How Russia's war exposed the dark side of luxury London

What do we have in here? So we have a four-bedroom Mews house just under 4,000 square feet. £11.95 million for the freehold. Shall we take a look in

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? Absolutely. Please pass. This is beautiful. This is what you would expect from a £12 million house. I just saw the ground! It's a great way to incorporate natural light. And you can see your workout below. Everything in the kitchen is of high quality. So, as you can imagine, Miele appliances have wine cellars. We have two parking spaces. I imagine you could probably fit a Range Rover down here, and then maybe something fancy like a Porsche 911 up top.

Sounds good. London. With its prime real estate market,

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business locations and access to high-end social circles, the city's status as a hub for the world's super-rich is well established. There is nothing more central than this. We are literally a stone's throw from Hyde Park, we have Grosvenor Square. Some of the best restaurants in the world. Everything here is just around the corner. But following Russia's invasion of Ukraine and subsequent sanctions on Pre

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nt Putin's oligarch elite, attention has been firmly placed on the British capital and its complicity as a storehouse of dirty money. If you are looking for a safe place to hide the profits of your nefarious activities, London is a very attractive place to do so.

It's hard to find anything more symbolic of the extent of Russian influence in the UK. We have an apartment owned by the Deputy Prime Minister of Russia, overlooking the Ministry of Defence, which he bought from the Queen. Yes, right opposite Downing Street. Now, the British government is looking to salvage its reputation by clamping down on corruption. But will it be successful? And how will London fare without its dose of forbidden finance? If people can't trust Britain, if we lose our status as a trusted jurisdiction, that in the long term is much more damaging to the UK economy.

When Russia staged its war in Ukraine in February 2022, Britain was one of the first Western allies to impose sanctions on the country. As of May, those sanctions have affected more than a thousand people and companies believed to be fueling President Putin's war coffers with ill-gotten wealth. That includes banks with total global assets of £500bn and oligarchs and their families with a combined net worth of £150bn. But behind the London ban lurks a murky relationship with Russian wealth that is anything but secret - a reputation that earned it the nicknames Londongrad, the Laundry and Moscow on the Thames long before the war.

A Home Office report from December 2020 found a “significant volume of illicit Russian or Russian-linked financing channeled through the UK economy”, including in things like “high-end UK real estate, license plates from private schools,

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vehicles and, sometimes, as donations.” to cultural institutions.” To understand how we got here, we have to go back to the fall of the British Empire. As the former British colonies gained their independence, the United Kingdom was left with a handful of outposts, which were granted special tax-exempt status to reduce their economic dependence. The Suez crisis of 1956 and subsequent financial pressures on sterling led the Bank of England to impose a temporary ban on lending to non-British borrowers.

This threatened a lucrative livelihood of the commercial banks in London, and an informal compromise was soon reached. Commercial banks in London could still carry out transactions on condition that they were between non-British residents and in foreign currency. This led to the inadvertent growth of offshore financial centers in the last remnants of the former British Empire, with London playing a key role in facilitating the unregulated industry. Those offshore centers made it easier for non-Britons to discreetly move their money to the United Kingdom through complex structures such as shell companies, a type of business that operates in name only.

Britain's offshore network of financial centres, places like the British Virgin Islands, provide the opportunity to create complex networks of what we call shell companies, layered on top of each other, to put distance between you as the owner of an asset and where it was originally located. found the money. He came from. The rise of Britain's offshore financial network stayed afloat in the 1980s during a period of increasing financial deregulation. We have to go back to the time of Margaret Thatcher, when she liberalized the financial services sector, the Big Bang. Then, under the Blair and Brown Labor government, we had continued deregulation of the financial services sector, which created an environment in which it was easy to use corporate structures for nefarious purposes.

Then, in 2008, Britain's position as a center of international wealth was consolidated with the introduction of a controversial new investor visa. Dubbed the 'golden visa', it granted residency and an eventual path to citizenship to anyone who invested £2 million or more in the UK. The banks took this golden visa as a sign that the government thought you were legitimate, and the government had not. carried out anti-money laundering controls. We call this a period of blind faith. The doors were wide open. The program was scrapped in February 2022, just before the war, amid pressure on the UK's ties with Russia.

Still, more than 12,000 golden visas were issued during its validity, of which 2,581 were to Russian citizens, including at least eight sanctioned oligarchs. Much of that investment over the years has come here, to London's luxury property market. And while many of those investments have been legitimate, around $9 billion of questionable funds have been parked in British properties since 2016. £1.5 billion of that amount we have connected to Russians accused of corruption or with close ties to the Kremlin. Tom Stocks is a senior researcher at the Organized Crime and Corruption Reporting Project. Some of these assets are owned directly, nominally, by officials or oligarchs, or perhaps by a company that they then own.

But that's pretty rare. Most of the time we talk about assets that belong to very complex offshore ownership structures; through companies in the British Virgin Islands, Luxembourg, Liechtenstein or other offshore jurisdictions. Using a combination of public records and major data leaks such as the Panama Papers and Pandora, OCCPR's Russian Asset Tracker has so far identified $17 billion in assets belonging to sanctioned oligarchs. That includes metals magnate Alisher Usmanov, industrialist Oleg Deripaska and Chelsea Football Club owner Roman Abramovich. So far we have been able to identify around $9 billion in assets owned by Abramovich. A big part of that is in the UK and especially here in London.

Much of it is in real estate, key business investments like Chelsea. But, also, townhouses, mansions. It also includes superyachts, jets, helicopters and other eye-catching assets. In March 2022, the UK government enacted a long-awaited Economic Crimes Act aimed at combating corruption. This includes a Foreign Entities Register, which requires those behind foreign companies with property in the UK to reveal their identities. A government spokesperson was not available for an interview, but they said in a statement: We continue to lead the way in our fight against corruption, working closely with the private sector, international partners and the Crown Dependencies and Overseas Territories to ensure that there are no safe havens for criminals to hide their dirty money.

But some opponents say it's not enough. Unfortunately, the legislation is flawed and I think that by the time we get to the second economic crime bill, we will have to amend it. And it has two defects. An oligarch who buys property through a company registered abroad, say in the British Virgin Islands, we will need to know who that beneficial owner is. But that oligarch could pass it on to his children and then we would no longer be able to know. Or the oligarch could pass it through a trust, and once he has it in trust, again, the identity of the true beneficial owner of the property, and therefore the owner of the wealth, will be unknown.

We're going to have to amend that bill when the ink has barely dried on the paper. The government has already said it is drafting a second economic crimes bill to be passed later in 2022. The follow-up legislation will give the government new powers to seize crypto assets from criminals and make it harder for shell companies to find loopholes. . Still, tackling illicit wealth is an issue that extends far beyond Britain. The UK Parliament is now working with its counterparts in the US Congress and the European Parliament to ensure that as London moves away from Russian riches, dirty money does not find new places to hide.

This international action is equally important, because you want to expel him from the United Kingdom, but you do not want him to then land in another jurisdiction. The wealth that is put into London comes not only from Russia but from Nigeria, Azerbaijan, Brazil and other countries. So, really, confronting the oligarchy has to be a global project. So we should not only take a narrow view of Russian wealth in London, but also kleptocratic wealth around the world.