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Receipts of Deceit – Kokiba Mohan

Kobi Mohan deconstructs the perception of corruption as a historically distant or ‘foreign’ concept. Recent British and foreign governments have been involved in scandals often inaccurately dubbed ‘sleaze’ instead of what they are: plain corruption. By analysing the broader legal and economic systems that have allowed corruption to flourish, Kokiba aims to turn her angry, frustrated feelings of powerlessness about the issue into musings on possible solutions and action moving forward, starting with issues of money laundering and stolen assets in London. 

Swift and shockingly appropriate action has been taken by the British government to put pressure on the Kremlin so far as the Russian invasion of Ukraine continues. Having once been all too enthusiastic to blindly welcome billions in Russian money to British shores, the government’s announcement just over a month ago of an ambitious raft of measures targeting Kremlin-affiliated wealth stored in the UK certainly came as something of a surprise. 

These measures primarily come in the form of sanctions on Russian investments and assets based in the UK, which have led, amongst other things, to the notable sanctioning of the £230m property portfolio of former-Chelsea owner Roman Abramovich, and the freezing of two of his associates’ assets, which, combined, totalled £10bn, making the instance the single greatest asset freeze in UK history. The intention behind this and other measures is to prevent assets from being returned to the Kremlin to be used to fund the continued Russian invasion of Ukraine. Undoubtedly, progress has been made to this end, and yet, these figures pale in comparison to the mammoth sums associated with the Kremlin that have made their way to the UK in recent decades and stayed here.

Determining the exact figure is a difficult task because of how Russian, or specifically Putin-affiliated individuals typically move their money; through a series of transactions often involving some combination of offshore satellites and shell companies in order to conceal the origins of the income. The Guardian reports that some £9bn has flowed directly from Russia to the UK in the past decade, whilst over seven times this, £68bn, flowed between Russia and one of Britain’s many offshore financial centres. How much of this money has direct ties to the Kremlin is hard to say, but the choice to divert funds using offshores, for example, should raise eyebrows regarding the source of these flows.

Privacy in regards to financial transactions is one thing, and secrecy is another. The means taken by many wealthy individuals surrounding Putin, more than not, tend to be of the latter sort. It is not that these structures being used are inherently corrupt, but rather that their use is indicative of some attempt to cover up illegal dealings, illicit sources of income and corruption.

The recent asset freezes of Billionaire Row properties with underground swimming pools and cigar rooms are an overdue attempt to end a decades-long policy of welcoming, with open arms and covered eyes, all investment into this country regardless of how murky their origins. The UK has long been attractive to global investment, illicit or otherwise. There are many conditions that make it so ripe for the role of global money laundering hub: its deregulated financial markets, (which, until recently, lacked stringent checks on the provenance of money) and perhaps more importantly, its overseas territories, the lax financial laws of which shield agents’ identities as they dodge taxes or launder money. 

Sanctions on Russian money fail to chase investments much further than Surrey, let alone the Seychelles, and yet each year millions of illicit money, some of it Putin-affiliated, is laundered through these territories each year. The freezing of assets may occasionally catch out the odd mansion in an oligarch’s collection, but for the most part, especially with the help of the finest lawyers and accountants money can buy, this can be dodged by simply passing a property onto a wife or a nephew, picking up a Chagall or two at Sotheby’s, or buying another property in cash from an all-too-willing London property manager all to divert your assets. For the unfortunate few whose properties have been subjected to unexplained wealth orders to freeze assets, still jail or any further punishment is not even a remote concern. 

Sanctions on russian money fail to chase investments much further than surrey, let alone the seychelles

After calls for further action to prevent more flows of dirty money, Kremlin-affiliated or otherwise, into the country, Boris’ government announced new beneficial ownership register, the function of which is to improve transparency around who benefits from the existence of certain assets, a bold proposal worthy of praise at the least for its ambition. Yet it seems loopholes were being drawn up even before Johnson could make a final TV promise about his conviction to the efficacy of these measures, because non-profit Transparency International has identified the inclusion of an eighteen- month grace period for those having to join the register, which is more than enough time for a skilled team of lawyers and accountants to draw up an alternate route for illicit financial flows. A £500 daily fine is to be paid by overseas-property-owning firms that fail to disclose relevant information regarding their ultimate beneficiary, which, doubtless, is a small hurdle for those with a disposable fortune in the hundreds of millions. On top of this, the allotted funding for the register is estimated to be grossly insufficient, seemingly setting the project up for failure. This is not to say the effort is not still worth acknowledging; the task the government has set for itself is formidable- the sheer volume of information that will need to be analysed and the ever incorrigible and opaque Kremlin being just two hurdles to face in the battle against Putin-affiliated dirty money. 

In 2011, David Cameron said maintaining the secrecy of overseas territories’ financial records “means minimising the burden of regulation so that business and entrepreneurship can flourish.” It is neither entrepreneurship nor business, but corruption that thrives on secrecy, and secrecy within the global financial system enables and validates those who accrue wealth through the exploitation of others. My hope is that the new policies being implemented represent a sincere, albeit incomplete, effort to tackle the problem of global money laundering and asset theft that the government has found itself to be complicit in as a result of its inaction thus far.

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