Kazakhstan: Anti-corruption Sanctions

Kazakhstan: Anti-cor­rup­tion Sanctions

Motion made, and Question pro­posed, That this House do now adjourn.—(Scott Mann.)

17:02:00

Dame Margaret Hodge (Barking) (Lab)
I thank Mr Speaker for grant­i­ng this debate and the Minister for join­ing us. I also thank a host of civ­il soci­ety experts who have helped me—too many to name—but I give spe­cial thanks to Professor John Heathershaw of Exeter University, Adam Hug of the Foreign Policy Centre and Sue Hawley of Spotlight on Corruption.

Earlier this week, the Foreign Secretary announced wel­come moves to tough­en up the sanc­tions regime against Russia, but we should not be wait­ing for a poten­tial mil­i­tary cri­sis before we act against illic­it finance at home and cor­rup­tion over­seas. We should act and use the pow­ers we have now.

Today, I want to shine a light on for­eign cor­rup­tion in anoth­er state, not sim­ply because that is impor­tant in itself, but because I want to high­light the UK’s role in facil­i­tat­ing shame­ful wrong­do­ing. Put sim­ply, Britain enables klep­toc­ra­cy. My ask of the Government is twofold. First, they should act proac­tive­ly by sanc­tion­ing wrong­do­ers in Kazakhstan. Secondly, now that they have com­mit­ted to tabling an eco­nom­ic crime Bill in the next Session, they must ensure the Bill’s pro­vi­sions are fit for pur­pose, tough, effec­tive and appro­pri­ate so that Britain can show by what we do that we are seri­ous­ly com­mit­ted to fight­ing the scourge of dirty money.

It is 30 years since Kazakhstan, a mul­ti-eth­nic, resource-rich cen­tral Asian state, emerged from the dis­in­te­gra­tion of the Soviet Union. In those years, Kazakhstan has, by some indi­ca­tors, been a suc­cess. Its GDP growth has out­stripped that of many of its neigh­bours, includ­ing Russia. Living stan­dards are high­er and until the 2010s Kazakhstan appeared to enjoy polit­i­cal stability. 

But there is anoth­er side to the Kazakhstan sto­ry. The coun­try is ruled by a klep­to­crat­ic elite that has grown rich off the back of mon­ey stolen from its peo­ple. Until 2019, its auto­crat­ic dic­ta­tor was Nursultan Nazarbayev.  In Kazakhstan, just 162 peo­ple own 55% of the wealth—mostly mem­bers of Nazarbayev’s fam­i­ly or close asso­ciates. The coun­try has a poor human rights record and lit­tle media freedom. 

As ear­ly as 2006, Jonathan Winer, for­mer Deputy Assistant Secretary of State for International Law Enforcement in the Clinton Administration, said:

“I can’t think of a leader in the free world as noto­ri­ous­ly cor­rupt as Nazarbayev… We’ve know about his cor­rup­tion for at least 15 years”. 

 Yet in Britain, we turned a blind eye, ignored the cor­rup­tion and helped the Kazakh regime laun­der and spend its dirty money. 

Three exam­ples con­firm my view. Between 2008 and 2015, we issued 205 Kazakh klep­to­crats with gold­en visas to set­tle with their dirty mon­ey in the UK, which was the fifth most com­mon coun­try for users of the Tier 1 Investor scheme. A recent Chatham House report reveals that the Kazakh elite owns over half a bil­lion pounds of prop­er­ty in the UK. Around £330 mil­lion of that belongs to Nazarbayev’s extend­ed fam­i­ly, includ­ing Sunninghill Park, alleged­ly bought by Nazarbayev’s son-in-law for £15 million—£3 mil­lion over the ask­ing price. The Organised Crime and Corruption Reporting Project has revealed how Nazarbayev secret­ly con­trols four char­i­ta­ble foun­da­tions with at least $7.8 bil­lion-worth of assets, invest­ed in every­thing from hotels to banks. This glob­al for­tune is part-owned through a UK list­ed hold­ing com­pa­ny set up in 2020—Jusan Technologies. 

