UK failure to tackle ‘dirty money’ led to it ‘laundering Russia’s war funds’
The government’s failure to tackle Russian kleptocrats laundering “dirty money” through the UK has led millions of pounds used to finance Putin’s invasion of Ukraine to flow through London, a powerful committee of MPs has warned.
The commons foreign affairs committee said ministers’ complacency over “morally bankrupt billionaires using the UK as a safe deposit box” had led to “assets laundered through the UK … financing President Putin’s war in Ukraine”.
“The government’s unwillingness to bring forward legislation to stem the flow of dirty money is likely to have contributed to the belief in Russia that the UK is a safe haven for corrupt wealth,” the report said.
“Although ministers have spoken eloquently in the House about the need to clamp down on kleptocrats, rhetoric has not been matched by constructive action. Meanwhile, corrupt money has continued to flow into the UK.”
Tom Tugendhat, a Conservative MP, and chair of the foreign affairs committee, said the UK’s consistent failure to tackle international corruption had led the UK to become “a safe haven for dirty money” which he said was “a stain on our reputation”.
“Dirty money brings corruption to our homes and turns our institutions against us,” he added. “It attacks our society and our security. For far too long successive governments have allowed malign actors and kleptocrats to wash their dirty money in the London ‘laundromat’. Complacency has left the door open to corrupt wealth taking root and morally bankrupt billionaires using the UK as a safe deposit box.”
The report said “inadequate preparation and foresight” by the Foreign, Commonwealth and Development Office (FCDO) meant the government was slow to impose sanctions in response to Russia’s invasion of Ukraine.
The MPs said it was “shameful that it has taken a war to galvanise the government into action”, and bring in the Economic Crime (Transparency and Enforcement) Act 2022 intended to prevent corrupt funds being laundered through the UK property market.
However, the report warned that the measures still “do not go far or fast enough” and did little to address the “fundamental mismatch” between the resources available to the law enforcement agencies and the individuals they are targeting.
The committee repeated a previous call for a “substantial increase” in funding and expert resourcing for the National Crime Agency, Serious Fraud Office and other responsible bodies. “Without the necessary means and resources, enforcement agencies are toothless. The threat (that) illicit finance poses to our national security demands a response that is seen to be serious.”
Despite the government’s threats to impose swingeing sanctions against Russia, the committee said the sanctions regime had proved to be “underprepared and under-resourced”.
“The primary reason for early ineffective action on sanctions was inadequate preparation and foresight by the leadership of the FCDO and consequent understaffing within the sanctions unit,” it said. “We welcome the government’s expansion of the sanctions unit. But policy effectiveness requires practical backing, sufficient resources and the right capabilities, including the capacity to gather necessary intelligence to support designations.”
The committee also called on the government to publish its long-awaited review of the “golden visa” tier 1 investor visa scheme. “We note that at least eight individuals whom the UK has sanctioned in relation to Ukraine hold tier 1 visas,” the report added.