The UK government says it’ll crack down on the fortunes of Putin’s supporters. Experts say it needs to go much further.
- The UK has promised to crack down on Putin’s allies — but that’s complicated by London’s reputation as a “laundromat”.
- The city is a haven of Russian dirty money, undermining plans to impose sanctions, experts say.
- Oligarchs are drawn to London due to its free-flowing financial markets, lavish houses, and international standing.
Boris Johnson’s government has taken a tough line on Moscow in recent weeks as Russian President Vladimir Putin masses hundreds of thousands of his troops on the Ukrainian border.
So far, the UK has sent more than troops to the countries neighboring Ukraine and sent thousands of anti-tank weapons to Kiev while other European powers including Germany were accused of floundering.
Earlier this week Johnson flew to Kiev in a show of solidarity and warned that any such incursion would be “disastrous”, while his Foreign Secretary Liz Truss held a press conference with her counterpart Sergey Lavrov that was remarkably frosty.
Johnson’s government broke ranks with other European powers to accuse Moscow of a plot to install a puppet leader in Ukraine. Meanwhile ministers on Thursday tabled new legislation designed to beef up the sanctions regime against Russia if Putin does re-invade Ukraine, with Defence Secretary Ben Wallace warning on Friday of the “economic impact” that Russia would face if it did provoke a war.
But there’s a contradiction at the heart of the UK’s ostensibly muscular new position: London’s own reputation as a playground for Russian oligarchs, some of whom are alleged by MPs to have close links with Putin himself.
Hundreds of wealthy Russians have made their home in the UK in recent years, drawn to the expensive townhouses of Belgravia and Mayfair, the UK’s exclusive private schools, and London’s reputation as a cultural hub. Russians also use London’s debt market to raise billions of pounds a year, and there are 23 Russian companies listed on the London Stock Exchange, The Wall Street Journal reported.
Such is the scale of the issue Roman Borisovich, an anti-corruption campaigner, has run guided bus tours around London pointing out lavish homes owned by former ministers and wealthy friends of Putin.
Many of the wealthy Russians living in London have made their fortunes entirely legitimately. But lawmakers and campaigners say a significant portion of the Russian money flowing into London and being used to buy up lavish properties across the UK is suspicious.
In 2018 Transparency International identified 176 properties worth £4.4 billion that had been bought with suspicious wealth, over a fifth of which came from Russian individuals. This figure was “the tip of the iceberg” when it comes to London property, the anti-corruption charity said.
But it’s not just property that has been infiltrated. A 2020 report by the Intelligence and Security Committee (ISC) described London as a “laundromat” for dirty money and found that “there are a lot of Russians with very close links to Putin who are well integrated into the UK social and business scene, and accepted because of their wealth.”
Those same figures launder their reputations, as well as their fortunes, through London, said Thomas Mayne, a corruption expert at Chatham House.
“When you have these Russians who have loyalty to the Kremlin in the UK, that money can be used for a variety of malign purposes, for a variety of types of influencing that may be detrimental to British democracy and British society as a whole. If they’re funding disinformation campaigns or funding pro-Russian think-tanks.”
The UK has actively cultivated its reputation as a haven for foreign capital in recent decades. “Ever since the collapse of empire, we’ve made our money by servicing rich foreigners in all sorts of ways,” said Edward Lucas, a senior fellow at the Center for European Policy Analysis.
Lucas, who gave evidence to parliament’s Intelligence and Security Committee for its 2020 report on Russian influence in the UK, added: “We pioneered the whole idea of lightly regulated global finance, and it basically keeps this country afloat.”
The UK is making renewed efforts to crack down on the inflow of illicit Russian money to the UK.
As well as a beefed-up sanctions regime, the government has promised to bring forward an Economic Crime bill which contains measures designed help expose and stem the inflow of illicit Russian money to the UK.
Liberal Democrat peers are also pushing to crack down on a loophole to stop ports which have been designated as post-Brexit “freeports” from being used to launder money.
The new sanctions legislation announced on Thursday substantially broadens the criteria for Russian sanctions, which could allow officials to cause greater damage to the Kremlin, including by targeting any individual deemed to be “obtaining a benefit from or supporting the Government of Russia”.
But the UK already has many of the anti-corruption tools needed to target individuals with links to the Kremlin, said Tom Keatinge, an expert in finance crime and security at the Royal United Services Institute, in an interview before the new legislation was published.
The government last year rolled out the UK’s version of the Magnitsky Act, which allows it to sanction individuals linked to corruption. The UK could also make use of Unexplained Wealth Orders or asset-freezing orders which were introduced specifically to deal with dirty money in the UK.
“A very great many of the oligarchs [Truss] would have in her sights could probably be targeted by the anti-corruption sanctions that were introduced in 2021,” he told Insider.
However, targeting individual oligarchs with links to Putin may not be nearly enough to dissuade Putin from military aggression, Keatinge said.
“If we’re going to have a war in Europe, going after the oligarchs to my mind is a bit like using a peashooter,” Keatinge said. “You need to be going after the banks, the energy companies [with ties in the UK.] You need to be going after the Russian economy, not after the individuals.”
Many experts have questioned why it has taken the threat of war in Ukraine for the UK government to step up its activity against illicit Russian money in the UK.
“I think it’s very clear that the UK government — and UK society as a whole — has been quite happy to accept this money without thinking of consequences down the line,” said Thomas Mayne, a corruption expert at Chatham House, during a Twitter Spaces event with Insider last week.
“Russia’s done some pretty bad stuff in the past, but only now are we thinking about cracking down on some of this Russian money flowing into the UK from Russia.”
The question of tackling dirty money in London may ultimately be a question of will on the UK government’s part.
Labour MP Chris Bryant, a member of the UK’s Foreign Affairs committee, on Thursday accused the government of being “lazy” in bringing forward new sanctions measures compared to other countries, adding: “We are Johnny-come-latelies when it comes to sanctions in this area.”
Diplomats in Washington have grown frustrated at the UK’s perceived lack of interest in tackling the problem. The Centre for American Progress, which has close links to the Biden administration, said in January that perceived lack of action was compounded by “close ties between Russian money and the United Kingdom’s ruling conservative party, the press, and its real estate and financial industry.”
Lucas argues that the government needs to go much further to make the UK less hospitable to illicit money, including by introducing sweeping reform to Companies House, the UK’s registrar of private companies which he described as a “black hole” for illicit finance.
“There’s a vast agenda of very overdue, boring, important stuff to do which is a world away from the tabloid headlines, but without that nothing else we do will be serious. If you don’t know who owns stuff, you don’t really know how to apply the sanctions,” he said.