We have opened our bor­ders, our prop­er­ty mar­ket and our finan­cial struc­tures to the Kazakh rul­ing class, enabling them to laun­der their illic­it wealth and spend it. Worse, we do not even enforce our exist­ing laws against any of this wrongdoing. 

Why does this mat­ter now? Because the fault lines of the cor­rupt Kazakh polit­i­cal elite have explod­ed. Protests, ini­tial­ly trig­gered by the soar­ing costs of liq­uidised petro­le­um gas, quick­ly devel­oped into a nation­al move­ment against the gov­ern­ing regime. The response from the new President, Tokayev, alleged­ly hand­picked for the job by Nazarbayev, was ini­tial­ly to dis­tance him­self from the old regime. He then request­ed sup­port from Russia, which sent in troops. Finally, on 7 January, he deployed the mil­i­tary against the pro­test­ers, with a “shoot to kill with­out warn­ing” order. Protesters, most of whom were peace­ful cit­i­zens, were gunned down with­out so much as a warn­ing shot. According to some experts, this shock­ing, vio­lent sup­pres­sion has left 225 dead, 4,500 injured and 10,000 arrested. 

That ter­ri­ble loss of life in Kazakhstan should lead to a moment of reflec­tion for us in Britain. We are com­plic­it in what is hap­pen­ing in Kazakhstan. Our lack of trans­paren­cy over for­eign prop­er­ty own­er­ship, our lax reg­u­la­to­ry regime and our weak enforce­ment agen­cies have all aid­ed and abet­ted the Kazakh elite. 

Yet it is not too late for us to act. The Government have put in place a new regime of anti-cor­rup­tion sanc­tions to com­ple­ment our Magnitsky sanc­tions. They allow us to des­ig­nate for­eign, cor­rupt actors, freeze their UK assets, stop them enter­ing Britain and lim­it their access to our finan­cial or legal enablers. Sanctions are pow­er­ful tools, but, Minister, they must be used. That is why the Government should impose sanc­tions on the Kazakh oli­garchs, who have sys­tem­at­i­cal­ly robbed their peo­ple to line their own pock­ets. The recent vio­lence demon­strates the true cost of klep­toc­ra­cy. It is sure­ly up to us, in the UK, the juris­dic­tion that has done so much to facil­i­tate cor­rup­tion in Kazakhstan, to act and hold these indi­vid­u­als to account. 

Our all-par­ty group on anti-cor­rup­tion and respon­si­ble tax is co-oper­at­ing with rep­re­sen­ta­tives from leg­is­la­tures in Europe and America. We have formed the Inter-Parliamentary Alliance against Kleptocracy, and togeth­er we are urg­ing Governments in the UK, the US and the EU to issue sanc­tions against the klep­to­crats of Kazakhstan. Today, I am call­ing for action from the UK to des­ig­nate anti-cor­rup­tion sanc­tions against the fol­low­ing indi­vid­u­als, whom I shall name, all of whom are alleged­ly involved in asset seizure and bribery. The details I will pro­vide are lim­it­ed because of time, but every sto­ry is shocking.

There is Timur Kulibayev, his wife Dinаra Nazarbayeva —the daugh­ter of Nazarbayev—and their asso­ciate Arvind Tiku. Evidence sug­gests that Kulibayev abused his posi­tion to accrue vast wealth. In 2020, the Financial Times showed that Kulibayev ben­e­fit­ed from a secret scheme to divert prof­its from big state pipeline con­tracts. He has faced mon­ey laun­der­ing and bribery inves­ti­ga­tions in oth­er juris­dic­tions. His worth, accord­ing to Forbes, is $2.9 bil­lion, and he owns at least £60 mil­lion of real estate here in the UK.

