From Rus­sia with loot

The City is fac­ing calls to curb the flow of il­licit money from Moscow

The Daily Telegraph - Business - - Front Page - Rachel Mil­lard

On his way to a meet­ing in Down­ing Street, deputy na­tional se­cu­rity ad­viser Hugh Pow­ell held to his side top-se­cret pa­pers set­ting out the Gov­ern­ment’s re­sponse to Rus­sia’s an­nex­a­tion of Crimea. But a long-lens cam­era trained on of­fi­cials walk­ing in and out of Num­ber 10 was enough to catch the gist: the UK should not “close Lon­don’s fi­nan­cial cen­tre to Rus­sians”.

Six years later, ten­sions per­sist be­tween the cap­i­tal’s open em­brace of in­vest­ment from Rus­sia and the wider de­sire to limit the state’s reach.

They resur­faced last month when the par­lia­men­tary in­tel­li­gence and se­cu­rity com­mit­tee pub­lished its long-awaited re­port into Rus­sia’s in­flu­ence in the UK.

It added to con­cerns that the UK’s mar­kets have pro­vided cover for klep­to­crats and crim­i­nals to laun­der money from Rus­sia, and acted as a plat­form for Rus­sian oli­garchs to gain po­lit­i­cal and so­cial in­flu­ence.

“This level of in­te­gra­tion – in ‘Lon­don­grad’ in par­tic­u­lar – means that any mea­sures now be­ing taken by the Gov­ern­ment are not pre­ven­ta­tive but rather con­sti­tute dam­age lim­i­ta­tion,” it warned.

In the fight to curb Rus­sian in­flu­ence and money laun­der­ing, cam­paign­ers are now turn­ing up the heat on their pow­er­ful “en­ablers” – lawyers, ac­coun­tants, es­tate agents and public re­la­tions pro­fes­sion­als.

They have, wit­tingly or un­wit­tingly, helped “in the ex­ten­sion of Rus­sian in­flu­ence which is of­ten linked to pro­mot­ing the ne­far­i­ous in­ter­ests of the Rus­sian state”, ac­cord­ing to the Rus­sia re­port, which calls for tougher se­cu­rity laws and sanc­tions.

Trans­parency In­ter­na­tional laid bare the role played by en­ablers in money laun­der­ing in a re­port last year, which found ev­i­dence of 86 banks, 81 law firms and 62 ac­coun­tancy firms that had, un­wit­tingly or oth­er­wise, helped move sus­pi­cious or cor­rupt wealth from around the world into prop­er­ties, jets, yachts, other as­sets and shell com­pa­nies. Firms ranged from those who had been de­ceived, to those that courted high-risk clients, to those that know­ingly helped with money laun­der­ing.

In one of the most prom­i­nent cases, in 2017, Deutsche Bank was fined $630m (£483m) by reg­u­la­tors in the

US and UK over a $10bn so-called “mir­ror trade” scheme, in which it bought Rus­sian stocks on be­half of clients and then shortly af­ter sold them through its Lon­don branch, cleared through New York. Deutsche Bank agreed the scheme “could have fa­cil­i­tated cap­i­tal flight, tax eva­sion or other po­ten­tially il­le­gal ob­jec­tives”, al­though it was “un­able to iden­tify the ac­tual pur­pose be­hind this scheme”, ac­cord­ing to re­ports at the time.

TI’s anal­y­sis found that clients at 72 UK banks and branches had re­ceived more then £570m in sus­pi­cious funds con­nected to the for­mer Soviet Union, more than a third of which was paid into just five UK bank ac­counts.

Anti-cor­rup­tion cam­paigner Ro­man Boriso­vich, for­merly an in­vest­ment banker, is con­cerned that lit­tle has changed since his 2015 Chan­nel 4 doc­u­men­tary From Rus­sia with Cash, in which UK es­tate agents sought his busi­ness de­spite him pos­ing as a cor­rupt of­fi­cial who had stolen money. Boriso­vich is co-founder of the “klep­toc­racy tours”, in which sight­seers are shown lav­ish Lon­don prop­er­ties snapped up by cor­rupt of­fi­cials.

“We need to see some more court cases,” he says. “Money is at­tracted by the fact it can come in anony­mously, buy prop­erty and en­joy it­self. The UK has cre­ated an at­mos­phere – a bub­ble – of wel­com­ing tainted money.”

Data sug­gests pro­fes­sion­als are not turn­ing a blind eye. The So­lic­i­tors’ Reg­u­la­tion Au­thor­ity says it has taken 94 so­lic­i­tors and firms to the So­lic­i­tors Dis­ci­plinary Tri­bunal for money

‘Money is at­tracted by the fact it can come in anony­mously, buy prop­erty and en­joy it­self’

laun­der­ing cases since 2015 – 25 of which have been struck off, and 14 sus­pended.

Es­tate agents alerted au­thor­i­ties to po­ten­tial cor­rup­tion or ter­ror­ist fi­nanc­ing 1,345 times over the last two years, ac­cord­ing to Na­tional Crime Agency data. That com­pares with 869 re­ports be­tween 2014 and 2016; it is not clear whether the flow of cor­rupt money is in­creas­ing or pro­fes­sion­als are get­ting bet­ter at re­port­ing.

Yet even well-in­ten­tioned busi­nesses can face prob­lems. “There is a lot of le­git­i­mate busi­ness from Rus­sia and pro­fes­sional ser­vices com­pa­nies in Bri­tain quite prop­erly are try­ing to get that bit of the busi­ness that is le­git­i­mate,” says Sir Mark Boleat, for­mer chair­man of the City of Lon­don Cor­po­ra­tion’s pol­icy and re­sources com­mit­tee.

“I’d be very sur­prised if the big pro­fes­sional ser­vices firms were not [vet­ting clients] all the time. It’s more dif­fi­cult when they have a sig­nif­i­cant client, then they per­haps wish they didn’t have that client – and they have to make a judg­ment of whether to keep them.”

He be­lieves money laun­der­ing rules are over-en­forced, and not nec­es­sar­ily in an ef­fec­tive way. “The nor­mal per­son strug­gles to open a bank ac­count. But I don’t think it has any ef­fect at all on sub­stan­tial money laun­der­ing which goes on,” he says.

Ben Cow­dock, from TI, hopes that the new Mag­nit­sky amend­ments, which al­low UK courts to sanc­tion peo­ple in­volved in se­vere hu­man rights abuses, could be ex­tended to those in­volved in ma­jor cor­rup­tion.

Nev­er­the­less, Boriso­vich is call­ing for a public in­quiry into the wider con­clu­sions of the Rus­sia re­port, which ac­cuses min­is­ters of un­der­es­ti­mat­ing the threat from Rus­sia. ISC mem­ber Ste­wart Hosie later said min­is­ters had “ac­tively avoided” look­ing for ev­i­dence of Rus­sian in­ter­fer­ence in UK democ­racy – a claim fiercely re­jected by For­eign Sec­re­tary Do­minic Raab. Rus­sia says the re­port is an ex­am­ple of “Rus­si­a­pho­bia”.

“To say ‘ac­tively avoided’ is so damn­ing – it can’t be worse,” says Boriso­vich. “Why have they ac­tively avoided? In­com­pe­tence? Or maybe the an­swer is deeper than that. The public needs to know.”

Lon­don’s fi­nan­cial cen­tre has been ac­cused of not do­ing enough to halt Rus­sian money laun­der­ing

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