Beyond Magnitsky: Britain, the Subcontinent and Dirty Money

Britain’s National Crime Agency can claim some successes against money of questionable provenance from the Indian subcontinent.

The Council of the European Union has begun the process to develop a European Magnitsky Act. This follows similar legislation in the United States and United Kingdom, restricting the freedom of movement of those involved in human rights abuses and corruption, and freezing their assets which are often held in or transferred via western banking systems. Named after a Russian opponent of corruption, Sergei Magnitsky, who died in 2009 after mistreatment in a Russian prison, the first Magnitsky Act was signed by President Barack Obama in 2012.

The UK Act saw its initial wave of sanctions this summer. Alongside 25 Russians, and 20 Saudis allegedly involved in the murder of Jamal Khashoggi, were two generals from Myanmar, and two North Korean organisations. In declaring an important post-brexit intervention on the global stage, the Foreign Secretary, Dominic Raab, was pictured with members of Mr Magnitsky’s family, and Bill Browder, a former investor in Russia who has become a tireless opponent of the Putin regime.

There are objections to acts which function in this way. These are arguably political as much as judicial processes, lacking the usual weight of evidence required to convict someone in a court of law. Senior figures in friendly nations accused of human rights abuses or corruption (and they do exist) are unlikely to appear. Whilst Saudi intelligence officers are listed for Khashoggi’s murder, the country’s de facto leader, Prince Mohammed bin Salman, is not. The British government has no wish to destroy diplomatic relations with Saudi Arabia over Khashoggi. In 2019, the United States used Magnitsky legislation to list former Karachi police chief Rao Anwar for his alleged role in over 400 extra-judicial killings in Pakistan, often targeted at the Muttahida Quami Movement (MQM). Curiously, Rao is not one of the 49 names on the British list, despite press reports of his frequent travel outside of Pakistan and business interests overseas. As further proscriptions have been indicated by Dominic Raab, the question of which politicians, security figures and businessmen from the Indian subcontinent will be sanctioned becomes more acute.

WHY LONDON MATTERS

An important financial centre, London offers a haven for overseas investors, with banking, financial and property services that make the United Kingdom’s capital the global city par excellence. Linguistic convenience, respected private schools and universities, tourist attractions, shopping and sporting venues also ensure the wives and families of kleptocrats of every political stripe are catered for. Britain’s resident diaspora communities also ensure long- and short-term visitors may remain insulated in their comfort zones. For justice and human rights to prevail over corruption and intimidation, Britain requires the will to disrupt this cosy scene. There are plenty of others who can, and should, join Rao Anwar on any list of those to be sanctioned.

Britain’s National Crime Agency can claim some successes against money of questionable provenance from the Indian subcontinent. In December 2019, Pakistani property tycoon Malik Riaz Hussain, owner of Bahria Town developments, one of Pakistan’s biggest private sector employers, handed over the keys to his £50 million Hyde Park mansion, as part of a deal which saw him give up £190 million in assets to the UK authorities. This money will then be transferred to the Pakistani government. Interestingly, press reports in that country accuse Bahria Town of using police officers under the control of Rao Anwar, to intimidate opponents.

A second challenge for the British authorities involves money flowing in the opposite direction—from London to South Asia. This pivots on the sustained defrauding of Her Majesties Revenue and Customs (HMRC). Frauds centre around the visa, tax and welfare systems, the creation of fake employees and benefit claimants, and what is known as carousel or MTIC (Missing Trader Intra Community Fraud). This is a bogus trade between two companies, where one charges Value Added Tax (VAT) but never pays it to the government, whilst the second then re-claims it from HMRC. From such simple frauds, millionaires have been created. An investigation entitled Operation Vex discovered the scale of frauds running since the 1990s. Sums in the billions were being transferred to the Indian subcontinent, the Gulf and Hong Kong, a percentage of which is believed to have helped fund Al-qaeda. Much of the detail of these court cases remains subject to reporting restrictions.

FUTURE CHALLENGES

The British government’s generous response to Covid19, in terms of supporting businesses and furloughing employees, will have proved a tempting feast to those criminals used to gorging at the British taxpayer’s expense. Arrests have already begun of gangs registering fake employees or making multiple benefit claims in periods where civil servants were overwhelmed with paperwork. For a minority of offenders, the knowledge they can leave the country if investigated or charged, reuniting with family networks and ill-gotten gains in the Gulf and Indian subcontinent forms a particular backdrop to their offending—they know they have somewhere to run to, where there is very little chance of being caught.

Without punishment, crime flourishes. Britain has extradition arrangements with India, although hardly satisfactory, as the case of Tiger Hanif demonstrates. Wanted for 1993 bomb blasts in Surat, in May it was announced Britain had refused a request for his extradition to India. There is no formal extradition relationship with Pakistan or Bangladesh, indeed British diplomats have even stated that they do not seek such arrangements with the latter. Whilst occasional extraditions from Pakistan to Britain have occurred, they tend to be in high profile cases after sustained diplomacy. In 2018 a Bangladeshi visa scam operating in London saw £13 million in fraudulent claims to HMRC, with five men, including a law student, jailed for a total of 31 years. By the time of the judge’s sentencing, however, three of the five defendants had left the country, with warrants issued for their arrest.

The Magnitsky Act offers a possible tool going forward. But the challenge of dealing with crime, human rights violations and terrorism in the intersection between Britain and the Indian subcontinent, continues.

Dr Paul Stott is a writer and commentator based in the United Kingdom. He tweets @ Mrpaulstott

In 2019, US used Magnitsky legislation to list former Karachi police chief Rao Anwar for his alleged role in over 400 extra-judicial killings in Pakistan.