “There is now quite a broad consensus that some kind of reform or update is necessary, and it is not really fit for the digital age. There are a lot of different views on the table as to what should happen, and all of them carry slight risks,” said Hawley.

Keys to the henhouse

One idea is to give the “keys to the henhouse”, i.e. - to provide all documents to the defence, making it their responsibility to sift through the data.

The source said that the solution, short of changing the CPIA regime itself, was to take a leaf out of Canada’s handbook: “They have addressed complex, predominantly digital, corporate crime by dumping it all onto a secure database and giving keys to the defence team. It means the defence needs to check the evidence. (UK) law firms may say, we don’t get money to do that, well, neither does the SFO.”

Hawley said this approach has raised concerns about commercial sensitivity and privacy issues, “such as whether this creates unfairness for defendants as results could vary according to the quality of legal representation.” Hodges said that 22 buses worth of paper are not presented to the jury: “It is only a fraction of the total volume of material that is gathered by the prosecution which will be provided to the jury in a trial. There is often a mass of material that is available in a complex case but technology is available to sift and sort through vast amounts of data quickly to find what is relevant to a particular individual or issue – it is the availability and transparency of how those technological tools are used that is important to ensure a fair process and trial.”

As for issues over disclosure in trials, Hodges said that “what sometimes gets missed is the Attorney General’s Guidelines on Disclosure, which does provide practical ways that disclosure can be approached in complex and document or data heavy cases.”

And she pointed to two recent reviews of the SFO, by Sir David Calvert-Smith and Brian Altman QC respectively, that saw the problem less with the disclosure regime itself “but more application of guidelines.” (9, 10)

The identification principle – change, at last

Criteria for establishing corporate liability for fraud is also to be addressed: instead of the prosecutor having to demonstrate that a company's ‘directing mind and will’ is responsible, - often interpreted as the most senior executives, who, in large organisations, may be deemed too far removed to have the required control – under the Economic Crime and Corporate Transparency Bill a company would be liable for offences by “senior managers”, those who play a “significant role in the making of decisions about how the whole or a substantial part of the activities of the body corporate” (11).

This is potentially revolutionary for going after companies, and alongside the failure to prevent fraud offence, could really help in corporate crime prosecutions in the UK,” said Hawley.

Other proposed reforms such as introducing a specialist panel of expert judges for complex fraud cases should be considered, she added: “We definitely need specialist judges. It is extraordinary that fraud is 40 percent of reported crime and judges don’t have proper training. And we have a really dire level of recruitment among judges,” said Hawley.

Hodges argued against other suggested amendments such as introducing expert panels for juries in complex fraud cases: “It is a bit of a distraction. The issues that the jury looks at are simple concepts: honesty or dishonesty. Corruption is not a difficult concept for juries to grasp,” she said.

A former police officer, Nick Ephgrave, taking over as SFO director and expanded legal powers are grounds for optimism about the agency's future performance. “It will be quite interesting having ex-Metropolitan Police officers in charge of both the NCA and SFO,” Hicks remarked.

NOTES

1- https://www.reuters.com/article/britain-sfo-enrc-idAFL8N3A557D 

2 - https://www.sfo.gov.uk/2023/09/04/sfo-chief-capability-officer-delivers-keynote-speech-at-2023-cambridge-symposium/  

3 - https://www.reuters.com/article/britain-sfo-enrc-idAFL8N3A557D 

4 - https://www.justiceinspectorates.gov.uk/crown-prosecution-service/wp-content/uploads/sites/3/2014/04/SFO_Nov12_rpt.pdf 

5 - https://www.citysolicitors.org.uk/storage/2023/04/CLLS-Recommendations-for-SFO-19-04-23.pdf  

6 - https://www.sfo.gov.uk/2023/09/04/sfo-chief-capability-officer-delivers-keynote-speech-at-2023-cambridge-symposium/  

7 - https://www.legislation.gov.uk/ukpga/1996/25/contents 

8 - https://www.gov.uk/government/publications/attorney-generals-guidelines-on-disclosure 

9 - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1092872/DCS_report_-__FINAL_-_21_July_08.31_.pdf 

10 - https://www.sfo.gov.uk/download/review-of-r-v-woods-marshall-by-brian-altman-qc/?ind=1658492916929&filename=1658492916wpdm_Brian%20Altman%20QC%20Report.pdf%20Report.pdf&wpdmdl=33885&refresh=6504507ec113a1694781566 

11 - https://bills.parliament.uk/bills/3339  

Wednesday, November 08, 2023

Gaza Besieged: Why Israel’s Genocidal Strategy Won’t Destroy the Palestinian Resistance

Counterpunch, 23 October 2023

 

                                        A pro-Palestine demo in Copenhagen (Typhanie Cochrane).
 

Israel and its supporters want to destroy Hamas, and kill the “human animals”, as the Israeli defense minister called Palestinians. Such a genocidal strategy will not work.

Even if Israel manages to destroy the leadership of Hamas, another group would take its place. In any case, what is hardly mentioned at all in media coverage of the crisis is that other Palestinian groups were involved in the October 7 attacks – Al Aqsa Martyrs Brigade, Communist Democratic Front for the Liberation of Palestine, Palestinian Islamic Jihad, Palestinian Mujahideen Movement, and the Popular Resistance Committees.

No matter how hard the Israelis pound the Gaza Strip, they will not wipe out the resistance against the occupation. Rather it will act as a recruitment vehicle for the resistance, as Israel’s actions have done for decades, and will not endear people in the region in any way towards Israel.

For instance, during the July 2006 war by Israel on Lebanon’s Hizbullah, I was sitting with Lebanese friends in the Dahiyeh (Beirut’s majority Shia southern suburbs) watching the news of the Qana massacre. My friend pointed at his seven-year-old nephew and said, what do you think he thinks of Israel seeing this? “Nothing good,” I replied.

The same scene is playing out today as the Middle East watches the bodies of men, women and children being pulled out of the rubble in Gaza. The boy I watched TV news with 17 years ago is now 23, and to the best of my knowledge not involved with the resistance, but he still doesn’t like Israel.

Generation after generation has seen and experienced such incredible violence inflicted on Palestinians and neighboring countries. Such a cycle of violence will not cease until there is an end to apartheid and the occupation. As Nelson Mandela wrote, “If the oppressor uses violence, the oppressed have no response but to respond violently.”

The Palestinians have tried every means possible to be heard, yet are faced with unceasing violence. In March 2018, Palestinians protested at the border fence calling for the “right to return” to their ancestral homes. The year-long protests were met with sniper fire and the deaths of 266 people and 30,000 injured.

No Palestinian is safe under the occupation. As the UN has reported, between 2015 and 2022 there were over 8,700 child casualties alone. And last year, as Human Rights Watch has documented, was the “deadliest year for Palestinian children in the West Bank in 15 years, and 2023 is on track to meet or exceed 2022 levels.” That report was as of August, since then over 1,500 children have been killed during the siege on Gaza, while some 50,000 Palestinian women are pregnant.

