Londongrad: what is the cost of Russian-linked illicit finance in the UK?

London has been used, entirely legally, for foreign capital-raising by Russian companies, such as the energy giant En+. More than 20 of them, with a total market value of more than £400bn, are listed on the London Stock Exchange, giving them an arguably undeserved respectability.

Why is all this so problematic?

Russia is widely regarded as a kleptocracy, a mafia state run by an elite that has vastly enriched itself. Its businessmen are not normal businessmen. According to “Moscow’s Gold”, a report by the Foreign Affairs Committee, “the contemporary oligarchs owe their wealth to the president”. In exchange, they act as “a source of private finance for the Kremlin”.

That raises moral and security questions about handling their money; the bond also “forces them to do all sorts of chores for Putin”. This is a worrying prospect, given that Russian influence has become such a powerful force in the UK. Since Boris Johnson became leader of the Tory party, it has received £2m in donations from Russian-linked sources. Several members of the House of Lords have worked for companies linked to the Russian state.

What is being done now?

Since Putin’s invasion of Ukraine, unprecedented steps have been announced to close down the “London laudromat”. An asset freeze has been imposed on all major Russian banks; over 100 companies and oligarchs have also been hit with asset freezes, travel bans and sanctions. The “golden visa” scheme has been scrapped.

A new Economic Crime Bill has been promised, which will reform company rules so that those holding assets through offshore shell companies have to declare their ownership on a register. A new “Kleptocracy Cell” will be set up in the National Crime Agency to target sanctions evasion and corrupt assets hidden in the UK. Russian companies have been prohibited from raising finance on UK markets, and the Kremlin from issuing sovereign debt there.

Will it work?

In theory, it ought to. But Britain has pledged numerous anti-Russian crackdowns before – after the murder of Alexander Litvinenko in 2006, the annexation of Crimea in 2014, and the Salisbury poisonings in 2018. Unexplained Wealth Orders were introduced in 2018 to target the illicit wealth of foreign officials suspected of corruption and those involved in serious crime.

But, owing to the high cost of applications, the Government has only issued four since. Besides, at this point, such a campaign may be, at best, a matter of damage limitation.

Why can so little be done?

Because, according to the Intelligence and Security Committee, many Russian oligarchs are “to all intents and purposes now apparently legitimate” in the UK.

The Anti-Corruption Foundation founded by the jailed opposition leader Alexei Navalny has compiled a list of 35 oligarchs whom it describes as “key enablers” of “Putin’s abuses”. They include Roman Abramovich and Oleg Deripaska, who have long-standing links to Britain. Both deny such a role, and their position here is thought to be legally unimpeachable.

London’s law firms have been very helpful and ferociously protective of their Russian clients, with the help of Britain’s plaintiff-friendly libel laws. “For the UK,” said the FT last week, the invasion of Ukraine “should be a wake-up call over whom it is willing to do business with”.

Article source: https://www.theweek.co.uk/news/world-news/russia/955971/londongrad-cost-russian-linked-illicit-finance-uk