- Fact-Finding Unit
The UK is considering imposing sanctions on Russia over the Ukraine crisis, but Foreign Secretary Liz Terrace told the BBC: “There are past cases of illegal financing in London which we are working to clear up. “
Why is it so difficult to address this issue?
How much Russian money in Britain?
Many wealthy people and companies from Russia and around the world invest legally in the financial and property markets in Britain.
But Transparency International Britain – which fights corruption – said five billion pounds worth of property in the UK had been bought with “suspicious money”, and the body added that a fifth of this amount came from Russia.
A Home Office report said the country had seen a “significant increase in illicit Russian or Russia-linked funding”, which is spent on luxury property, cars, school fees and sometimes donations to cultural organisations, enabling people to “their to clear reputations”. .
And when it comes to real estate, which can be owned by companies rather than being registered in the names of individuals, it is sometimes difficult to obtain information about it.
The Overseas Business Ownership Database for England and Wales says that only four of the 94,000 properties legally registered by companies outside Britain are owned by Russian companies.
But it is possible that more property purchases will eventually be made for Russian individuals, using companies based abroad in places like the British Virgin Islands.
The extent of the use of these companies was revealed in a major leak, consisting of almost 12 million documents, known as the Pandora documents in October 2021.
These documents revealed hidden wealth, tax evasion and, in some cases, money laundering by some of the world’s richest and most powerful people.
The researchers identified more than 700 foreign companies that own property in the UK, and found that five percent of them are owned by Russian citizens.
One such example was Alexei Cheba, the Russian politician and businessman, who used a BVI company to buy a ten-bedroom mansion in London’s Holland Park in 2011 which sold for £25m last year. Its representatives said the purchase “followed the appropriate procedures exactly as requested at the time”.
Why Prepare United Kingdom attractive to Russian investors?
London has long been a popular destination for wealthy Russians to settle or buy real estate and investments.
The “golden visa” system – the investor visa – grants residence to those who invest two million pounds or more in Britain, and allows him to bring his family.
After that, holders of this visa will apply for permanent residence in Britain, and the period to allow them to apply for residence depends on the size of their investments:
- Application for residence after two years if the volume of investments is 10 million pounds sterling
- Application for residence after three years if the volume of investments is 5 million pounds sterling
- Application for residence after five years if the volume of investments is 2 million pounds sterling
The UK Home Office has issued 14,516 investor visas to Russian citizens since the law was implemented in 2008.
Russian companies were also able to raise large sums of money from share sales on the London Stock Exchange.
One of the beneficiaries of the London Stock Exchange is the energy company, the EN Plus Group, which was at its IPO under the management of Oleg Deripaska, an aide to Russian President Vladimir Putin.
And in 2018, a report by the British House of Commons called on the government to close the gaps “in the sanctions regime so that a company like EN Plus is not allowed to make profits on the stock exchange.”
What steps has the government taken so far?
In 2018, the UK government introduced a mechanism to confiscate property without first seeking a criminal conviction.
The law of “undisclosed wealth” puts the onus on the person to prove the source of his money in order to have the right to buy a property.
However, this law was used only four times, and only one case resulted in property seizure.
Another legal avenue is an account freezing order, which allows courts to freeze assets held in a bank or building society if they suspect they are linked to criminal activity.
The use of this legal tool, the “account freezing order,” appears to have been more successful so far than the “undisclosed enrichment” law, according to a report by the Chatham House think tank, which indicated that legal action had been taken against it. the niece of Syrian President Bashar al-Assad and the son of the former Moldovan prime minister. .
The government said in 2016 it had plans to combat money laundering through a comprehensive register of beneficiaries of UK property ownership.
These plans were mentioned in the 2019 Queen’s Speech, but the government has not yet announced when it plans to introduce the legislation.
The British government has said that its existing sanctions against Russia will be extended in the event of Russian actions against Ukraine.
The Foreign Office says the new measures will enable the UK to “work closely with the US and other allies on asset freezes and travel bans”.
Individuals linked to the Kremlin will be targeted, have their assets frozen, banned from entering the UK, and will not be able to do business with any UK company or individual.