Despite such violence, the oppressor cannot silence aspirations for freedom. This is not an alien concept to the US. As US President Ronald Reagan said in 1982 when he dedicated the launch of the space shuttle Columbia to the Afghan people, the “struggle” against “occupation … represents man’s highest aspirations for freedom”.

Yet the Israelis, the Americans and their European allies continue to think that massive bombing and collective punishment will somehow work. The Israelis have tried this strategy since 1948, and against Gaza in 2006, 2008, 2009, 2010, 2011, 2014, 2018, 2019, and 2021. It clearly hasn’t worked, but it has produced a lot of post-traumatic stress and suffering.

From 1982 until 2000, the Israelis tried to occupy Southern Lebanon, but left with their tail between their legs, as the USA did after 18 years in Afghanistan. An indigenous resistance, even if not supported by everyone, will inevitably survive. The Palestinians testify to this, as do the Afghanis, the Iraqis and many others. The most sophisticated armies cannot destroy resistance as they cannot win over ‘hearts and minds’.

The white South African apartheid regime and colonizers elsewhere in Africa and Asia found that out too. The status quo could not be maintained unless the indigenous population was totally or largely annihilated, as happened in the Americas and Australia (which still denies its indigenous population a voice).

The US-led Global War on Terror caused the deaths of over 4.5 million people, cost trillions of dollars, and left destruction and mayhem in its wake, making the world a less secure place. This was foreseeable and obvious. As the late Lebanese Shiite Muslim leader Grand Ayatollah Mohammed Hussein Fadlallah told me in 2004, just after the invasion of Iraq: “As long as American foreign policy remains the same and the Palestinian issue is left unresolved, the US ‘war on terror’ will increase terrorism by 100 percent.”

The Israelis back in 2006 wanted to bomb Lebanon ‘back to the dark ages’ (an oft-repeated mantra), and wipe out Hizbullah. It did not manage to, despite US and British support, which included delaying calls for an end to hostilities. Instead, Hizbullah came out stronger. Out of the devastation wrought on Southern Lebanon and Beirut’s southern suburbs, buildings were rebuilt. The Hizbullah-aligned Al Manar TV, which had its studios totally destroyed, were rebuilt bigger and better (and largely underground). The buildings in which I had interviewed Hamas and Hizbullah members were also rebuilt (the leaders I interviewed survived).

Indicative of Hizbullah’s strength, heightened by years of bruising conflict in Syria, including fighting the Islamic State (ISIS), is that the US and the UK have sent their navies to the Mediterranean to protect Israel should the Lebanese group, and others, enter the fray. It is a clear message to not expand the conflict.

Besieging Gaza then will not achieve the Israelis’ aims, other than assuaging their thirst for vengeance. Even using tactical nuclear weapons to wipe out Gaza, as an Israeli politician suggested, will not succeed in diminishing resistance, as it will then come from elsewhere. Genocide will not make Israelis any safer, nor prevent further attacks against civilians, as happened on 7 October.

The only option left to end the violence is for the occupiers themselves to end the occupation, as the white South Africans eventually had to accept, and the British had to accept in Northern Ireland. One does not hold one’s breath of course.

As for international law, the so-called arbiters of the rules-based system – the US and Europe –  only selectively believe in it, from the Geneva Conventions to the Rome Statute, to decisions at the UN. Israel does not abide by the 45 resolutions (as of 2013) passed by the UN Human Rights Council (which comprise almost half of all country-specific resolutions ever passed) while the US has vetoed some 53 UN Security Council (UNSC) resolutions critical of Israel since 1972, according to UN data.

The West’s support for Israel has indeed undermined international law due to its hypocrisy. As an unnamed senior G7 diplomat told the Financial Times in an article titled ‘Rush by West to back Israel erodes developing countries’ support for Ukraine’: “We have definitely lost the battle in the Global South … All the work we have done with the Global South [over Ukraine] has been lost . . . Forget about rules, forget about world order. They won’t ever listen to us again.”

This article is dedicated to the memory of Issam Abdallah, a Lebanese journalist and acquaintance killed by Israeli shelling in Southern Lebanon on 13 October.

UAE landing station confirmed for fibre optic cable set to link Israel to Gulf states

Middle East Eye, 22 September 2023

Leaders of Israel and Saudi Arabia have both recently said cables and trade routes linking Europe to India are potential benefits of any normalisation deal
 
 

An agreement to land a proposed fibre optic cable running between India and Europe in the United Arab Emirates has highlighted how Gulf states and Israel are positioning themselves as potential partners on projects to develop new regional trade and connectivity routes.

The 20,000-kilometre project, known as the Trans Europe Asia System (TEAS), would link Mumbai to Marseille via submarine cables and a terrestrial segment crossing the Arabian Peninsula.

On Wednesday, Cinturion, the company behind the project, announced it had signed a memorandum of understanding with the Emirates Integrated Telecommunications Company, known as "du", to build a landing station in the UAE.

Middle East Eye has previously reported how Cinturion, an industry newcomer, is being backed by a major Israeli infrastructure investment fund, Keystone.

The announcement comes as Middle Eastern leaders and the G20 have floated the idea of building new routes between India and Europe as a possible benefit of a touted normalisation deal between Israel and Saudi Arabia.

In early September, Israeli Prime Minister Benjamin Netanyahu said that, following talks with the Cypriot government, there was a “possibility of making real the idea of an Asia-Middle East-Europe corridor”.

Netanyahu added: “An example of the most obvious one is a fibre optic connection. That's the shortest route. It's the safest route. It's the most economic route.”

A week later, the India-Middle East-Europe Economic Corridor (IMEC) was announced at the G20 summit in New Delhi.

The IMEC is intended to bolster connectivity and economic integration between Asia, the Gulf, and Europe, and includes the proposed laying of new fibre optic cables for digital connectivity along a route similar to the one earmarked for TEAS.

This week, Saudi Arabia’s Crown Prince Mohammed bin Salman also highlighted the logistical importance of the G20 plan and fibre optic cables in an interview with Fox News.

“It's not only about moving goods and building railways and ports. It's about linking grids, energy grids, data cables and other stuff that will benefit Europe, the Middle East and India... It's a big deal for us, Europe and India,” he said.

Bypassing Egypt

Cable companies have been keen to establish new routes through the Middle East over the past 15 years to avoid the stranglehold that Egypt and state-owned Telecom Egypt (TE) holds over the industry, according to Michael Ruddy, director of international research at US-based Terabit Consulting.

Currently, all fibre optic cables that run through the region, connecting Europe with Asia, pass through the Red Sea and across Egypt, handling an estimated 17 to 30 percent of all global internet traffic.

“The Red Sea is one of the top four trans-oceanic routes in terms of volume, and connecting hubs, from Tokyo and Shanghai to Singapore and on to Europe,” said Ruddy.

