Dirty money still flows through the capital which isn’t sending a good message to UK business, writes Arun Kakar
The laundering and stashing of corrupt capital by Russians in Britain poses a significant national security risk and must be stamped out, according to a damning report from the House of Commons foreign affairs committee, which claims the UK is instead turning a blind eye to Russia’s dirty cash.
Although it is hard to estimate the amount of dirty money flowing through the capital, the National Crime Agency has it at around £100 billion a year: most of which goes straight into luxury assets such as yachts, art and property. Tom Tugendhat, foreign affairs committee chairman, says: ‘The scale of damage that this “dirty money” can do to UK foreign policy interests dwarfs the benefit of Russian transactions in the City. There is no excuse for the UK to turn a blind eye as President Putin’s kleptocrats and human rights abusers use money laundered through London to corrupt our friends, weaken our alliances, and erode faith in our institutions.’
While Russia is only the third largest offender — coming close behind China and Hong Kong respectively — the chief problem, experts say, is that the wealth of its oligarchs has a direct relationship with the ability of President Putin to exercise his foreign policy objectives. This makes dirty Russian money a national security risk.
Most Russians in the UK are not linked to the Kremlin, of course, but notes Tom Keatinge of the Royal United Services Institute: ‘The fact of the matter is that there is an agglomeration of Russian money in the UK, and with that comes people and activity that I am not sure we want to have here.’
Britain has been slow to deal with these issues, with a lack of both political will and resources damningly cited as major problems, according to the MPs. The UK already has new legislation such as Unexplained Wealth Orders (UWOs) in place designed to counter illicit wealth, but as the committee notes, there is a ‘clear need for stronger political leadership to show the government’s commitment’ to rooting out the problem. Observing due process cannot be an excuse for lethargy.
Worryingly, the government doesn’t treat foreign companies with the same parity as domestic firms, say the MPs. British companies and firms are required by law to declare the names of any individuals controlling more than a 25 per cent stake, yet the same won’t be required of foreign company owners who operate or purchase UK property until 2021. Some 176 properties worth a total of £4.4 billion were found to have been purchased with ‘suspicious wealth’ in the UK, according to Transparency International. Information on the properties, over a fifth of which were Russian, was only obtained through leaks and open source information. It is merely the tip of the iceberg, believe many.
The report paints a picture of government as having the desire to remove corruption, but lacking the facility and resolve to do so. As a financial centre and G7 member, the UK has ‘significant leverage’ to counter the Kremlin’s aggressive behaviour, yet the government won’t block UK investors from buying Gazprom bonds or stand beside even the US on unified financial sanctions.
So what needs to be done? Clearly, the government needs to find the will to meet the challenge of dirty money of all types — not just Russian, but if this is the most dangerous, then it should surely find itself at the top of the to-do list. Fundamentally, the case for vanquishing corruption is irrefutable. The reputational damage of being associated with dirty money will ultimately also scare away clean money, which is far more abundant. In the days of Common Reporting Standard and international disclosure the days of grubby backroom deals is over. Wise heads in the City, wealth management and professional services know this already. The government and the authorities must play catch up before too much damage is done.
Arun Kakar writes for Spear’s