Britain today set out regulations to crack down on "black money", adopting new legislation to "tie the hands" of Russian President Vladimir Putin by making it harder for those close to him to use London as... their playground.
The much-delayed Financial Crime Bill comes as voices from across the political spectrum called on the government to do more to stop the flow of Russian money into London, dubbed by some as "Londongrad" in response to Putin's invasion of Ukraine.
Anti-corruption activists said that while some of the measures were aimed at forcing property owners to reveal their identities and boosting disclosure of their undeclared sources of wealth, however, without new funding, they said, law enforcement agencies would struggle.
The new law shows the government is "determined to crack down on dirty money in our economy and, most importantly, crack down on Putin and his friends," Interior Minister Priti Patel told parliament.
Duncan Hames, director of policy making at Transparency International , said the most important step was a new register requiring unnamed foreign owners of British property to reveal their identity to prevent some hiding behind shell companies.
"It's a world-changing change that will reveal the ownership of companies registered elsewhere in the world and, in that respect, it's really ambitious and groundbreaking, but as with all these things it's not enough to write good rules, we have to commit to enforcing them," he said.
London has long been a top destination for Russian money and the Prime Minister, Boris Johnson, has pledged to crack down on those who use the capital as a "luxury playground", enjoy luxury hotels and educate their children in private schools.
However, the British prime minister has come under fire for being slow to impose sanctions and asset freezes on Russian oligarchs and those close to Putin's government since the invasion of Ukraine.
The government denies there is a delay in imposing sanctions, but claims it needs to make sure it has a strong legal basis to back any sanctions against individuals. However, critics point out that the European Union and the United States are moving faster.
Italian police have seized villas in its most famous locations, including Lake Como, and yachts worth 143 million euros from five Russians, while France has seized a yacht belonging to Rosneft boss Igor Shekhin.
Transparency International said property worth £1.5 billion had been bought from Russians accused of corruption or links to the Kremlin. Some £830 million of that total is owned by offshore companies.
The new law will introduce the Register of Overseas Entities, but will give unnamed foreign property owners six months to reveal their true identity - a provision that Britain's opposition Labour Party has stressed gives them too much time to move assets elsewhere.
Some MPs have called on the government to go further, asking ministers to allow the seizure of British assets from those oligarchs suspected of having links to Putin even before the authorities impose sanctions.
However, it seems unlikely the government will go that far.
Uncharted waters
The opposition Labour Party says the ruling Conservative Party has received about £1.9 million from Russian donors since Johnson came to power. Conservative officials say the party controls all donations and accepts only those from British citizens.
Experts say the scale of sanctions adopted by Western countries against Russia since the invasion of Ukraine is "unprecedented" but there remains "considerable scope" to increase them.
"We are in uncharted waters. The use of sanctions against a country so embedded in the West is unprecedented," said Tom Keating, director of counter-financial crime and security studies at the Royal United Services Institute (RUSI) in London.
And while "freezing the assets of the Russian central bank has had a huge impact," there is still "great scope to increase" sanctions, particularly around measures targeting Russian energy, he said.
After several rounds of coordinated sanctions against the Russian financial system and economy, a possible ban on imports of hydrocarbons, the main source of income for Russia, is now at the center of discussions among Western countries.
There are also "still banks that are not affected" by the sanctions and "we know it's not due to the need to keep energy-related payments going," Cutting added.
"If the goal is to hit the Russian economy, it's the energy sector that needs to be hit," added Neil Shering, an expert at Capital Economics. But these sanctions "come at a cost to the rest of the world," he noted, noting that the announcement of the start of Western talks on this issue pushed oil to record prices today.
"We have never used sanctions in this way against another G20 country," said Justin Walker, international sanctions and risk director at Acams (Association of Certified Anti-Money Laundering Specialists), a specialist anti-money laundering association. "We have only used similar sanctions against countries like Venezuela or North Korea," he continued, noting the risks of unintended consequences, particularly in "transactions that we would like to see continue for security reasons."
The expert specifically mentioned the problem posed by certain impulsive retaliatory actions taken by private actors, such as the decision of major shipping carriers to stop serving Russia for fear of possible sanctions or fear of being outlawed. This "creates a very difficult condition and scenario for transporting goods while we want to see trade continue," such as grain, he said.
These "self-sanctions" taken preemptively by some companies have contributed to a spectacular rise in commodity prices, to record highs, since the beginning of the invasion of Russia, particularly in the prices of wheat, hydrocarbons, and industrial metals.
Source: APM
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