From Russia with loot
The City is facing calls to curb the flow of illicit money from Moscow
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