SPECIAL INVESTIGATION
POSING on the bonnet of a brand new Bentley, in high heels, dark glasses and showing off the shapeliest of legs, Elina Cobaleva looks every inch the multi-millionaire’s wife. the celebrity stylist was clearly relishing the moment. now, though, five years after the photograph was posted on social media, that luxury limousine is at the centre of an unfolding scandal involving ‘dirty’ Russian cash laundered through British High Street banks.
the Bentley was one of two bought for a total of £216,000 by Valemont Properties, a Britishbased firm caught up in allegations related to an enormous financial scam known as the ‘Laundromat’ run by the Russian mafia.
According to documents obtained by the Organised Crime and Corruption Reporting Project, a respected collective of investigative journalists (part-funded by the U.S. department of State), 17 British banks including Lloyds TSB, Barclays, HSBC, the Queen’s bank Coutts, and the Royal Bank of Scotland handled £600 million from the Laundromat. the banks now face questions over why they allowed such huge sums from dubious sources to flow through their hands, despite supposedly ultra-strict regulations.
the scheme, which saw at least £16 billion moved out of Russia between 2010 and 2014, was run by criminals with links to the Kremlin and the successor organisations to the KGB.
Investigators believe the true figure could be as high as £65 billion, with the money sent from Russia via Moldova and Latvia (both formerly members of the Soviet Union) — and siphoned off to the U.S., Europe and especially Britain. there is, of course, a good reason why a certain type of Russian, usually a Kremlin crony who has benefited from the grotesque corruption among an elite of politicians and businessmen, loves London — with its buoyant property market, luxury shops and excellent private schools.
Who wouldn’t want a mansion in Chelsea (or Chelski, as it’s now known), to take his mistress shopping in the designer stores, furriers and jewellers on Bond Street, stock his library with antique books, to dine at novikov in Mayfair or Mari Vanna in Knightsbridge, and to educate his offspring at a top public school?
As a result, according to some anticorruption campaigners, it has become the money- laundering capital of the world.
And the tide of soiled cash brought in by these corrupt tycoons — be it plundered profits from Russia’s mineral wealth or the proceeds of crime, drug-dealing, prostitution and the like — is seeping into the very fabric of British life.
In Russia, meanwhile, it is this kind of rampant corruption — which is draining money that could be invested in infrastructure, hospitals and schools — that saw street protests against Vladimir Putin’s rule break out nationwide at the weekend.
‘London is the most corrupt place on Earth in the sense that there is a higher concentration of dirty money per square foot here than anywhere else on the planet,’ claims Roman Borisovich, a former Russian banker-turned-anti-corruption campaigner.
He says he had to flee Moscow in 2012 when it became clear the Kremlin was taking a dim view of his attempts to highlight wrongdoing.
‘Once you’ve got your money in the UK, it is safe because you have the rule of law and property rights. Combine that with the fact London is a cultural hub, you have great schools and rising house prices that never seem to go down. I’m surprised that even more criminals from around the world don’t come here,’ he adds.
So, how has London become such a ‘Spivski’ paradise? Where is the money being spent? How are the banks implicated? And what are the consequences for the rest of us?
LOCATED in a grand house in Central London is one of the UK’s leading ‘company formation agents’, doing a lucrative trade in setting up thousands of off- the- shelf businesses. there is nothing illegal about it: indeed, it’s useful for legitimate firms to be able to establish a company quickly.
But the ease with which anyone can set up a new company — and, until recently, hide their true identity behind so-called ‘nominee’ directors who may be paid for lending their names — left the door open to criminals. (Rules introduced last year stipulate that new firms have to reveal who controls them.)
the Russian Laundromat scam is alleged to have worked through a network of 21 such ‘ghost’ companies, mostly based in the UK, and involved bogus trades and loans.
In essence, the scam operated like this. A Russian criminal with money to launder would set up Company A which would ‘loan’ money to another ‘ghost’, Company B, although no money actually changed hands. Company A then demanded repayment. When Company B failed to pay back the loan, Company A would take legal action against B in Moldova, a country in which the judiciary and financial authorities were less likely to scrutinise transactions.
Once a Moldovan judge had ‘authenticated’ the debt by ruling that Company B must pay it back, it would allow real money to be transferred out of Russia to a Moldovan bank. From there, it would go to a bank in Latvia — crucially, a country inside the EU — and then be transferred, with few questions asked, anywhere in the world. Which is where British banks come in.
they stand accused of failing to prevent the flood of dirty money by offering private banking services to Russian clients, without ascertaining the origins of their riches. (British customers are subjected to onerous identity checking to open even a basic savings account.)
Much of this money then flowed out of the banks and into London’s property market, which has long been a honey-pot for millionaires and billionaires from around the world whose wealth is entirely legitimate.
HOWEVER, according to a recent report by anticorruption campaign group transparency International, more than 44,000 land titles are owned by overseas companies. Some of these are based in secretive tax havens, raising the possibility that their anonymous owners may have bought them with dirty cash.
the Organised Crime and Corruption Reporting Project (OCCRP), first exposed the workings of the Laundromat in 2014, but has recently released specific detail of where some of the money went, detailing 70,000 transactions, 1,920 of which involved British banks. It alleges that a West London townhouse was purchased for almost £30 million via a British Virgin Islands-registered company.
the UK does not stop foreign nationals from buying property here. But there are consequences for ordinary Britons because dirty money is one of the factors driving prices so high that even professionals on six-figure salaries may struggle to buy a family home in London.
that price inflation trickles down to more modest properties, so that workers in essential jobs such as teaching, the police and nursing are locked out of buying in the capital.
‘the London housing market is a money- launderer’s dream,’ says Borisovich. ‘But for other people, the result is tangible: they can’t afford to live here.’
London Mayor Sadiq Khan recognises the problem and has launched an inquiry into overseas ownership of properties in the capital. According to the OCCRP investigation, companies linked to the Laundromat scam also bought commercial premises, including a hotel apartment in Central London, costing more than £10 million, and a historic London building, which is listed by its British Virgin Islands-registered owner as having a price of nearly £200 million.
Other purchases include a car park in London’s Holborn, several flats in Manchester and land in Essex.
After property, a British education is considered an attractive investment by multi- millionaires with money to offload. the Independent Schools Council says more overseas pupils at British private schools come from Russia than any other country apart from China.
demand for places from families abroad is a contributory factor in keeping fees high and out of reach for many Britons. But increasingly, schools are rightly wary of how the fees are being paid, introducing their own financial checks to safeguard against tainted funds.
the OCCRP investigation reveals, for example, that in 2011, one of the ghost companies linked to the Laundromat, Valemont Properties Ltd, paid £10,943 into the Lloyds TSB account of the leading public