Clean-up must go beyond Russia
HOW effective is a clampdown on Russian money in London likely to be? Here’s a clue. Almost at the very moment Theresa May was promising to get tough, European investors, including some in London, were lining up to buy into a bond issue in state-owned gas giant Gazprom, which was heavily oversubscribed.
A cheeky tweet from the Russian embassy – ‘Business as usual’ – summed up the situation.
The poisoning of the Skripals may be a game-changer but, so far, any concerns politicians, the security services, or indeed the rest of us might have about some Russian companies have come a distant second to the money to be made out of them.
BP has a 20 per cent stake in Rosneft, the state oil firm, and it’s only a matter of a few months since aluminium magnate Oleg Deripaska floated his company, EN+, on the London market in one of the biggest offerings of last year. Quite openly, the EN+ prospectus declared that the proceeds of the share sale would repay debt owed to VTB, a Russian bank that was hit by sanctions following Vladimir Putin’s excursion into the Crimea in 2014. Even the concerns of MI6 about the listing were ignored.
In the inflammatory atmosphere following the poisoning of the Skripals, there is a danger of confusion.
London certainly does have a problem with dirty money – but not all Russian cash is tainted, and the laundering extends far beyond corrupt roubles.
UK-headquartered banks have shamefully shown themselves ready to act for the crooks and despots of the world, as HSBC and Standard Chartered, both heavily fined for such behaviour, have shown.
An indiscriminate drive against Russian business and wealth here would be wrong in principle and would also miss the much more important question: how can London retain the openness which makes it so attractive as a financial centre and a magnet for wealth and talent from around the world, whilst maintaining high standards?
London has historically punched far above its weight in insurance, banking and investment because of the City’s lack of insularity and its outward gaze. It’s a by-product of our maritime heritage and a marked contrast with Wall Street, which is focused largely on domestic American business.
But the light-touch regulation pioneered in the Blair/Brown era led to a collapse in standards that resulted in an influx of dirty cash and undesirable business – by no means all of it Russian and plenty of it home-grown. Rules already exist to combat this situation, including new Unexplained Wealth Orders that apply to individuals whose lifestyle appears out of kilter with their official earnings.
We have stock market listing rules and anti-money laundering regulations aplenty. Somehow, though, these seem to make it really hard for an ordinary saver to open a new deposit account at their local branch, while allowing Mexican drug lords to carry on with abandon.
There are worrying signs that London might be losing its allure for big multinationals. In the past few days, Unilever, the AngloDutch consumer goods giant, announced it is moving its nerve centre to Rotterdam, in a shift that it claims has nothing to do with Brexit. Perish the thought – our laissez-faire takeover rules also played a part. Then the Pru revealed it is splitting itself into two, to focus on its fast-growing Asian business, which bosses regard as much more exciting than the UK side.
There is also a growing feeling that Saudi Aramco, the stateowned oil giant, may opt against a London listing because of disclosure rules that go against the instinct for secrecy. That would dash long-cherished hopes among bankers, PRs and other advisers of a fee bonanza.
The row over Russian money is a reminder that the City needs to be open – and clean. In a race to the bottom, there are no real winners.
Banks with HQs in the UK have been ready to act for the world’s despots