There is Dariga Nazarbayeva and her rumoured hus­band Kairat Sharipbayev. Dariga is Nazarbayev’s eldest daugh­ter. Her empire, esti­mat­ed by Forbes at $595 mil­lion, is hid­den in an incred­i­bly com­plex sys­tem of off­shore com­pa­nies, foun­da­tions and trusts. Three of her London prop­er­ties were sub­ject to a failed unex­plained wealth order, but inves­ti­ga­tors at Source Material allege that Nazarbayeva may have mis­led the UK High Court. Meanwhile, Sharipbayev is alleged­ly one of the ben­e­fi­cia­ries of a $334 mil­lion fraud at Kazakh bank Bank RBK, which has been labelled

“the bank of the Nazarbayev family”.

There is Nurali Aliyev, son of Dariga and grand­son of the for­mer ruler. Aliyev was appoint­ed deputy chair­man of a pri­vate Kazakh bank called Nurbank—after the grandfather—at the age of 21, and chair­man at 22. UK court doc­u­ments show he received a $65 mil­lion loan from a bank in 2008, through a com­pa­ny which then made a fur­ther loan. According to Nurali’s lawyers, he used some of those funds to pur­chase a £39.5 mil­lion house in Bishops Avenue.

There is Karim Massimov, and his asso­ciate Aigul Nuriyeva. Massimov is a for­mer Prime Minister of Kazakhstan who has been sub­ject to bribery alle­ga­tions, includ­ing from UK list­ed com­pa­nies, as report­ed in the FT. He was also impli­cat­ed in alle­ga­tions of bribery by Airbus for the pur­chase of 45 heli­copters. Nuriyeva is a Kazakh banker and alleged proxy for Massimov, who is him­self impli­cat­ed in major bribery scan­dals totalling $64 mil­lion with the Swedish tele­coms com­pa­ny Teli.

Vladimir Kim is Kazakhstan’s rich­est man, worth some $4.3 bil­lion. He chaired Kazakhmys plc, the first Kazakh com­pa­ny to list on the London Stock Exchange. A Global Witness report claimed that Kim act­ed as a proxy own­er, and that Nazarbayev actu­al­ly con­trolled the com­pa­ny. In 2017, Kim’s daugh­ter Kamila, then 18, bought three flats worth $60 mil­lion in Knightsbridge. His asso­ciate, Eduard Ogay, is co-own­er of Kazakhmys—sorry if I am pro­nounc­ing these names wrongly—and is alleged to have giv­en bribes to the country’s Prime Minister.

Kenes Rakishev is a mys­te­ri­ous­ly wealthy Kazakh busi­ness­man worth up to $1.6 bil­lion, with close ties to the polit­i­cal elite, and a close asso­ciate of the head of the Chechen Republic, who has been sanc­tioned by the US.

Sauat Mynbayev was Minister for ener­gy and min­er­al resources, yet he secret­ly co-owned a Bermuda-based com­pa­ny worth $3 bil­lion, which won pub­lic con­tracts in Kazakhstan despite the obvi­ous con­flicts of inter­est with his min­is­te­r­i­al role. His wife and son own prop­er­ty in the UK.

Alexander Mashkevich, Patokh Chodiev and an asso­ciate who died were known as the “Trio”, renowned for their own­er­ship of Eurasian Natural Resources Corporation, a Kazakh-based min­ing com­pa­ny also list­ed on the London Stock Exchange. In 2013, the Serious Fraud Office launched a crim­i­nal inves­ti­ga­tion into the com­pa­ny, fol­low­ing alle­ga­tions of bribery to African polit­i­cal figures.

Bulat Utemuratov is a for­mer chief of staff to Nazarbayev. A US diplo­mat­ic cable report­ed alle­ga­tions that Utemuratov was the President’s “per­son­al finan­cial man­ag­er” and his own web­site assess­es his per­son­al wealth at $3.9 billion.

Bolat Nazarbayev is Nursultan Nazarbayev’s very wealthy broth­er. In 2008, he pur­chased a £20 mil­lion apart­ment in Manhattan’s ultra-exclu­sive Plaza Hotel. He is accused of involve­ment in armed groups that helped to spark the January violence.

