By James Treacy
Co-Founder of AML Intelligence and publisher of StubbsGazette
The long awaited Russia Report of the British Intelligence and Security Committee of Parliament (ISC) into allegations of Russian interference in British politics, including alleged Russian interference in the 2016 Brexit referendum was released this week. Boris Johnson’s government refused to publicly release it before last December’s general election.
After reading it, you can see why. It is a damning indictment of Russia’s interference and influence in British politics. The report also shines a light on illicit Russian money being laundered on a grand scale in London, which now has the dubious moniker of the ‘London Laundromat’
Russian oligarchs view London as a particularly favourable destination for their money which the ISC attribute to the exploitation of the UK’s investor visa scheme introduced by John Major’s government in 1994.They point out that the UK welcomed Russian money, and few questions, if any-were asked about the provenance of this considerable wealth. Furthermore the ISC believes the UK Government at the time naively felt that exposure to a law-based commercial environment would promote good governance by encouraging ethical and transparent practices by the Russians.
The report is pretty explicit in how that worked out. “What is now clear is that is was in fact counter-productive, in that it offered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat” It goes on to say that “the money was also invested in extending patronage and building influence across a wide sphere of the British establishment – PR firms,charities, political interests, academia and cultural institutions were all willing beneficiaries of Russian money contributing to a ‘reputation laundering’ process”
The British National Crime Agency estimate that hundreds of billions of pounds are being laundered through Britain every year, and that it was a prime destination for Russians looking to legitimize the proceeds of corruption. At the last count, there was some £35bn of Russian money alone sloshing through London’s jurisdiction
According to the ISC report many of the oligarchs have very close links with Russian President Vladimir Putin and are now 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”
All of this has spawned a growth industry of enablers – such as lawyers, accountants, estate agents and PR firms who have cashed in on the vast amounts of illicit money washing through the London economy. The ISC go on to say that “ a large security industry has developed in the UK to service the needs of the Russian elite in which British companies protect the oligarchs and their families, seek kompromat (compromising information) on competitors, and on occasion help launder money through offshore shell companies and fabricate ‘due diligence’ reports, while lawyers provide litigation support”
It’s hard to believe that we are talking about the UK rather than a banana republic, but the US State Department has for some time, considered the UK as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes
According to the Know Your Country, a website which tracks countries money laundering risk profile, the UK is ranked 79 way below countries such Zambia ,Rwanda and Qatar. According to the American-British financier Bill Browder “London is the world capital of dirty money”
Brexit and AML
Brexit is likely to amplify this as legitimate money is replaced by illicit funds as many companies are getting out of London. The National Crime Agency predicts that money-laundering opportunities will increase following Brexit, as criminals are ultimately attracted to weakness.
While the EU is stepping up its efforts to create a robust AML infrastructure through data sharing and the formation of a new European AML authority to be launched early 2021, after Brexit the UK will be isolated from this new intelligence sharing. This will make it a target for increased money laundering activity.
‘Big Crocs’ get their share of the London property pie
Meanwhile China’s equivalent of the oligarchs – the so called ‘big crocs’, have now reportedly overtaken the Russians as the biggest overseas buyers of property in London with over 200,000 properties now in the hands of Chinese and Hong Kong buyers.
This would seem to be as a direct result of the Chinese government’s recent crackdown on these ‘big croc’ tycoons who are escalating their endeavours to launder money abroad. London is a prime location for them which adds to it’s already dubious reputation as the dirty money capital of the world.
Clearly, Britain and London in particular now have a serious image problem. The money laundering activity by dodgy oligarchs – and more recently Chinese ‘crocs’ has done enormous reputational damage. This is something which will only deteriorate further post-Brexit unless the UK government makes some very hard decisions.
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