Londongrad: Does the U.K. now have a plan to crack down on Russian money?

Russian money is so ubiquitous, so notorious in Britain’s capital city that the global financial hub was long ago nicknamed “Londongrad.”

It is an old joke, but not so funny to anti-corruption crusaders, kleptocracy tour operators and frustrated lawmakers, who have watched as post-Soviet elites with ties to the Kremlin snap up London townhouses and English estates, often bought anonymously through shell companies, with the profits generated by Russia’s version of crony capitalism.

After Johnson promised new sanctions against 100 Russian banks, defense contractors and oligarchs, to punish President Vladimir Putin and his circle for the invasion of Ukraine, many said the move was long overdue.

“For too long, our country has been a safe haven for the money Putin and his fellow bandits stole from the Russian people,” opposition Labour Party leader Keir Starmer said, simply stating the conventional wisdom.

However, despite the outrage and shock caused by Russia’s aggression in Ukraine, some are skeptical about what will happen in Britain. The previous Conservative Party government has not made any significant progress in reducing dirty money in London.

There have been parliamentary investigations, which have issued many reports, one of the latest under the title “Moscow’s Gold” in 2018.

The British courts can compel targets to disclose their sources of wealth by using a toothless ordinance called “unexplained wealth”. A promise of ten prosecutions per year was made. Four prosecutions per year were promised, none of which was against Russians.

Instead, there’s an entire ecosystem of investment brokers, property agents, tax lawyers and “reputation managers” who have enriched themselves off Russian money in London.

The anti-corruption group Transparency International U.K., which has been researching real estate transactions in Britain since 2016, reported this past week that 150 properties in Britain, valued at $2 billion, were “owned by Russians accused of financial crime or with links to the Kremlin.”

“This is just the tip of the iceberg,” said Rachel Davies Teka, head of advocacy for the group, who added that 90,000 properties in Britain have been bought anonymously through shell companies, most registered in Britain’s Overseas Territories and Crown Dependencies, such as the British Virgin Islands. Tom Tugendhat is the chairman of the Foreign Affairs Committee. He stated that London’s involvement in global finance had brought “considerable benefits to the British people.” “But the reality is that the channels of wealth have also been carrying corruption and crime through our markets,” he said, adding that the government “has done little to address these dangers.”

Margaret Hodge, a Labour Party lawmaker who has led the charge to slow the sketchy foreign funds from flowing into business and politics, put it this way: “There’s a ‘for sale’ sign hanging over Britain.”

“Britain asks few questions, doesn’t care who you are, and doesn’t mind where your money comes from,” Hodges wrote in the Guardian newspaper.

Protesters who massed outside of Downing Street on Thursday night, many of them originally from Ukraine, told a Washington Post reporter they assumed the British establishment was corrupted by its embrace of Russian money.

As the red double-decker buses passed, a man speaking loudly claimed that Russia had “trillions of dollars” over the years from oil and natural gas.

” This money isn’t kept in Russia. He shouted, “That money is not kept in Russia. That money is located in London. New York. Switzerland.”

Protesters in London decried Russia’s attack against Ukraine on Feb. 24. (Karla Adam/The Washington Post)

Some of the demonstrators held aloft signs that read “Stop Russian money laundering in London” and “Block Putin’s wallets in London.”

Liubov Fodor, 53, a Ukrainian-born health worker, was in the crowd and accused Britain and its allies of enabling Putin since his 2014 invasion of Crimea. She said that instead of punishing Putin they have sponsored him by purchasing oil and gas and supporting oligarchs on the French Riviera.

London is known for being an attractive destination for global wealthy. London can be quite a nice place, and it’s not only for Russia’s poor. London is safe, cosmopolitan, with luxury goods at Harrods, skilled doctors on Harley Street, and posh boarding schools like Johnson’s alma mater, Eton College, which costs $70,000 a year for one boy’s tuition.

The growth of London’s financial services sector also happened to coincide with the collapse of the Soviet Union in the 1990s. Elites from the former U.S.S.R. had vast fortunes to spend, invest and launder — and the city provided the way.

“There is all sorts of dodgy cash in London,” said Helena Wood, a senior fellow with RUSI, a think tank. She stated that accountants and lawyers are available to distance wealth from sources. This can often be done by pouring money into London’s hot market for property, which is able to be inherited or flipped.

Johnson this past week announced the creation of a new “kleptocracy cell” at the National Crime Agency that will “target sanctions evasion and corrupt Russian assets hidden in the U.K.”

Wood, who used to work at that agency, said taking on oligarchs is difficult, and she is skeptical that the new unit would make much of an impact unless it’s backed with considerable resources.

Unlike drug traffickers who may eschew publicity, oligarchs are often willing to have their day in court. She said that “they turn up with banks and lawyers”, who face off against law enforcement officers and litigators lacking in resources. “I can only describe it as a David-and-Goliath battle.”

In one high-profile case, the National Crime Agency lost against the family of the former president of Kazakhstan. The agency used the “unexplained assets” statute to freeze three properties belonging to the family, one of which was located on a London street called “Billionaire’s Row.” However, the U.K.’s High Court ruled that the agency had not proved the funds were illegally obtained.

Britain has a legal system that helps to protect oligarchs. They can sue journalists and researchers under strict libel laws. However, they are able to keep their luxurious homes with indoor swimming pools and cinemas.

An oligarch’s enemies cannot buy a London judge.

A recent report on dirty money, from the Chatham House think tank, concluded that Britain “is ill-equipped to assess the risk of corruption from transnational kleptocracy, which has undermined the integrity of important domestic institutions and weakened the rule of law.”

The authors wrote that “the success of kleptocracy requires that the perpetrators are hidden in plain sight,” with “professional enablers” available to help exploit loopholes. They found out that money is not just being laundered in London but also reputations. According to the report, “Donations to charities, especially ones headed by British royals — are a crucial part.”

And so is giving money to political parties.

In 2008, Britain introduced the “golden visa” program, which allowed rich Russians and other wealthy nationals to live and spend in London — and after seven or eight years, to apply for British citizenship, which would allow them to donate freely to British political parties.

Between 2010 and 2019, Johnson’s Conservative Party received PS3.5 million from donors with a Russian business background, according to a study by the group Open Democracy. Since then, it appears that donations have increased. The prime minister promises a change.

After Putin’s troops entered Ukraine, Johnson promised that he would fix the loopholes before Parliament returns to spring recess.

He promised to bring in an economic crime bill. Britain will demand the identity of the owners of shell companies which buy property. The first time this has happened, a Kensington house or Cotswold cottage buyer would have to be identified with a name. This is not Johnson’s original idea. It was first proposed in 2016, two prime ministers ago.

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