“There’s a lot of sensitive traffic - financial data and from data centre to data centre - with a lot of demand on that route. And there’s not a lot of great alternatives right now.”

The TEAS cable is not the only proposed project under development that aims to bypass Egypt.

In 2021, Google announced plans for a $400 million cable between Europe and Asia known as Blue-Raman running through Israel, Jordan and Saudi Arabia.

“TEAS and Blue-Raman are both really quite urgently needed by the industry in terms of trying to provide an alternative to Egypt,” said Ruddy.

Cinturion’s deal to build a landing station in the UAE follows an earlier agreement in July to build a landing station for a southern branch of the TEAS network near Jeddah on Saudi Arabia’s Red Sea coast.

Israeli involvement in the project remains rather ambiguous, however, with no reference to Keystone’s investment on Cinturion’s website.

On its own website, Keystone describes itself as holding 25 percent of shares in the TEAS project.

Announcing its investment in 2021, Keystone CEO Navot Bar was quoted as saying that partners included: “Former senior officers in the US Army, British investors, and investors from the Gulf states and Israel."

Cinturion had not responded to questions from MEE at the time of publication about Israeli involvement.

“There are whispers of terrestrial connections between Saudi Arabia and Israel. But there’s a desire to keep it quiet, and that’s probably influencing the tack of TEAS and Blue-Raman,” said Ruddy.

“There’s still a lot of geopolitical sensitivity, and they don’t want to publicise the routings they have.”

Industry players are unsure whether the cables mentioned by Netanyahu or bin Salman in their recent public comments refer to TEAS or Blue-Raman, if at all.

Israel earlier in the year announced plans to turn the country into a regional digital hub by building a fibre optic cable from Ashkelon on the Mediterranean to Eilat on the Red Sea.

The Israeli state-owned energy company Europe-Asia-Pipeline-Co (EAPC) is to build the 254-kilometre cable.

Saudi Arabia meanwhile is investing billions of dollars in data centres and fibre optic cables to turn the kingdom into a regional digital hub.

Seven new cables are to land in Saudi Arabia in the coming three years, adding to the 15 already in operation.

Sources in the submarine cable industry said that getting agreement for multi-jurisdictional projects like TEAS that run between countries that have historic friction, such as Israel and Saudi Arabia, nonetheless remains “extremely challenging”.

Militarism, Corruption, and the Need for Impolite Direct Activism: a Q&A with Andrew Feinstein

Counterpunch, 3 August 2023

Podcast available on the Latitude Adjustment Podcast website


                                                        Bell's Special Missions Aircraft (Bell)

 

Paul Cochrane and Eric Maddox interviewed Andrew Feinstein about the devastating impact of the global arms trade, how militarism feeds corruption and undermines democracy, how the arms trade supports occupation, and why the military’s carbon boot print should not be excluded from climate change talks.

Feinstein, a former African National Congress (ANC) member of South Africa’s parliament, is the author of Shadow World – Inside the Global Arms Trade and is a researcher at Shadow World Investigations. A documentary was also made about his book, which can be found online. This is an abridged transcript of the interview broadcast on the Latitude Adjustment Podcast website.

The Global North’s systemic corruption

Eric Maddox: As someone who’s been involved in politics in both South Africa and the UK, how well does South African corruption compete with UK corruption? How is corruption in the Global North and Global South discussed in the Global North, and how does implicit racism inform the disparities?

Andrew Feinstein: I had a very interesting personal experience. I was an African National Congress (ANC) member of parliament in South Africa, and worked on the financial accountability side in parliament. I was the ranking ANC member on the Public Accounts Committee, and we investigated a $10 billion arms deal that my own party and government took just a few years after we became a democracy. For South Africa, the sums of bribes were quite large, we are talking about a total of $350 million of bribes paid to senior politicians, senior officials, senior corporate executives and of course intermediaries. The incredible thing is South Africa was immediately named this deeply corrupt country – “typical of Africa”, “didn’t take long to become like the rest of Africa”, was the sort of discourse one heard.

When I started investigating the global arms trade and moved to the UK, I discovered that (former UK prime minister) Tony Blair and Prince Andrew, and his mate Jeffery Epstein – I am not sure if he is involved, but he was involved in a lot of arms deals and corruption related to arms deals –  had paid £115 million ($150 m) of bribes in South Africa for BAE Systems (British Aerospace) to win a contract that they weren’t even shortlisted for. They were doing the same thing in seven or eight countries at the same moment, and they were paying over £1 billion ($1.31 bn) of bribes, at that particular moment in history.

One of South Africa’s former presidents, Jacob Zuma, is on trial with a French arms company, but the reality is Zuma received what is worth today around £25,000 ($32,775) in bribes, and he should suffer the consequences of that, because he had no right to take bribes as a senior politician and government official – in my opinion he betrayed the South African people and South Africa by so doing – but what about Tony Blair? What about BAE Systems, the most corrupt company on the planet, who continue to this day to bribe and corrupt people around the world shamelessly, and Britain doesn’t see itself as a corrupt country. It sees the corruption as elsewhere, completely ignoring the fact that the corruption has its source in London, and in fact I would argue that a huge amount of the world’s corruption has its source in Washington D.C., London, Paris, Berlin, Madrid, Rome etcetera.

Countries of the Global North who effectively corrupt both other countries in the Global North and the Global South, and the discourse around it, is a completely subversive one. When we look at the Transparency International Corruption Perception Index, what Transparency International does is ask people in a country whether they think their country is corrupt, and shock and horror, in the Global North people say no our country is not corrupt, and in the Global South the responses are, our country is corrupt. The reason for that is low level corruption is more common in the Global South on a daily basis when trying to access basic services, whereas in the Global North the corruption is at such a systemic level that people are virtually unaware of it.

Look for instance at the UK during the COVID pandemic, and the fact that (former Prime Minister) Boris Johnson, probably one of the most corrupt individuals to hold office anywhere in the world at any time, gave friends of his, and donors to his political party, contracts worth tens of billions of pounds, that they simply didn’t deliver on, and there have been no consequences, either for Johnson, or for the recipients of public money.

Then there is another level, and that is the way in which anti-corruption activities are used selectively. In the case of the South African arms deal I mentioned, (former President) Thabo Mbeki was the president who really oversaw the deal and ensured that the ANC benefitted from the bribes. He allowed law enforcement authorities and prosecutors to investigate his opponent Jacob Zuma but told them absolutely explicitly that they couldn’t investigate any of his political allies, and so they didn’t. This is a carry over from the reality that in the Global North this sort of corruption is seldom ever investigated.

We have the case of (former Chancellor) Helmut Kohl in Germany, a Chancellor who unified East and West Germany, who funded his political party, the Christian Democratic Union (CDU) – I have written extensively about all of these things I am raising here with thousands and thousands of footnotes, so if people are interested, I would strongly recommend they look at the Shadow World book and can see the sourcing of the evidence for all of these statements I am making – and Kohl financed his CDU primarily off licit and illicit arms deals, and I actually describe in particular how arms dealer Karl Hans Schreiber would actually meet with Kohl’s party treasurer and personal accountant just across the border in Switzerland, and would literally move briefcases of cash from the boot of his car into the boot of the car of the party treasurer or personal accountant. Literally until the day he died Helmut Kohl was indignant, threatening to sue anybody who accused him of corruption.