Akhmetzhan Yesimov, chair­man of the sov­er­eign wealth fund, alleged­ly abused his posi­tion to give his for­mer son-in-law, Galimzhan Yessenov, relat­ed par­ty loans through secre­tive British Virgin Islands com­pa­nies to buy a UK enti­ty called Kazphosphate. Yessenov is now one of Kazakhstan’s rich­est men.

Kairat Boranbayev’s daugh­ter mar­ried Nazarbayev’s grandson—it is all in the fam­i­ly. He held a num­ber of posi­tions, includ­ing one involved in the noto­ri­ous­ly cor­rupt tran­sit of gas from Turkmenistan. He owns a £25.4 mil­lion man­sion in an exclu­sive gat­ed com­mu­ni­ty in Virginia Water, a £60 mil­lion flat in One Hyde Park, and three lux­u­ry apart­ments, worth more than £15 mil­lion, in Knightsbridge.

Then there is Alexander Klebanov and his son Yakov. Alexander has an esti­mat­ed wealth of $374 mil­lion and chairs the Central Asian Electric Power Corporation. The two act as finan­cial prox­ies for the for­mer president’s fam­i­ly, and are thought to have helped Dariga Nazarbayeva to avoid the unex­plained wealth order.

Nurlan Nigmatulin, Baurzhan Baibek and Marat Beketayev are senior fig­ures in the rul­ing Nur Otan par­ty and are close asso­ciates of Nazarbayev. They are embed­ded in sup­port­ing cor­rup­tion and alleged­ly respon­si­ble for human rights abuses.

A UK High Court has high­light­ed how Aliya Nazarbayeva, Nazarbayev’s youngest daugh­ter, moved over $300 mil­lion out of the coun­try through com­plex off­shore struc­tures, includ­ing in the BVI. Aidan Karibzhanov is accused by his for­mer wife of hav­ing prof­it­ed from his posi­tion as a banker by sell­ing the Kazakhstan nation­al tele­coms com­pa­ny and, I quote,

“pri­va­ti­za­tion of pub­lic assets result­ing in huge prof­its to polit­i­cal­ly con­nect­ed insid­ers at the expense of the state”.

Kairat Satybaldy and Samat Abish are Nazarbayev’s nephews, enjoy­ing sig­nif­i­cant wealth through off­shore struc­tures. Both are key play­ers in Nazarbayev’s inner cir­cle, involved in the cur­rent pow­er strug­gle that is under­min­ing peace and security.

I have named those peo­ple. Imposing sanc­tions on this cor­rupt elite will not of itself root out evil prac­tices or lead to a rad­i­cal demo­c­ra­t­ic trans­for­ma­tion in Kazakhstan, but it will demon­strate that we mean what we say when we com­mit to fight­ing dirty mon­ey and cor­rup­tion. The cost of inac­tion is high. The rep­u­ta­tion of London and our finan­cial ser­vices sec­tor is already sul­lied, with the UK seen as the juris­dic­tion of choice for dirty mon­ey. With swift action, we can begin to restore the idea of a good glob­al Britain and demon­strate to our allies that we will not pro­vide a safe haven for klep­to­crats or oligarchs.

I ask the Minister whether he will con­sid­er the indi­vid­u­als I have named and impose sanc­tions on those who have stolen from their coun­try, laun­dered their mon­ey here, used UK struc­tures to hide their ill-got­ten gains, used the gold­en visa route to gain entry to the UK or com­mit­ted human rights abus­es. Will he act now? Only by strength­en­ing trans­paren­cy, leg­is­lat­ing for tougher reg­u­la­tions and ensur­ing con­sis­tent, strong enforce­ment will we be able to hold our heads up high again as a trust­ed juris­dic­tion that lives by the high­est stan­dards. We must final­ly turn the warm words of suc­ces­sive Governments into firm actions in the promised eco­nom­ic crime Bill. Will the Minister con­firm that the Bill will be con­sid­ered this year? If the Government fail yet again on these two fronts, the only ones who will be delight­ed are peo­ple such as the crim­i­nal klep­to­crats from Kazakhstan who will be laugh­ing all the way to the bank.

