How Russia’s dirty money sullies Britain

What’s happened?

The long-delayed report on Russian influence on public life in the UK was finally published by the government last week. It found no “smoking gun” of evidence to show that Russian efforts to influence the result of the 2014 Scottish referendum, or the 2016 Brexit referendum, were successful. But its worrying main conclusion was that the UK has left it too late to untangle the web of Russian influence that permeates the country’s political and business elite. “Russian influence in the UK is ‘the new normal’,” the report says. “There are a lot of Russians with very close links to Putin who are well integrated into the UK business and social scene, and accepted because of their wealth. 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.”

Why are Russians undesirable?

Not all of them are, of course. But it is impossible to ignore the reality of Putin’s Russia as a hostile actor intent on waging a hybridised war against the West, and the UK in particular. Part of that strategy, the report says, rests on “the extension of Russian influence which is often linked to promoting the nefarious interests of the Russian state”. Thus, the question of Russian influence, and illicit flows of Russian money into Britain, is a “national security threat” and must be treated as such, says Tom Keatinge of the RUSI security think tank. The Russia report highlights that “there is as much to fear from licit flows put to illicit use as there is from the flow of illicit funds alone”. This is not just an economic crime question; it’s a matter of Russian expatriates using their wealth (whether illicitly gained or not) to buy influence via, for example, donations to academic institutions, charities, or – crucially – political parties.

How much is given?

According to The Times, some 14 government ministers, including six cabinet ministers, have received donations from individuals or companies linked to Russia. In addition, so have two of the Tory MPs recently appointed by Johnson to the intelligence committee, Theresa Villiers and Mark Pritchard. The Conservatives’ leading donor is Lubov Chernukhin, a Russian-born businesswoman, who has donated more than £1.7m since 2011. Alexander Temerko, who told The Guardian that he is no “friend of Putin’s”, is not far behind with gifts of £1.3m; he runs a company, Aquind, hoping to be granted the right to build an electricity interconnector between Britain and France.

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What about economic crime?

The scale of illicit activity is hard to assess, the figure is probably in the tens of billions annually. In 2016, the Home Affairs Select Committee concluded that the London property market was the primary avenue for the laundering of £100bn of illicit money a year, of which Russia accounted for a significant slice (though a much smaller one now than ten years ago).The UK’s National Crime Agency believes that £100bn in “dirty money” is funnelled into the UK each year, mainly from Russia, Nigeria, Pakistan and the Far East. In 2017, an investigation by a consortium of international newspapers, including The Guardian, found that, between 2010 and 2014, British-registered firms and British-based banks helped move at least $20bn of the proceeds of criminal activities out of Russia via Latvia and Moldova.

Why the UK?

Because London is a giant financial hub crowded with transactions so it becomes easier to disguise the dodgy ones. And because decades of relatively light-touch regulation, and an entrenched culture of secrecy over the beneficial ownership of companies, makes the setting up of the necessary shell companies and bank accounts relatively straightforward. Combined with the attractions of a relatively stable property market; the “golden visa” system of granting residency in exchange for million-plus investments; and the hordes of lawyers, bankers, accountants and estate agents (an “industry of enablers” in the words of the report), and the attractions are clear. With the help of an industry of “private wealth advisers, lawyers and accountants, the oligarchs were introduced to a labyrinthine world of non-domicile tax statuses, trust laws and company formations in Britain and its overseas dependencies,” says Simon Nixon in The Times. And “with their impeccable social connections, London bankers could offer their foreign clients unrivalled reputation-laundering services, too”.

What should the UK do now?

If the government were serious about “closing down the laundromat, it would provide crime-fighting agencies with the resources needed”, says Nixon. Instead, one of the most striking parts of the report was the “stark admission” by the head of the National Crime Agency that it does not have the resources to mount many large investigations into vastly wealthy targets. Unexplained wealth orders are supposed to be a key plank of the UK’s fightback against money-laundering. But when the NCA recently lost its attempt to impose an order on a wealthy Kazakh family, it was landed with a £1.5m legal bill. “Not surprisingly, it is now reconsidering its use of the orders.” The government should also address the weakness of the UK’s corporate registry system, says Keatinge, and enact the Registration of Overseas Entities Bill that has been moribund for over a year.

What else?

The government must invest in upgrading the security services’ capabilities around financial intelligence, argues Keatinge. The UK currently has no system in place to monitor funds flowing into and out of the country. The government claims that “tackling illicit finance and driving dirty money and money launderers out of the UK is a priority”. But, says Keatinge, its response so far and the lack of resources made available make that look a “hollow claim”.