At the time of writing, 100,000 Russian troops are massing on the Ukraine border. Meanwhile, the government has announced new legislation to allow Britain to instigate economic sanctions against banks, energy companies and “oligarchs close to the Kremlin”.
Previously, the law only allowed the UK to sanction individuals and companies involved in assisting Russia to destabilise Ukraine. Now the reach is to be widened to any person or entity of “economic or strategic significance to the Kremlin”.
It sounds like a tough response to Russia’s aggressive actions. Liz Truss, the foreign secretary, has declared there would be “nowhere to hide for Putin’s oligarchs”.
Suspect Russian money
But according to officials in the US state department, it is too little, too late. They have expressed concerns that after years of suspect Russian money flooding into London, and sanctions imposed by the US and the UK will be largely meaningless.
One Washington source was quoted in The Times as saying: “The fear is that Russian money is so entrenched in London now that the opportunity to use it as leverage against Putin could be lost.”
Anyone who in the past dismissed money laundering as being a largely victimless crime can now see how far-reaching the consequences are of allowing Russian funds to flow into what the Centre for American Progress think tank recently described as “Londongrad”.
Failure to take action against money laundering through the so-called ‘London laundromat’ has arguably created a situation in which sanctions can have little impact against Russia and it can install troops on the border with Ukraine without any concern over consequences.
Russian oligarchs
Surely there can no longer be any excuse for the government to continue with the “light and limited touch to regulation” identified in 2020 by the intelligence and security committee as attracting Russian oligarchs to London.
Hopefully, there will also be a new focus given upon introducing the delayed Economic Crime Bill that UK anti-corruption groups argue needs to be introduced to stem the flow of dirty money from abroad.
The bill was first outlined by the government in 2019, but so far progress has been notable by its absence.
When Lord Agnew resigned as a minister at the Treasury and Cabinet Office with oversight of fraud prevention, he noted in his resignation letter to Boris Johnson that the Economic Crime Bill had been rejected for consideration in the next parliamentary year, a decision he described as “foolish”.
Improve oversight
The bill had been expected to bring in measures to improve oversight of businesses registered in the UK and bring in a public register of beneficial ownership of property.
At present, the UK has a relatively lax approach to checking companies following changes in 2011 that made it quicker to register a business online. Furthermore, it is not mandatory to use electronic verification for Know Your Customer and anti-money laundering checks.
The National Crime Agency estimates that money that money laundering presently costs the UK £100bn annually, while separate losses to fraud cost an estimated £190bn each year.
The introduction of new laws on economic crime, and a mandatory requirement for regulated bodies to use electronic verification, could help to stem these losses. They could also play a vital role in helping to tackle London’s reputation as a global centre for money laundering.
Martin Cheek is managing director of SmartSearch
