In the UK, the tide is turning against Russian money – POLITICO
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Oliver Bullough is the author of “Butler to the World: How Britain Becomes the servant of oligarchs, tax dodgers, kleptocrats and criminals”, which will be published on March 10.
LONDON — The first man to sell part of Britain’s capital to a post-Soviet Russian was, at first, very happy to tell me about it. He was a real estate agent – chubby, English like an extra from a Hugh Grant movie, and he was laughing out loud at the ease with which the money had come in. The sale took place in early 1992. Communism had collapsed a few weeks earlier, and a A man called “Alex something or other” plus two friends literally walked down the street, into his London agency, and said they wanted apartments.
“It bothers me that I can’t remember his last name, but he’s moved on to bigger things,” the man said. “He’s probably a billionaire now.” Alex and his two friends have each bought a flat for prices ranging from £200,000 to £320,000, and the commission from the sale has likely bought the estate agent a new car. The money he has since earned from sales to the Russians has not only enabled him to buy a house or two, but also to send his children to school. “It’s very common to sell to Russians,” he said. “If they wanted it, they would pay for it, no matter the cost.”
What a triumph, and what profits. No wonder he loved remembering it. But he and I weren’t talking in the early 1990s but five years ago, and even then more and more people were wondering if selling large parts of our cities to the Russians hadn’t been a little silly. Vladimir Putin had just organized his strike against the 2016 American elections. The Russian president had annexed Crimea and was interfering more and more brazenly in the countries of others. A few months after our conversation, the real estate agent wrote to me asking me not to mention his name on the book I was writing.
If the virtue of welcoming Russian money was questionable then, now – with Putin’s tanks on the outskirts of Kiev and Russia a pariah in the face of the kind of sanctions previously imposed on countries like Iran – a profession like that of the real estate agent would put an end to his career.
London has long faced a realization of its role in creating Russia’s kleptocracy, and it will make many people uncomfortable. I suspect that many London-based professionals currently want to be able to undo records of deals they have made with the Russians over the past three decades.
London’s financial ties with Moscow, of course, did not begin in 1991. From the 1950s, the Soviet Union began to keep its dollar deposits in a London-based bank, fearing that keeping them in the United States States does put them at risk of being frozen (a prescient concern, in light of recent events). These offshore services provided a lucrative source of income for a Britain at the time struggling to find a post-imperial place in the world.
Soviet institutions were adept at hiding their financial dealings behind shell companies registered in places like Jersey, and it’s widely believed that the KGB used the secrecy available in Britain’s offshore territories, as well as in Switzerland and other equally discreet jurisdictions, to move his money. around undetected.
Given that many of today’s newly wealthy Russians hail from the Soviet ruling elite, it’s no surprise that they sent their money through the same channels as their predecessors. During the 1990s, a series of scandals caused prosecutors in the United States and Switzerland to pay more attention to the flood of inexplicable wealth. This is not the case in the UK, where London seized the opportunity to make the most of its sudden competitive advantage as a major financial center where wealth would not be encumbered.
The biggest ex-Soviet money laundering scandals that have come to light in recent times have all had a British connection, thanks to the complete lack of control over information entered when setting up companies or other business structures. company at Companies House, the UK business register. .
When officials at Danske Bank’s Tallinn branch wanted to offer clients transferring tens of billions of dollars complete anonymity – as impenetrable as anything available in Zurich in its heyday – they set up a limited partnership registered in the UK with an account. This was only possible because Britain did not insist on company registrations providing reliable ownership information.
As a means of attracting investment, it worked. Hundreds of Russians have bought up expensive properties in the tony Belgravia, Knightsbridge and Highgate areas of London, as well as in the leafy counties around the capital. Transparency International has identified £1.5billion of property owned by wealthy Russians in the UK, and it’s clearly just the exposed tip of the buried mountain of wealth.
Between 2008 and 2015, 706 Russians purchased Tier 1 “golden” visas to gain residency in the UK, in addition to an unknown number in previous years when visas had a slightly different name, bringing at least £729 million of investment in the UK economy. There were no controls over where the money came from, or even requirements for it to actually be invested in the UK. It simply had to be invested in a British company, which could in turn own property in Russia.
“The New Normal”
Sometimes it seemed like the whole town was in on it. It was not only real estate agents and the government’s visa department who profited, but also accountants, financial institutions, art dealers, yacht brokers, private schools and managers of reputation. Members of the House of Lords have served on the boards of major Russian companies listed on the London Stock Exchange. Long-running battles between Russian tycoons in the Commercial Court have earned lawyers millions of pounds in fees. The City of London loved Russian money, and officials’ only goal was to keep it flowing.
It’s not that no one was aware of the potentially corrosive effect of Russian money. It was that no one in power was interested in doing anything about it.
Thanks to the likes of Boris Berezovsky – the hyperactive tycoon who fell out with Putin and fled to the UK in 2000 where he waged a raucous propaganda campaign against the Russian president – there was a misconception among journalists that London was a hotbed of Russian opposition. In reality, the UK was a playground for anyone with money to spend, regardless of their political views or, in some cases, any crimes they might be associated with.
In 2006, after Russian agents came to London to kill dissident Alexander Litvinenko with polonium-210, the British government took almost no substantive action. “This case obviously causes tension with the Russians. They are too important for us to argue,” an unnamed cabinet minister from then British Prime Minister Tony Blair told media before Litvinenko’s body was even released. not be buried.
In 2017, following a new money laundering scandal, parliamentarians pushed for minimal changes to company law to prevent UK shell structures being used for money laundering silver. The Treasury responded by further deregulating them, demonstrating how determined the government was to keep money flowing, whatever the cost.
A few years later, a 2020 report by Parliament’s Intelligence and Security Committee concluded that “Russian influence in the UK is ‘the new normal’, and there are many Russians with very close ties with Putin who are well integrated into British affairs. and the social scene, and accepted because of their wealth.
It was a sobering report, offering an alarming conclusion, but Prime Minister Boris Johnson’s response was to claim – ridiculously – that it was an attempt to delegitimize the Great Britain’s departure. Britain from the EU and completely rejected its conclusion. As recently as January, a government minister resigned, disgusted by the Johnson government’s failure to tackle illicit finance.
This is the backdrop to the Ukraine-inspired British scramble to expose and expel dirty Russian wealth and its owners.
In short, not much has changed. Many measures are gimmicks. Canceling golden visas makes no sense, since most of their recipients have long since been granted citizenship; blocking the RT TV channel will have little impact, as not many people watch it anyway. And those measures which are potentially significant – such as a measure long promised but never delivered to force offshore companies with property in London to reveal their true owners – will not bring results for months.
A white paper on Companies House contains measures that could theoretically end its role as the main supplier of front companies used to launder money out of Russia, but cleaning up the mess caused by decades of deliberate under-regulation will take more than of legislation.
At the heart of Britain’s acceptance of dirty Russian wealth is the chronic underfunding of law enforcement. Even with a generous assessment, UK law enforcement agencies spend just £42m a year fighting financial crime. Most experts believe it would take at least twice as much to fix the problem, and Johnson has promised no additional resources, beyond renaming a National Crime Agency office “The Kleptocracy Unit.” .
For too long Britain – like the estate agent who sold that first house – has seen Russian money purely as a source of profit, not realizing that oligarchs don’t just stop being oligarchs because they left Moscow. Extracting their money, and the influence it buys, from Britain will be the work of many years and requires far more attention than the government has given it so far.