17:20:00

The Minister for the Middle East, North Africa and North America (James Cleverly)
I am grate­ful to the right hon. Member for Barking (Dame Margaret Hodge) for secur­ing the debate and I pay trib­ute to the work that she has done on these com­plex issues both in her for­mer role as a Select Committee Chair and as chair of the all-par­ty group on anti-cor­rup­tion and respon­si­ble tax. As my noble Friend Lord Ahmad, the Minister with respon­si­bil­i­ty for south and cen­tral Asia, is in the oth­er place, it is my plea­sure to respond on behalf of the Government.

This month, the UK cel­e­brat­ed 30 years of diplo­mat­ic rela­tions with Kazakhstan, our largest part­ner in cen­tral Asia. Over the years, we have built a strong part­ner­ship in areas such as oil and gas invest­ment, edu­ca­tion and finan­cial ser­vices, as well as pro­mot­ing human rights and demo­c­ra­t­ic val­ues. We have had real suc­cess in encour­ag­ing a more open busi­ness envi­ron­ment in Kazakhstan, includ­ing through the Astana International Financial Centre.

Hon. Members—though few are here—will have wit­nessed the vio­lent clash­es that took place in January after ini­tial­ly peace­ful protests in west­ern Kazakhstan over increased fuel prices. As the right hon. Lady said, the lat­est esti­mates are that more than 200 peo­ple died dur­ing those clash­es. There were reports of organ­ised attacks on prop­er­ty and law enforce­ment offi­cers, and almost 10,000 peo­ple were detained. I am sure that she will join me and oth­ers in round­ly con­demn­ing the vio­lence and loss of life.

My noble Friend Lord Ahmad has been engaged inten­sive­ly on these issues, speak­ing to senior Kazakh con­tacts last month, includ­ing President Tokayev’s spe­cial rep­re­sen­ta­tive on 14 January. In each of these calls, the Minister has under­lined the impor­tance of Kazakhstan respect­ing its inter­na­tion­al human rights com­mit­ments. President Tokayev has called what hap­pened an “attempt­ed coup” and we are urgent­ly seek­ing fur­ther infor­ma­tion about that very seri­ous devel­op­ment. We wel­come the President’s deci­sion to estab­lish an inves­tiga­tive com­mis­sion to ascer­tain what led to these unprece­dent­ed events and loss of life. We sup­port the Kazakh author­i­ties’ com­mit­ment that this will be an effec­tive and trans­par­ent inves­ti­ga­tion and have encour­aged them to con­sid­er inter­na­tion­al and inde­pen­dent expertise.

In his pub­lic remarks, the President was clear that the orig­i­nal peace­ful protests were based on legit­i­mate griev­ances about the socioe­co­nom­ic sit­u­a­tion and that urgent eco­nom­ic reform is need­ed. We sup­port that mes­sage and we seek oppor­tu­ni­ties, with our inter­na­tion­al part­ners, to sup­port those reforms.

President Tokayev has also been crit­i­cal of an exist­ing social sys­tem that has seen eco­nom­ic growth large­ly ben­e­fit a small num­ber of very rich peo­ple in soci­ety, as the right hon. Lady high­light­ed. We are well aware of reports on the alleged acqui­si­tion of assets by wealthy mem­bers of elite Kazakh soci­ety, includ­ing of sub­stan­tial prop­er­ty hold­ings here in the UK. It is, of course, the role of law enforce­ment agen­cies to inves­ti­gate any spe­cif­ic alle­ga­tions of wrong­do­ing, as she said.