His successor, Angela Merkel, a politician who is quite respected in Western Europe and the Global North generally, she did it more cleverly than her predecessor and political mentor Kohl, in that she got Germany’s arms companies to give an exponential number of gifts to local party officers, of which there are thousands across Germany, all in the amount of Euro 1,000 ($1,122). The reason she did that is German prosecutors don’t regard payments of Euro 1,000 or less as corruption so they don’t even bother to look into the issue.

I think political systems around the world have become deeply corrupted by the intertwining of business and politics that was an inevitable consequence of neoliberal capitalism. I think the way we decide to attack it depends entirely on the political hat we wear. The hypocrisy of the Global North in the way it talks about corruption in the Global South, ignoring the systemic corruption that is intrinsic to each and every form of governance in the Global North, is devastating and I find it deeply disturbing.

Even when corruption is blatantly used and undermines democracy, as it was in Brazil, and I would recommend a brilliant documentary called The Edge of Democracy, where prosecutors conspired to put the current, then former President Lula (da Silva) in jail for corruption, but were doing so on behalf of the far right wing in Brazil, who then came to power because Lula was in prison, and because his political protege (former President) Dilma (Rousseff) was forced from office. She was probably the least corrupt politician in Brazil at the time, and the prosecutor who led all these charges then became (now former President Jair) Bolsonaro’s justice minister.

Even after emails and Whatsapp messages between the prosecutors explicitly conspiring to remove Lula from public life in Brazil, even after those became public, anti-corruption organisations in the Global North still speak about those prosecutors as if they were some sort of anti-corruption heroes rather than political operatives who ensured that a far more damaging and reactionary, and corrupt group of people, came to power in a country like Brazil.

“What is their competitive advantage? They pay bribes”

Cochrane: You have argued for years that the arms industry is one of the world’s most corrupt sectors, accounting for around 40 percent of all corruption in world trade, and that European manufacturers can be considered more corrupt versus the US arms industry, which is the largest in the world – why is this the case?

Feinstein: I think originally, in the post World War II world, it was the most corrupt on the planet. The US has for decades manufactured around 40 percent of all weaponry that is made in the world, so you can’t talk about the trade without talking about the US, and I am not in any way saying the US arms industry isn’t corrupt, in fact the domestic industry, the way in which the big defence companies sell to the US government, which is obviously the majority of their business, is a form of what I describe as legalised bribery.

It is actually legal in American law for a company like Lockheed Martin to fund a whole lot of politicians’ campaigns and political careers, and once in office to ensure that those politicians, quite explicitly, will vote for billion dollar contracts to go back to Lockheed Martin and at the same time, defence contractors do like the latest revelation, they charge the American taxpayer  $52,000 for a trash can that costs them about $200. In that sense, the domestic US arms trade is entirely and fundamentally corrupt.

The involvement of US defence companies in foreign corruption has decreased over time with the advent of the Foreign Corrupt Practices Act (FCPA) and particularly the tightening of the Act in the mid to late 1980s. Before then US companies would pay bribes wherever they were trying to sell arms, very explicitly. There was this wonderful incidence of the husband of the Queen of the Netherlands, Prince Bernhard, and Lockheed Martin and Nothrop Grumman, two of the biggest defence contractors in the world, who were vying for a contract to produce a jet fighter for the Dutch military. Without realising they were both bribing Prince Bernhard to covertly act as their agent on the deal, they didn’t realise he was taking about $1 million from each of them, and they were competitors for this contract. Obviously when they found out they were less than thrilled, although he was very proud of himself.

The Americans used to be at the forefront of corruption in the arms trade, but the FCPA has made a significant difference, and the Americans now dominate the arms trade because one, economies of scale, they produce so much for the Pentagon that adding on for the international market is relatively cheap to do, and it means their prices are very competitive and their equipment is very competitive, but in addition to that, what they use as leverage is their power. By buying weapons from the USA you are consolidating an alliance with that country, so poodles of the US like the UK continue to buy huge amounts of weaponry from the US and it sort of guarantees their poodle status.

Other allies like Saudi Arabia would be a great example, who have an appalling human rights history at home and abroad, completely undemocratic, but are seen as flawless by the US who will sell them any arms they want. For many decades they were buying this weaponry and leaving it, they weren’t using it, they didn’t have the capacity to use it. I managed to find this photograph while I was researching the Shadow World book of over 70 jet fighters parked in the deserts of Saudi Arabia that have never been flown, they were just left to rust, but this is how Saudi ensured that their reliance on the US remained strong. Given that people are benefitting from these deals materially just adds to the force of that alliance.

When NATO expanded Eastwards this was a huge boondoggle for defence contractors as well. There was this committee created called the Committee to Expand NATO, very creatively named, and it was chaired by a senior vice president for international operations of Lockheed Martin, a guy called Bruce Jackson. Jackson basically went from Eastern European capital to Eastern European capital and said to them quite explicitly, when you join NATO you are going to have to increase your defence spending to 2 percent of GDP, you are going to have to modernise all of your equipment as follows, and here’s the deal: if you spend the $20 billion or whatever you need to modernise with Lockheed Martin I will guarantee you that the US will support your accession to full NATO membership. And that is what they did, and made tens of billions upon tens of billions of dollars in that way. But then, in the case of the Europeans, no European country has anything equivalent to the FCPA, in fact foreign corruption from most European countries and the UK is virtually ignored by law enforcement.

We have taken literally dozens of cases to the UK Serious Fraud Office (SFO). The ones they have have even bothered to look into, at all, I don’t even need one hand to count them, I just need a couple of fingers, because it literally is just a couple of cases. There is no interest and it is politically unpopular to do. Don’t forget prosecutors come under enormous political influence, and often get their job because they are very political players, Keir Starmer (head of the UK Labour party, former Director of Public Prosecutions and head of the Crown Prosecution Service) being a case in point. Their desire to investigate corruption that is at the same time corrupting foreign ministers and officials is creating what we call the feedback principle, it is also paying off politicians at home, and the families of political parties at home. That sort of stuff just doesn’t get investigated.

The Europeans, they don’t have the economies of scale that the US have, they don’t have the same international diplomatic kudos that the US can bring to bear on its arms sales, so what is their competitive advantage? They pay bribes. All of the European countries and the UK, until today, continue to pay massive bribes on virtually every arms deal that they do, and those bribes are built into the economic structure of the industry.

“We are living in an insane world”

Maddox: Speaking as an American, I notice that the US discourse around “gun control” is almost entirely limited to the domestic sphere, while most of our arms sales take place internationally. In what ways does the US role in the global arms industry impact the way Americans discuss and deal with gun violence at home? What connections should Americans start making?

