The UK government has vowed to step up its efforts to stem the flow of what Prime Minister Boris Johnson has called “dirty money” this week, with accelerated measures presented to Parliament, presented in response to Russia’s invasion of Ukraine. Johnson said the rules, which had been in the works for several years, were a warning to supporters of Russian President Vladimir Putin.
“There will be nowhere to hide your ill-gotten gains,” Johnson said in a declaration. The UK National Crime Agency estimates that money laundering costs the UK more than £100 billion ($133 billion) every year. the Time to London reported that Washington officials had expressed concerns about whether the UK could impose tough enough sanctions, given the amount of dirty Russian money circulating in the UK, and how that might affect international sanctions efforts.
Johnson’s revamped economic crime bill, introduced on February 28, will require anonymous foreign owners of British property and businesses to reveal their identities, to ensure that kleptocrats cannot hide behind shell companies. The bill will also cap the legal costs that law enforcement would incur trying to seize the assets of the oligarchs.
President Joe Biden also spoke about US plans to sanction Russian oligarchs during his first State of the Union address on Tuesday. “We join European allies in finding and seizing their luxury yachts and apartments, their private jets,” he said. noted. “We come for your ill-begotten gains.”
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Britain’s economic crime bill seen as too little, too late
Campaigners and experts say the UK’s reform is long overdue and does not go far enough. Parliamentary bureaucracy could delay progress for months, while Russian troops advance further into Ukraine in days. “There’s definitely a feeling of too little too late,” says Thomas Mayne, a researcher at Chatham House think tank who specializes in corruption studies. “The oligarchs feel their money is safe here.”
London’s position as a global financial center, combined with a friendly regulatory environment and its proximity to Russia, has made the city an attractive location for some oligarchs and kleptocrats. Billionaires were able to buy luxury properties and send their children to private schools UK, often with little examination of their sources of wealth. Until last month, they could also access a so-called golden visa scheme, which allowed wealthy investors to enter a fast-track process to live in the UK.
After facing ridiculous for having initially sanctioned just three Russian oligarchs and five banks, Johnson expanded the list to include 100 companies and individuals, eight of whom are oligarchs. He also has canceled the golden visa systemwhich since its inception in 2008 has allowed wealthy overseas investors to move to Britain if they have at least £2 million ($2.7 million) to invest in the UK. British Foreign Secretary Liz Truss said on Monday the government was working on a “list of results” other oligarchs with ties to the Kremlin.
Opposition lawmakers in the UK have noted that only two people on the list of 35 oligarchs and others who allow the Putin regime, named by the imprisoned Russian opposition leader Alexei Navalny, are on the UK Sanctions Register. Roman Abramovich, a billionaire, former Russian politician and owner of Chelsea football club, is one of those named on Navalny’s list. Abramovich has refuse have near ties to Putin or the Kremlin.
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Abramovich, who has not faced any government sanction, said in a declaration On Wednesday, he put Chelsea football club up for sale. It would also be try to sell its London properties. British Labor Party lawmaker Chris Bryant told parliament on Wednesday that Abramovich was “terrified to be sanctioned, that’s why he will already sell his house tomorrow and sell another apartment as well.” Labor Party leader Keir Starmer also interrogates the Prime Minister on Wednesday on why Abramovich was not facing sanctions.
A lack of transparency
To analyse by the anti-corruption association Transparency International UK found at least £1.5 billion ($2 billion) in British property belonging to Russians accused of financial crime or with links to the Kremlin. Of this amount, £830 million ($1.1 billion) is owned by companies registered in the British Overseas Territories and Crown Dependencies, according to the analysis. The true figure should be much higher, but the obscurity of the current system, which has some hurdles the creation of front companies, means that information about the wealth of kleptocrats is often only obtained through public data leaks, such as the Pandora’s Papers published last year.
The lack of transparency in the UK property market means dirty money can flow through the country undetected, says Rachel Davies Teka, Advocacy Manager for Transparency International UK. It is also ccomplicates the effectiveness of sanctions. “You can’t actually freeze assets if you don’t know where they are,” she says.
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Using electricity usage and electoral vote records, Transparency International UK has found evidence that many luxury developments in London are uninhabited. “There are thousands and thousands of houses generally across London that are basically empty vaults,” says Davies Teka.
Theoretically, forcing foreign owners to register their identities when buying properties in the UK would make it harder for criminals to launder money or kleptocrats to hide their wealth using luxury developments. However, Transparency International UK pointed out that a loophole will allow companies that own assets to register as having “no beneficial owner”. This allowance would have already been used for money laundering and concealment of assets in the UK commercial register, Companies House, according to Open Democracy. Additionally, the requirement for existing owners to register their identity will not come into effect until 18 months after the bill is passed, a timeframe that Starmer noted is “far too long for the Ukrainian people”. In Parliament on Wednesday, he demand Johnson, “Why are we giving Putin’s cronies 18 months to quietly launder their money out of the UK property market and into another safe haven?”
Transparency International UK said in a statement that owners of at least 6,000 properties purchased more than 20 years ago will not be required to register their property. The organization also told the Guardian that the £500 ($668) a day fine in the UK for non-compliance is “small change for those with deep pockets”.
Enforcement Fee Cap
The Economic Crimes Bill also addresses concerns that law enforcement was deterred from seizing the assets of oligarchs by the risk of incurring extremely high legal costs – the current investigative powers, known as the name of Unexplained Wealth Orders, is believed to have only been used by the UK’s National Crime Agency. four times since their introduction in 2018. The bill provides a cap on these costs to encourage better enforcement.
Matt Ingham, a lawyer who specializes in unexplained wealth orders, says prosecutors often struggle to prove their suspicions that an oligarch obtained their assets illegally because the individual’s country of origin can refute the allegations. “The British authorities still have a stumbling block in the form of uncooperative foreign regimes who may not be willing to help for political reasons,” he said.
Lawyers, accountants and bankers who advise oligarchs, criminals and dictators have also been critical to allow the flow of dirty money around the UK Regulated professionals are required to report suspected money laundering, but watch dog the National Crime Agency has said in the past that lawyers have not done so. Mayne and Davies Teka both argue that the self-regulating nature of these professions means that so-called enablers are often not deterred from handling illicit assets.
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A combination of an intense political focus on the Russian invasion, bolstered law enforcement resources, and increased corporate focus on environmental, social, and governance commitments may deter the usual network of oligarch enablers, says Timothy Ash, an economist specializing in emerging markets. Whether the UK’s shift in stance on Russian assets is enough to help Ukraine is another question, say observers like Mayne. “Several months or years later for change is not really enough as we try to clamp down on Russian money now to prevent further incursions into Ukraine,” he says.