President Joe Biden and other Western leaders have repeatedly warned they will impose swift and punitive economic sanctions against Moscow in the event Vladimir Putin orders an invasion of Ukraine. British ministers announced Sunday they plan new legislation to make it easier to impose sanctions on “Putin’s oligarchs” and Russian officials who have investments and assets in Britain.
Russians have invested about an estimated $2 billion in the London property market alone, according to Transparency International, an anti-corruption lobbying and research organization in Berlin.
And the House of Commons’ own research library noted in a report last year: “For some time the UK has been accused of being a hub for dirty money — especially London’s prime property market.”
The British move is in response to frustration in Washington, where officials have complained that the government of Boris Johnson has not done enough to stop London from being used as a destination, and also a way station, for the profits of the Russian mega-rich.
The Britain problem
Last week, analysis by the Center for American Progress, an influential Democratic-aligned think tank, outlined the challenges the White House will face making economic sanctions bite. It suggested that the “economic domain will be the primary theater for U.S.-Russia confrontation,” but noted “expectations for what imposing economic costs can achieve must be kept in check.”
The think tank singled out Britain as a problem. “The United Kingdom, in particular, has become a major hub for Russian oligarchs and their wealth, with London gaining the moniker ‘Londongrad,’” Max Bergmann, author of the report noted. “Uprooting Kremlin-linked oligarchs will be a challenge given the close ties between Russian money and the United Kingdom’s ruling Conservative Party, the press and its real estate and financial industry,” he concluded.
Britain’s foreign secretary, Liz Truss, is outlining legislative proposals to British lawmakers, which she says will make it easier to freeze the assets of Russians with financial links to Putin and his government.
Britain’s sanctions regime currently only covers assets lodged in Britain that can be tied to businesses or individuals who can be linked to Russia’s 2014 annexation of Crimea.
"There will be nowhere to hide” for Putin’s oligarchs, Truss told Britain’s Times Radio on Sunday. Truss said new legislation would widen the scope of sanctions.
Bill Browder, a British-American financier who has long campaigned to expose high-level corruption in Russia, has been urging British authorities for years to target Putin-connected oligarchs. In 2018, in the wake of the poisoning on English soil of former Russian double agent Sergei Skripal, he told British lawmakers that Western weakness only emboldens the Kremlin. The British government blamed the Kremlin for attempted assassination of Skripal and his daughter, something Russia denies.
“The Achilles heel of the Putin regime is to go after Putin-connected oligarchs in the UK by seizing their assets,” he argued. He told a British parliamentary panel approximately $800 billion worth of Russian state-backed assets, mostly real estate, are held outside Russia and could be targeted. About $300 billion in cash and assets are estimated to be in the United States.
According to a 2018 report by Transparency International, large amounts of the Russian state-backed money controlled by Putin-connected oligarchs flow through British Crown dependencies and British Overseas Territories in the Caribbean and then are transferred to the British capital.
“London has certain advantages and Russians have always found London particularly attractive,” according to Robert Barrington of Transparency International. “It has these historic links with the Crown dependencies and overseas territories, so it is very easy to be part of that global laundering system. It is also a huge market in itself, so if you want to hide dirty money, it is easier to do,” he said.
Anti-corruption campaigners say there was a huge jump in Russian money flows to London after the 2008 financial crash, partly because Britain courted foreign money and offered easy-to-get investor visas with very few questions being asked. An estimated 500 Russian multimillionaires live in Britain.
Their cash has driven up real estate prices and helped fuel the profits of expensive private schools and exclusive shops as well as providing a large share of the incomes of British bankers, fund managers, lawyers, and PR executives. More than 10,000 properties in Westminster, a central London borough, are owned by anonymous companies; some are thought to be Chinese or Gulf Arab in origin, but many are Russian.
The British government announced new asset-seizure powers in 2017 known as unexplained wealth orders, allowing for the confiscation of property without proving criminality and placing the burden of proof on the owners to explain their wealth. Britain’s i newspaper reported last week that officials were looking to issue more unexplained wealth orders in the event Russia invades Ukraine, forcing those suspected of having tight links to President Putin to explain the origins of their wealth.
But some skeptics harbor doubts about the determination of the authorities to move against Russian wealth. They note since 2017 only five such orders have been issued. “No one has done more to channel the flood of money out of Russia than London’s army of lawyers, bankers, and accountants; no one has been more accommodating of Putin’s oligarchs than Britain’s politicians,” wrote Oliver Bullough in Britain’s Sunday Times this week.
Author of "Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals," Bullough says: “If the government really wants to help Ukraine, it should force Putin’s oligarchs to take their cash home.”
Critics also say the government needs to insist that so-called crown dependencies in the Caribbean need to introduce rigorous transparency rules for stashed overseas money. And they worry that Russian oligarch money and properties are well concealed behind shell companies.
In December, British Prime Minister Boris Johnson pledged to force offshore companies that own British property to declare their ownership, and to tackle criminals who abuse UK-registered shell companies. He made the promise at the US-convened Summit for Democracy, a virtual conference that explored how to strengthen the world’s democracies.
The chairman of the House of Commons foreign affairs committee, Tom Tugendhat, said he plans to hold a new set of new hearings to discuss the assets and investments of Russian oligarchs in London. His committee did the same thing in 2018 and recommended several steps, but the recommendations languished.
Kremlin officials said Monday that London's threat to target Russian companies and businessmen are alarming and any sanctions would backfire by hurting British companies.