Feinstein: The important thing is that America is the biggest military player globally, it is not just that they produce the most weapons. America, since WW2, has been involved in more conflicts and more invasions, and military activity, outside the USA than any other country on the planet. In fact, many of the next biggest countries combined don’t come anywhere near this sort of military impact the US has had on the world.

One of the prime reasons the US is not what I would describe as at the forefront of peace efforts globally is because it is economically and materially advantageous to America to have conflict and instability around the world, pretty much all the time. So how does this work? To give you one example, in the work we are doing on the conflict on Yemen, in which America, Western Europe, the UK and to a much less extent China and Iran have effectively weaponised, the Americans have been so ubiquitous in selling or giving weapons to various dictatorial, human rights abusing regimes in the Middle East, and to a wide range of militia groups across the region, that there are a number of battles that have taken place since 2015 in Yemen where we have been able to identify that all of the protagonists in those battles, and this includes tribal groups within Yemen – it includes a whole range of political factions, it includes groups supported by Saudi Arabia, by the United Arab Emirates (UAE), groups supported by Iran – there are some battles where all of the weaponry used is American made. That is the extent of the ubiquity of America’s role in arming conflict around the world.

We see this most obviously in a very simple statistic – the US government employs more people to maintain and run one aircraft carrier than they have diplomats across the entire world. Today, the US has 12 aircraft carriers. What America lives with is what the sociologist C. Wright Mills calls a military mindset, a military metaphysics where everything is seen through the lens of conflict and war. It is in America’s founding myths, it is in the absurd approach to gun control that costs so many Americans lives domestically every year, and that causes such conflict around the world. How do these two things combine? We tend to think that the domestic gun lobby, the National Rifle Association (NRA), particularly, and all the politicians they buy, and that is what they do, they buy them. I think Americans need to understand that, your politicians are all bought. The thing is, it is easier in America to identify who, it is more difficult in Europe and the UK, because it is legal to buy politicians, as we described in the relationships between defence contractors and politicians.

What the NRA does is basically ensure that politicians cannot even have an adult conversation about meaningful gun control in the US yet alone actually doing something about it. They are creating the environment in which its defence sector plays such an incredibly important role globally it can only flourish. This is seen in the fact that in major sporting events in the US, the military is front and centre. In fact, when you board a plane in the US, military personnel are invited onto the plane even before families with young kids and babies. There is a psychological connection to weaponry, big and small, to the US military role in the world that I think is incomprehensible to most people outside of the US and everywhere else in the world.

I think it is really important that Americans be aware of the impact of this focus on a military metaphysic both at home and abroad, as what it is doing is taking a huge proportion of your tax contributions. A brilliant colleague of mine called Bill Hartung, he is now at the Quincy Institute, writing about the American arms trade for decades and decades, he has written a brilliant biography of Lockheed Martin (Prophets of War), describes the Pentagon as a self-licking ice cream, which is the best analogy of the Pentagon I have ever heard. Bill calculated that for every dollar paid to the US tax authorities, 30 cents pretty much goes to the defence contractors.

Let us think about the state of the world. What are the challenges facing us as human beings? Clearly climate catastrophe, global pandemics, and extreme and increasing inequality. That means people in America have to work three jobs to be able to feed their family if they are lucky enough to find a job, and it means that food bank use in countries like the UK is at its highest level since WW2.

We are living in an insane world at the moment, but we are still spending, in the case of the US, well over $1 trillion a year on what we euphemistically describe as defence. Now this is money that should be going into helping Americans with the current cost of living crisis, helping Americans with healthcare, with education, dealing with the climate emergency, ensuring that we are far better prepared for inevitable future pandemics than we were for COVID. So it infuses every aspect of American life, and the NRA’s constant pitch for no gun control feeds into the same sort of laissez faire attitude to American arms exports to the rest of the world, that fuels conflicts everywhere they are sold.

The Military Industrial Complex and the Ukraine-Russia conflict

Cochrane: Why has the White House been resistant to negotiations and instead emphasizing armed intervention in Ukraine?

Feinstein: It follows the pattern the US follows all over the world where you resolve issues by conflict rather than diplomacy because that is incredibly lucrative to the US, and it ensures the US continues to play a dominant role in the world. I think that is starting to change. For instance, if we look before I get to the Ukraine at the Yemen conflict, a very interesting development has happened, where China has brokered a rapprochement between Saudi Arabia and Iran, that has effectively made it possible to in practice, even if not in theory, maintain a cease fire in Yemen for a good while now.

Since 2015, the US and its Western allies have made absolutely no effort whatsoever to bring any sort of peace to Yemen because they are all making far too much money out of the conflict and the fact that tens of thousands of innocent civilians were being killed, a massive violation of international humanitarian law and in war crimes incidental to them, it is not their concern. In fact we see the complete weakness of any controls over who America and Europe and the UK sells arms to by the fact that they continue to sell arms to Saudi Arabia and the UAE, who are primarily responsible for the killing of those tens of thousands of innocent civilians, showing that the domestic arms export controls are basically voluntary, that regional and international agreements on arms exports control are pretty much ignorable, and allowing the US, Western Europe and the UK to do what they want. That is the first reason why they have very little interest in peace in the Russia-Ukraine conflict.

I should be clear on this as to where I stand on the matter. I believe that Russia’s invasion of Ukraine has been a brutal, illegal invasion. I don’t believe there is any justification for it. At the same time I believe that the West has over a number of years contributed to an environment that led to that illegal invasion by, for instance, its zeal in expanding NATO Eastwards. You can actually understand whatever your thoughts on Vladimir Putin are, and I should say he has murdered at least two people I have worked on arms trade matters in Russia over the years, so I would hardly describe myself as a fan, and I think to be critical of the West and Ukraine does not in any way imply that one is in any way in favour of what Vladimir Putin has done, is doing and is likely to do.

I think the West contributed to a very febrile atmosphere, whether its approach to the Eastwards expansion of NATO, and the idea of Ukraine joining NATO, which would effectively mean that there would be American missiles on the border with Ukraine. Now there have always been contested territories between the two countries, there are significant ethnic Russians living in Ukraine, so the situation has been a very febrile one for many years.

What is America’s interest in all of this? Well, as we know the Biden family has a variety of interests in Ukraine that have never been properly explained. One of Biden’s sons seems to have had business interests in the country for quite a long while now. And I do think these material interests, we should not rule out there importance in geopolitical decisions, as unfortunately politicians across the world, be it Vladimir Putin, be it Joe Biden, they make a hell of a lot of money out of being politicians, and anybody who can’t see that is simply being incredibly naive and myopic. So, there is a history of some sort of financial engagement and relationship but I haven’t investigated it, I don’t understand it, and I am not sure what exactly it is.

