How UK can pursue corrupt tsars

London is full of Russian money. That gives scope to inflict pain on Putin’s associates.

AFTER British Prime Minister Theresa May promised to continue cracking down on corrupt Russian elites following the poisoning of a former spy and his daughter, one man’s name came up repeatedly in the parliamentary debate that followed: Sergei Magnitsky.

The lawyer died in a Russian prison in 2009 and his friend and former business associate Bill Browder said it’s his story that demonstrates how the United Kingdom can really hit Russia where it hurts – if it wants to.

Browder, a former hedge fund manager in Moscow who Interpol have declined to turn over to Russia, spent almost a decade lobbying western governments to investigate money he said was spirited overseas from a US$230mil (RM901mil) fraud that Magnitsky uncovered in Moscow.

Almost all of the governments contacted opened probes, according to Browder, except the United Kingdom.

“The British authorities rejected our requests five times,” he said in an interview following May’s announcement of punitive measures against Russia, including the expulsion of 23 undeclared Russian spies.

London is a favourite destination for wealthy Russians to buy property, keep money and send their children to elite private schools. Some of Russia’s biggest companies have listings on UK exchanges and raise funds there.

Investors last week were clamouring for

€

750mil (RM3.6bil) of bonds being sold by state-owned energy giant Gazprom PJSC.

That should give the United Kingdom a wide scope to inflict pain on President Vladimir Putin’s close aides and business supporters, albeit at a potential cost to the economy amid the uncertainties of Britain’s exit from the European Union.

The trouble is, according to Browder, there is little enforcement for May to “continue”.

The effect of British hesitation to confront Moscow over as many as 14 unexplained past deaths has been to create a permissive environment for Russians to carry out crimes in the United Kingdom, he said: “I’m talking about both murder and financial crimes.”

That may be about to change. New legal tools came into force in January that should make the job of UK prosecutors less difficult as they seek out laundered money.

Unexplained Wealth Orders now put the onus on public officials with low salaries and yet with multimillion-dollar London mansions to convince a judge they were bought with legitimately acquired money.

Until now, it was up to investigators to provide evidence that the assets were bought with the proceeds of bribery or other illegally acquired income.

A so-called Magnitsky amendment in the United Kingdom’s new Criminal Finance Act enables courts to freeze the assets of those who torture or otherwise abuse the human rights of whistleblowers.

The government has also proposed creating a registry of the beneficial owners behind offshore shell companies used to buy assets in the United Kingdom.

In addition, the language May used in her response to the poisoning of Sergei Skripal and his daughter, Yulia, in provincial England hints at a possibility the United Kingdom could use a 2001 anti-terrorism law to pursue Russian state assets, said Michael O’Kane, senior partner at Peters & Peters.

That law has been invoked only rarely, but notably after the 2006 polonium poisoning of former Russian intelligence agent Alexander Litvinenko, said O’Kane, whose law firm specialises in white-collar crime.

Russia has denied all allegations of involvement in the poisoning of the Skripals, who remain in critical condition, as it did in the Litvinenko case. It also said it destroyed the last of its nerve agents in 2017.

A spokesman for the United Kingdom’s National Crime Agency (NCA), which handles money laundering investigations, said the NCA “will make use of all the powers available to tackle the illicit finance and illegal activity of serious criminals and corrupt elites. This area of work is one of the agency’s highest priorities and rapid progress is being made.”

Asked about Browder’s claims that the NCA declined to investigate evidence of money laundering connected to the Magnitsky case, the spokesman said the agency does not confirm or deny the existence of investigations.

Still, none of the boosts to UK law is likely to provide a quick solution.

The Unexplained Wealth Orders may be of less value against corrupt officials from Russia than some other countries, said Roman Borisovich, a Putin opponent who campaigns against money laundering in the United Kingdom.

That’s because the Russian government will protect its own, providing any documentation required, he said. Similarly, the Magnitsky amendment stops short of laws passed in the United States and other countries.

While those establish a list of abusers subject to penalties, in the United Kingdom investigators will have to make each case in a court before being able to act.

The proposed registry, meanwhile, may take several years to materialise and will depend on cooperation from offshore tax havens.

“What’s really lacking is political will on the part of the UK government,” said Borisovich, who runs occasional bus tours of London that stop at the alleged properties of corrupt politicians and business people from around the world.

Calls for a full Magnitsky Act have gained support since the attack on the Skripals.

But what really has to happen, said Borisovich, is for the United Kingdom to de-list state-owned Russian companies from the stock exchange.

It should also end the exemption from sanctions related to the conflict in Ukraine that allows subsidiaries of Russian state banks to do business in London and elsewhere in Europe, he said.

It all might come at a cost to the United Kingdom, he said, but it should be a bearable one.

“These are arms of a state that has been involved in a nerve gas attack on British soil,” said Borisovich.

“At the very moment May was making her speech in parliament, Gazprom, another arm of the Russian state, was placing a bond in UK capital markets,” he said.

“It isn’t even funny.”