In the 1990s, Russia’s new capitalist class made much of its money from the questionable privatization of state assets; They then looked for places to safely save and spend their newfound wealth, far from the legal chaos of post-Soviet Russia.
London was classified as “a particularly favorable destination for Russian oligarchs and their money” since the introduction of the British investor visa system in 1994.
The UK offers rule of law but also light regulation, along with investment opportunities in the capital’s property and financial markets. Another major draw was the secrecy of anonymous British shell companies and the city’s network of offshore financial centres.
And alongside top-notch private schools and a cosmopolitan social scene, there were lawyers, accountants, and public relations guys to launder money and reputation.
Why were they welcomed?
For good reasons, as well as for mercenary reasons. It was genuinely believed that welcoming Russian companies and business leaders would improve relations with Russia and help raise business standards there. The investments made would also benefit Great Britain. “The presence of these exotic creatures, the billionaires, is good for the entire ecosystem,” said then-Mayor of London Boris Johnson in 2014.
Today, an estimated 150,000 Russians live in London – most of them have no ties to the Kremlin, and many of them came here to escape it: Mikhail Khodorkovsky, for example, once Russia’s richest man, spent a decade in prison after exposing state corruption. However, it is now widely acknowledged that the UK was far too welcoming.
How much Russian money is in London today?
A huge amount. In the seven years since Labor introduced the Tier 1 Golden Visa scheme in 2008, 700 Russians and their families have each invested more than £1m in Britain in a bid to quickly obtain British citizenship. This year, official figures recorded £27 billion of Russian investment in the UK.
Transparency International estimates that since 2016 £1.5 billion worth of British property has been bought by Russians accused of corruption or ties to the Kremlin. In 2020, the Home Office reported that the UK “continues to see a significant volume of Russian or Russia-related illicit funding channeled through the UK economy”.
London has been used entirely legally by Russian companies like energy giant En+ to raise capital abroad. More than 20 of them, with a combined market value of more than £400bn, are listed on the London Stock Exchange, giving them arguably undeserved credibility.
Why is all this so problematic?
Russia is widely viewed as a kleptocracy, a mafia state run by an elite who have become enormously wealthy. Its business people are not normal business people. According to Gold of Moscow, a report by the Foreign Affairs Committee, “today’s oligarchs owe their wealth to the President.” In turn, they act as “a private source of funding for the Kremlin.”
This raises moral and security issues in dealing with their money; The bond “also forces them to do all sorts of jobs for Putin.” This is a worrying prospect considering that Russian influence has become such a powerful force in Britain. Since Boris Johnson became leader of the Tory party, she has received £2million in donations from sources linked to Russia. Several members of the House of Lords have worked for companies linked to the Russian state.
what is done now
Since Putin’s invasion of Ukraine unprecedented steps announced that it would close the “London Laundromat”. A freeze on assets was imposed on all major Russian banks; Over 100 companies and oligarchs have also been hit with asset freezes, travel bans and sanctions. The “Golden Visa” system was abolished.
A new white-collar crime law has been promised that will reform corporate rules, requiring those holding assets through offshore letterbox companies to declare their ownership on a register. A new ‘Kleptocracy Cell’ is being set up within the National Crime Agency to combat sanctions evasion and corrupt assets hidden in the UK. Russian companies have been banned from borrowing from UK markets and the Kremlin has been banned from issuing government bonds.
Will it work?
Theoretically it should work. But Britain has already pledged numerous anti-Russian crackdowns – following the 2006 assassination of Alexander Litvinenko, the 2014 annexation of Crimea and the 2018 Salisbury poisonings. Unexplained Wealth Orders were introduced in 2018 to curb the illicit wealth of suspected foreign officials crack down on corruption and those involved in serious crime.
However, due to the high cost of applying, the government has only issued four since then. Also, at this point, such action can at best be a matter of damage limitation.
Why can so little be done?
According to the Intelligence Committee, many Russian oligarchs in the UK are “apparently legitimate in every respect”.
The anti-corruption foundation set up by jailed opposition leader Alexei Navalny has compiled a list of 35 oligarchs it describes as “primarily responsible” for “Putin’s abuses”. They include Roman Abramovich and Oleg Deripaska, who have longstanding ties to Britain. Both deny any such role, and their position here is considered legally unassailable.
London’s law firms have been very helpful and fiercely protected their Russian clients with the help of Britain’s pro-plaintiff libel laws. “For Britain,” he said FT Last week’s invasion of Ukraine should be “a wake-up call about who she’s willing to do business with.”
https://www.theweek.co.uk/news/world-news/russia/955971/londongrad-cost-russian-linked-illicit-finance-uk Londongrad: What is the cost of Russia-related illicit finance in the UK?