I think the Biden administration decided that it wanted to see Putin from office. Now regime change is something that the US in the post WW2 world has engaged actively around the world. Eric, where you are sitting in Latin America has probably seen the brunt of it. The carnage that has gone on in the Middle East for decades is primarily a consequence of the US desire for regime change, particularly in Iran. So I think that they saw an opportunity to weaken Putin, perhaps to defeat him. But as any student of conflict, of war, is aware, very few wars are won and lost. Most wars are resolved in some sort of highly unsatisfactory manner to everybody involved, and usually at an enormous cost to the lives of innocent civilians, and unfortunately I think this is what we are seeing playing out in Ukraine.

It has more to do with the US’ geopolitical view than it has to do with anything particularly germaine to Ukraine, and very sadly, I think that conflict will be brought to an end when it is no longer in the material interests of the main protagonists, and by that I mean Russia and Putin. I estimate that Putin has probably made in excess of $40 billion from his personal cut in arms deals over the time that he has been the key figure in Russian politics.

The so called Military Industrial Complex (MIC) in the US is, as I have tried to explain, absolutely central to the financing of the American political process, and to the personal finances of an enormous number of senior American politicians. But there will come a time when the costs of the war, even to these people, outweighs the benefits. And that time sadly, it will not be the people of Ukraine who are foremost in anybody’s mind, it is not going to be the people in the disputed territories that are at the foremost of anybody’s minds, it is going to be the then short term interests of the Americans and the Russians. I think the primary reason why the Americans haven’t been interested in any sort of peace initiative thus far is because it is serving their purposes of loosening Putin’s grasp on power and making an enormous amount of money for America’s MIC who have seen their share prices increase by on average 35-40 percent since the invasion.

Capitalism and the global international security elite

Maddox: What are your thoughts on the following statement: We don’t have an institutionalized corruption problem, we have a capitalism problem. Until we remove the profit incentives for violence, exploitation, and the hoarding of resources nothing will fundamentally change because corruption is inevitable under the system we have.

Feinstein: I would endorse that statement 100 percent. I spend a lot of my life trying to deal with the immediate consequences of the arms trade, be that in Yemen, be that in the Occupied Palestinian Territories, be that in Ukraine. That is the Band-Aid, that is the palliative for the immediate problem because you can’t ignore the suffering of human beings in the here and now in the appalling political and economic system that we have. The reality is that, for the nature and functioning of the global arms trade to change, for the primacy of conflict over diplomacy and development, what we need is a profound change in our political and economic system because it is rotten to the core.

In the US the manufacturing of weaponry has always been in private company hands, but those private companies are completely subsidised by the state, so in what America describes as its extraordinary model of free market capitalism, there are in fact certain sectors – arms amongst them, healthcare, finance, pharmaceuticals – wouldn’t exist without the backing of the state, what I call State Corporate Welfare. An enormous amount of money goes into these companies. The defence companies in particular are such badly run companies that none of them would survive if there was actually a free market in the US defence sector.

In Europe and the UK the function of manufacturing weapons was for a long time in state hands and then with the advent of a particularly aggressive form of neoliberal capitalism, and the wave of privatisations in the late 1970s and early 1980s, a lot of them became privatised and private companies. All that has done is create an incentive for conflict especially because of the incredibly close, symbiotic relationship between these companies, the state, the political actors in that state, senior military and intelligence leaders within that state, so that the very people that should be properly regulating this sort of trade are the people who benefit from it politically and materially.

It is what Lawrence Wilkerson, who was (US Secretary of State) Colin Powell’s chief of staff for many years, described as the global international security elite. They all personally make a substantial amount of money out of warfare and out of the arms business, and it means we live in a world where we are prepared to spend huge proportions of our GDP on so called defence, it should be called offence, but it is defence, ridiculously. And where we require conflict to be able to continue to justify this enormous expense. We also have to keep our populations fearful because otherwise they will start asking too many questions about why we are spending all this money on defence, and why so much of it ends up with the political parties and politicians, especially once they leave office.

To change this system, and there is no political will in our current political system to change it, requires a fundamental change in the nature and structure of our politics and economics. I believe we are in what the philosopher Karl Popper would describe as the classical interregnum, at the moment. The paradigm of late neoliberal capitalism is clearly failing except for a very tiny proportion, the one percent. For the vast majority of people the system is so obviously failing but we don’t know what comes next. We don’t know what replaces it, and that is why we are in this moment of interregnum and I think it is incredibly, for us, and I would describe myself, not only as a researcher but an activist and campaigner as much as a researcher, to be thinking about how we use the technological advances that have taken place in our societies, good and bad, to actually advance our political system. I think we have to ask ourselves huge questions.

The intertwining of business and politics has meant, in my opinion, that liberal representative democracy has totally failed. I can count on my hands the number of so called elected representatives around the world who I think actually represent the people that got them there. The vast majority of them represent themselves, their own narrow interests, and the interests of an elite that put them in power and that is what needs changing. I even ask myself the question, if with the technology we have today, is our current system of representative democracy of party politics, where parties are really just factions of people trying to force greater and greater space at the trough from which they feed, whether this form of politics even has a place in what would be a more democratic, more self organising system of how human beings manage our lives going forward.

The military’s carbon boot print should be front and centre at any discussion of climate issues

Cochrane: To confront climate change, environment degradation and the ravaging of our planet, we need now more than ever to divert the immense resources militarism uses for more ecological purposes. With global military spending at $2.24 trillion in 2022, nearly double that of 2000, we are going in the wrong direction. A key part of this is that at the Kyoto climate talks in 1997, the US and others made sure that the military was exempt from climate change talks, yet the US military is the single largest institutional polluter on earth, while the UK military’s carbon emissions is the same as Uganda’s, a country of 50 million people, roughly that of England’s 56 million. Do you think the military should be part of discussions at climate change talks?

Feinstein: Of course the military’s carbon boot print, as someone has called it, should be on the agenda at any discussion of climate change. It comes back to the matter of political will. I think the reasons that the military has been excluded, and it is not just from any sort of accountability around their carbon emissions, the defence sector is excluded from the World Trade Organisation (WTO) banning the use of offsets as a criteria in large scale public procurements. Why? Because offsets together with intermediation are key mechanisms through which bribes are paid for arms deals, so the WTO puts in place this exemption. Politicians are all thrilled with it, because they benefit from these bribes in exactly the same way in which you have a world that is dominated by conflict and the military metaphysic of which we spoke of earlier.

You can’t have the reality of the impact of that militarism available to people to comprehend, so they can actually make informed decisions about whether they want such a huge proportion of their tax dollars, pounds or euros to be used for military purposes, so it is part of an entire process of obfuscation, of education/entertainment in which militarism is presented as heroic, in which those who oppose militarism, who are actually more concerned about the maintenance of human life rather than its destruction, are painted as these villainous people who are both communist and nazis all rolled into one.

The sort of level of discourse and public discourse about these sorts of matters is so appalling that if we actually made the military tell us the extent of its contribution to the climate catastrophe, far more people across the world would be saying, hold on a moment, here are the costs, what are the benefits? Unfortunately the benefits column is pretty damn empty. It is part of a process of ensuring that we don’t have informed public discourse about the role of the military in our societies and in our world.

