This article is part of the DisinfoPortal’s #StratComDC article series. You can watch #StratComDC here.
Conspiracy theorists, amateur detectives and spy-watchers are still trying to make sense of the nerve-agent attack in Salisbury on March 4th. How many assassins were there—just the two identified by the British authorities, or perhaps more? Was the attack just an attempt to humiliate and isolate Britain, or was it triggered by something Mr Skripal, or British intelligence, had done?
Answers to these questions are trickling out. The two putative assassins turn out to be not health nutritionists on holiday, as they claimed, but officers of Russian military intelligence, the GU (formerly the GRU). Mr Skripal was busy in retirement: he not only trained intelligence officers in friendly countries, but also—according to the New York Times—was working closely with Spanish authorities against Russian organised crime in that country. Such cooperation probably prompted the fatal poisoning of another Russian, Alexander Litvinenko, in 2006.
But a much bigger question, so far unanswered, is whether Britain is finally ready to get tough on Russian dirty money. In the years since 1991, billions of pounds, euros and dollars have sloshed through the City of London, Britain’s financial centre. Some of it was the legitimate profits from buccaneering frontier capitalism. Few grudged Russian business pioneers the chance to stash legitimately acquired wealth in a safe and respectable jurisdiction. Much of the money eventually flowed back into Russia, with a Western label that allowed its owners to benefit from international investment-protection treaties.
But behind this attractive legend was a darker reality. The City of London was acting as a laundromat for fortunes acquired from misuse of power, political connections, or outright criminal activity. Bankers, lawyers and accountants earned huge sums for providing professional services for such clients. They also lobbied on their behalf, and took steps to muffle criticism, not least through use of Britain’s ferocious libel laws. (Full disclosure: this author organised the defence of his then employer, The Economist, in an action brought by a rich Russian who denied that his fortune stemmed from a long-standing friendship with Vladimir Putin).
As Oliver Bullough, author of “Moneyland” an acclaimed new book on kleptocracy, notes, Russia’s former deputy prime minister has a flat five minutes’ from Parliament; a former senator owns the second-largest house in London. Russian children are the third-largest group of foreign-born pupils in British private schools.
Despite encouraging headlines, such as an article on Bloomberg announcing “the last days of Londongrad”, the government’s response after Salisbury was regarded as unconvincing by those close to the issue. A report by the House of Commons Foreign Affairs Committee, called “Moscow’s Gold”, lambasted regulators for allowing “business as usual”, signalling that the UK is “not serious” about confronting the Kremlin. It argued:
Despite the Government’s strong rhetoric, President Putin’s allies have been able to exploit gaps in the sanctions and anti-money laundering regimes that allow them to hide and launder assets in London. This undermines the strength and unity of the global diplomatic response to Russian state actions, threatens UK national security, and helps to enable corrupt kleptocrats to steal from the Russian people.
Since then, progress has been patchy. Private jets are now inspected by customs officials on arrival. British private schools have been encouraged to reject applications from the children of notorious Kremlin cronies. Britain declined to renew a residency visa for the reclusive Roman Abramovich, an oligarch with close Kremlin ties. Many had thought Mr Abramovich was all but untouchable because of his ownership of Chelsea football club. New “Unexplained Wealth Orders” put on the onus on rich people living in Britain to explain that they have acquired their money honestly. But they have been used only three times in the first six months of their existence.
Officials are talking up the British efforts. The National Crime Agency says it has frozen or repatriated £750m (nearly $1bn) mostly linked to Nigeria, and will implement another nine UWOs, assuming it wins an upcoming High Court test case. Donald Toon, the agency’s director, says that crooked foreigners are now steering clear of the UK, and trying to sell up-market real estate. Some have approached his officials to clarify the sources of their wealth.
But this is only a tiny dent in the estimated £90bn of dirty money that transits London every year. To make a real difference, the government would need to crack down on beneficial ownership of limited companies and partnerships. Companies House, which registers details of these entities, makes no effort to check that the information supplied is correct. That would be too expensive, officials say.
It could also introduce legislation—along the lines of measures introduced two years ago in the U.S.—prohibiting shell companies from buying up-market real estate. It could go further, making the sale, lease or rental of such properties conditional on full disclosure of the beneficial owner. The government would also need to scare the bankers, lawyers and accountants who service the Laundromat. Britain’s pathetic record on prosecuting white-collar crime gives little hope on that front. Extradition to the U.S, by contrast, would be a terrifying prospect—albeit for now a frustratingly distant one.
Britain’s allies gladly joined in diplomatic sanctions and condemnation of Russia after the Salisbury attack. But they do wonder that the British government is failing to take the steps which would most hurt the Kremlin’s cronies. So do many Britons.
Edward Lucas is senior vice-president at the Center for European Policy Analysis (CEPA).