We are also presented with these completely fallacious arguments about how the defence sectors are good for our economies. I have a number of degrees in economics, and from multiple studies in various parts of the world, it is absolutely clear that the defence sector is probably the most expensive and least effective ways to create jobs that there is in the world. For instance, for the amount of our tax money that goes to create a job in the defence sector in the US, we could create three to seven similar level jobs in far more socially productive sectors, but also sectors that are far more economically productive like renewable energy.

Diversification from defence into renewable energy would have a whole lot of obvious economic effects that would be far better for our local economies and for our global economy, and far less damaging to them. So yes of course the military’s carbon boot print should be front and centre at any discussion of climate issues, but for the political reasons I’ve outlined it is absolutely not going to be.

The cultural hegemony of militarism

Maddox: Arms manufacturers not only put money into the campaign coffers of US elected officials, they also create jobs in their Congressional districts, jobs that politicians are loath to threaten or remove. So what exactly is our play here, as concerned citizens? How can we re-assert our leverage over our politicians? Or how can we go around them to seek an end to the military industrial complex despite them?

Feinstein: The defence sector is a really economically inefficient way of creating jobs but it is used as a political stick by the defence contractors and their political sponsors. Lockheed Martin on the F-35 jet fighter programme ensured that there were jobs in every single Congressional district. Now some of those jobs are just two people sitting in a rented office with very old computers doing absolutely nothing but it enabled Lockheed Martin and all the defence lobbyists to be able to say anybody running for Congress in that district, support the F-35 programme or otherwise we will fund the campaign against you, that you have consciously undermined job creation in your district.

So it is used for electoral purposes quite as directly as I have made out. If you are a politician in our current system thinking I don’t necessarily want the entire defence lobby, which is probably one of the best funded lobbies on the planet, ganging up on me in my Congressional fight in that district, what do you do? You go along with it, which is why you have literally a handful of representatives who even criticise a project like the F-35.

The F-35 has cost the American taxpayer $2 trillion thus far. Less than two years ago a US inspector general reported that the brains of the F-35, the most expensive weapons system ever built, supposedly the smartest weapons system ever built, the brains of the system, the combat suite, doesn’t work properly and they’ve got to go back to the drawing board.

This is the same jet fighter that failed its first fourteen test flights. This is the same jet fighter that when it was due to appear at an airshow in the UK for its European debut caught fire on the runway of its American base as it was leaving for the airshow. This is the same jet fighter that Pierre Sprey, a Pentagon veteran who was involved in the design of the F-16 jet fighter, said is the most expensive, biggest – excusing his language – piece of crap that Lockheed Martin, a company that specialises in expensive pieces of crap, has ever built. He said the only good thing about the F-35 is that the only people it is going to endanger is the test pilots.

What we have got to do first of all is find ways to communicate as widely as possible just how much of our money is being wasted. Just how much that waste of money is not just creating opportunity costs when it comes to fighting climate issues, to fighting global pandemics, but is actually making us less safe even if you accept a very narrow national security paradigm, which I don’t.

For example, after the tragedy of September 11 2001, it was identified that the Coast Guard was a particular weakness in US Homeland Security, so Lockheed Martin – a company we have mentioned a few times today – was given a $11 billion contract to effectively repurpose and re-equip the US Coast Guard.

After ten years of that contract, and this is work done by Bill Hartung who I have mentioned previously, what Lockheed Martin had to show for the $11 billion was one vessel. A vessel that when they first put it in the water, saw its hull crack, so it was useless. The contract was reviewed, Lockheed Martin were then given additional billions to continue its remarkable re-equipping of the US Coast Guard, so this money is being poured down a proverbial black hole, it is being spent on equipment that when it does get produced many years later, in almost every case, doesn’t work properly or isn’t fit for purpose.

Even the trillions of dollars that are being spent supposedly on the safety and security of American citizens is actually fundamentally undermining that very safety and security. I think we all have a responsibility to figure out how we communicate better about this, and it is a huge challenge because as the academic James Der Derian described Hollywood, it is the Military Industrial Entertainment Complex where everything that comes out of Hollywood presents anything to do with the military as heroic.

It is where we even have that Tom Hanks film Captain Phillips, where this brave captain fought off these two undernourished Somalian pirates, each equipped with a very rusty old AK-47, required an aircraft carrier and two frigates from the US Navy to do so. This was somehow turned into a hero narrative in-spite of the fact that the rest of the crew in the incident on which the film was supposedly based, were incredibly angry at the real Captain Phillips because when these two scrawny individuals made their way onto the ship, the captain of the ship hid himself in a cupboard. We have to overcome these sorts of narratives.

We have to overcome the sort of cultural hegemony that militarism has on the US and on the world at the moment. How do we do that? By more and better engagement in cleverer ways. I am beginning to think more and more that the most effective way to oppose this militarism is through direct action. You look at what quite a few thousand American military veterans do now, is when they pay their tax, they deduct 30 percent, the so-called Lockheed Martin tax, the 30 cents in every tax dollar that goes to the defence contractors. They pay the tax authorities the 70 percent of tax that they owe, and put the 30 percent into a peace and development fund. Far more of us should be doing that sort of thing.

Far more of us should be saying to our representatives, if you want our votes, let us stop the corrupt boondoggle that is the American arms industry, that is the American gun industry, and actually stop voting for these bloody people who are making fortunes at our expense, and those fortunes are our tax dollars. I think we have to improve our communication, we have to improve our strategy and tactics, but we also at the same time have to focus on changing our political system, because none of these major questions are going to change if we have the corrupted, self-serving political system we currently do.

Impolite direct action should be at the forefront of campaigning and activism against militarism

Cochrane: In environmental activism circles, there are increasing debates around tactics, that democratic and peaceful means are not working, and there is a need for more radical action – monkey-wrenching to destructive immobilize machines, adopting the tactics of the Plowshares movement against nuclear weapons, to Andreas Malm’s recent book How to Blow up a Pipeline. Countering militarism is part of such activism. What is your message to activists?

Feinstein: Many of us have grown up in an environment where our activism or campaigning has been fairly polite. When I was involved in the struggle against apartheid in South Africa, which was ultimately a successful struggle even if our democracy has only been partially successful, that struggle was not a polite struggle. The ANC waged armed struggle against a racist oligarchy, people on the ground made the country ungovernable because what was being understood by being governed, was being brutally oppressed by a very powerful military apartheid state.

As activists and campaigners we have to ask ourselves, if people aren’t getting angry about our forms of activism and campaigning, are they having any impact? Because, especially in so-called Western countries and the Global North, polite activism and campaigning is important for our governments to be able to hail the freedom of the press, of opinion, freedom of political activity that they trumpet. The fact that they do this at the same time as imprisoning a man (Julian Assange) who through the practice of journalism exposed their war crimes, and hope to imprison him for at least 176 years, suggests that when the provision of information, when campaigning and activism becomes impolite, and actually having an impact, then our liberal democracies are far less keen on it.

The forces of power that control our societies are a combination of economic and political power that has become completely intertwined and inseparable, are remarkably powerful, they control the media, they control public discourse, they control our political processes. They are not going to give up that power because someone politely asks them to. They are not going to give up that power if the vast majority of people ask them politely to. They are only going to cede power if forced to do so.

I have seen that both in the environmental movement and I’ve seen that in a small example of it in the arms trade, on the environmental side – a variety of environmental groups have over a period of time been sort of bringing the main business district of London, known as the City of London, to a halt, by occupying bridges and other key thorough fares into and out of the city. This has caused outrage, obviously on the Right, and among liberal commentators, and it has caused outrage as actually having an impact on the bottom line. So now we are actually threatening that power.

The traditional media, the established media, is demanding that these activists and campaigners re-think the politeness of their campaigning because it is actually having some form of effect. Let me give you the arms trade equivalent. There is a small group in the UK called Palestine Action. They decided that all the campaigning and activism they had been involved in on the issue of Israeli apartheid and the occupation of Palestine as well as the global military’s role in that, have fallen on deaf ears, and the situation in the Occupied Palestinian Territories has actually been getting worse and worse. We have seen over the past two days, at least 14 people murdered in Jenin by Israeli occupying forces. Our governments dare not even mildly rebuke Israel for its actions in the Occupied Territories, for the pogroms that are being carried out by settler movements which have the support of the fascist Israeli government and of the Israeli occupation forces.

With all this in mind the group Palestine Action says, well, how can we show solidarity with Palestine in a meaningful way? They identify the fact that the Israeli arms company Elbit Systems, which is the pioneer of drone technology, that continues to manufacture drones that are used in the Yemen conflict, that are used in the Ukraine-Russia conflict, but most notably are used in the Occupied Palestinian Territories. They started occupying Elbit factories in the UK, of which there are ten, producing parts and components for drones that actively enabling violations of international humanitarian law and committing war crimes, and these people are saying this is unacceptable.

They occupy those factories, and over a period of less than a year and a half, they have caused the permanent closure of two of those Elbit factories in the UK. The biggest remaining factory in Leicester is currently under siege, and has been since the beginning of May (2023) not been able to operate. Elbit Systems lost a £280 million ($366 m) contract with the UK Ministry of Defence as a direct consequence of the actions of Palestine Action. Hundreds of people have been arrested, but most of the cases were dropped before they ever came to court because Elbit Systems didn’t actually want the reality of what they do and what their factories produce to be raised in court case after court case. Both the Crown Prosecution Services and Elbit Systems itself, British law enforcement and British intelligence, do not know how to react to this direct action by Palestine Action.

It is probably the most effective campaign against a specific arms trade entity that has committed huge atrocities around the world. I am beginning to think more and more that it is this sort of impolite direct action that should be at the forefront of our campaigning and activism against militarism, against the despoliation of our environment, and against the political-economic system that requires both militarism and climate catastrophe to continue its profits.

Rejecting the Occupation Industry

Maddox: What do you have to say about Israel’s occupation as a commodity for export?

Feinstein: I do a lot of work on Israel, as I do on Saudi Arabia, the US, the UK, and Europe, because Israel plays an incredibly important role in the global arms trade. It effectively acts as both a research and development centre and a shop window for the US arms industry and for the European and UK arms industries.

Not only does the US government provide the Israeli government with around $4 billion a year, money which interestingly never leaves the US, as it is used on Israel’s involvement in R&D for American defence companies. How is that R&D done? It is done in the Occupied Territories and on the Palestinian people. Some of the stuff that is tested in the Occupied Territories is explicitly banned by international treaty, but Israel still uses it, and often the US, (as they) are not signatory to those treaties. Sometimes even the US uses cluster munitions, and Israel still uses cluster munitions constantly in the Occupied Territories.

Whenever there is a major incursion into the Occupied Territories, Israel will hold an arms fair in the immediate aftermath and often what happens is there will be special invitees, you don’t get to say I will come to one of your arms fairs, you need to be invited, and it is key military personnel, key procurement officers, from all the world’s countries, particularly the least democratic most oppressive countries in the world.

I have been to one of them, before I started publishing on this stuff, and they actually show footage of what has just happened in the Occupied Territories and they have people telling you as you sit there, individually, exactly how effective the weaponry has been and how it has worked in eliminating targets. They lie pathologically about how such hi-tech equipment does not affect civilians, whereas exactly the opposite is the case.

Jeff Halper has done some extraordinary work on occupation as an economic commodity. Israel sells aspects of its occupation philosophy, equipment and methodology to the rest of the world, and especially to that part of the world that buys in to the sort of ethno-nationalist project of which Israel itself is a part. You have this extraordinary circumstance in the world today where somebody like Viktor Orban, the prime minister of Hungary, who is an out-and-out anti-Semite, who uses anti-Semitism, caricatures of George Soros and other Jews to win election after election in Hungary, is greeted with adulation in Israel every year. How the current Indian prime minister (Narendra Modi), who himself is conducting an ethno-nationalist project, is a great friend of Israel. How the president of the Ukraine (Volodymyr Zelenskyy) can describe wanting to turn his country into the Israel of Eastern Europe, with nobody asking the question, what do you mean? A racist occupying state? And where criticism of Israel is now seen as anti-Semitic even when it comes from life long anti-racist Jews, many of us the sons and daughters of Holocaust survivors who understand exactly what anti-Semitism is.

Jeff Halper’s work shows Israel very cleverly markets itself as a sort of all-in-one solution. We will do everything, if you are an aspiring politician in an African country, we will come and help you develop a political party, we will develop your election materials for you, we will keep you secure, and once we have got you into power, you will then buy all your military, homeland security, and torture and surveillance equipment from us, because we use it all, we make it all and we know what will be good for you. The Israelis did this in the case of a politician called Mrs (Joyce) Banda in Malawi, an extraordinary story I won’t go into here, but it is worth looking at.

Israel effectively markets itself on the very worst of what it does in the Occupied Palestinian Territories, and any of us who oppose not just anti-Semitism, but Islamophobia, anti-Black discrimination, racism and discrimination of any sort, have a responsibility to call this out. At a time when our governments in the Global North are trying to make it illegal to protest against Israel, to criticise Israel, to boycott Israel, because the reality is that the Boycott, Divestment, Sanctions (BDS) movement, which I regard as a form of direct action, which was absolutely central to bringing about the end of apartheid in South Africa, will do the same thing in Israel.

I think for those of us that are anti-militarist and anti-racist, we have got to take this entire complex, and I think the word Occupation Industry is probably appropriate here, and we have got to reject it at a human rights level and also reject it because of the impact it is having around the world where Israeli spyware is being used by the world’s worst intelligence agencies to oppress and repress entire populations and extraordinary activists around the world.