As a lead­ing finan­cial ser­vices cen­tre, the UK can, unfor­tu­nate­ly, be the des­ti­na­tion for the pro­ceeds of cor­rup­tion, despite find­ings from the Financial Action Task Force that the UK has one of the strongest sys­tems to com­bat mon­ey laun­der­ing and ter­ror­ist financ­ing of more than 60 coun­tries assessed to date. Consequently, the inte­grat­ed review of secu­ri­ty, defence, devel­op­ment and for­eign pol­i­cy com­mit­ted to take stronger action to bear down on illic­it finance, includ­ing by bol­ster­ing the National Economic Crime Centre and work­ing with our clos­est allies, such as the United States, to max­imise our col­lec­tive impact against this com­mon threat.

The recent spend­ing review has put new resources behind that com­mit­ment: £42 mil­lion for eco­nom­ic crime reform from now until 2025. That is in addi­tion to £63 mil­lion for Companies House reform and the intro­duc­tion of the eco­nom­ic crime (anti-mon­ey laun­der­ing) levy, which will raise around £100 mil­lion per year from the pri­vate sec­tor, to com­bat eco­nom­ic crime from 2023. These addi­tion­al resources will sig­nif­i­cant­ly enhance our abil­i­ty to tack­le transna­tion­al cor­rup­tion and illic­it finance.

Since 2006, the Foreign, Commonwealth and Development Office has fund­ed the National Crime Agency’s inter­na­tion­al cor­rup­tion unit, a world-renowned law enforce­ment capa­bil­i­ty focused on inves­ti­gat­ing cor­rup­tion from devel­op­ing coun­tries with UK links. Since fund­ing start­ed in 2006, ICU inves­ti­ga­tions have result­ed in the con­vic­tion of 30 peo­ple and com­pa­nies for cor­rup­tion offences. It has also frozen, con­fis­cat­ed or returned to devel­op­ing coun­tries more than £1.1 bil­lion-worth of stolen assets.

In addi­tion, the UK leads and hosts the International Anti-Corruption Coordination Centre, which brings togeth­er spe­cial­ist law enforce­ment offi­cers from mul­ti­ple agen­cies around the world to tack­le alle­ga­tions of grand cor­rup­tion. The IACCC sig­nif­i­cant­ly enhances our abil­i­ty to inves­ti­gate com­plex, mul­ti-juris­dic­tion­al cor­rup­tion cas­es. Since its launch in 2017, it has pro­vid­ed sup­port on 88 investigations.

In 2019, the UK launched its eco­nom­ic crime plan that pro­vides a joined-up pub­lic and pri­vate sec­tor response to eco­nom­ic crime. The suc­cess of our pub­lic-pri­vate part­ner­ship is per­fect­ly demon­strat­ed by the work of the joint mon­ey laun­der­ing intel­li­gence task­force, a mech­a­nism that enables law enforce­ment and the finan­cial sec­tor to work more close­ly togeth­er to detect, pre­vent and dis­rupt mon­ey laun­der­ing and eco­nom­ic crime. To date, the joint mon­ey laun­der­ing intel­li­gence task­force has helped more than 600 law enforce­ment inves­ti­ga­tions. This has direct­ly con­tributed to over 150 arrests and the seizure of more than £34 mil­lion in illic­it funds.

Finally, in April last year, the UK launched the glob­al anti-cor­rup­tion sanc­tions regime, which the right hon. Lady men­tioned in her remarks. This allows the Government to impose asset freezes and trav­el bans on those involved in seri­ous cor­rup­tion around the world, and it sends a mes­sage that the UK will not tol­er­ate those indi­vid­u­als, or their ill-got­ten gains, in our coun­try. The regime does not tar­get coun­tries, but instead tar­gets those indi­vid­u­als or organ­i­sa­tions that are respon­si­ble. We believe that this is a strong, per­son­al deter­rent and it has been used so far to sanc­tion 27 indi­vid­u­als in 10 dif­fer­ent countries.

Collectively, these invest­ments sig­nif­i­cant­ly enhance our abil­i­ty to bring cor­rupt actors to jus­tice. They also send a clear mes­sage that we will use the full force of our capa­bil­i­ties to bear down on those who seek to use the UK as a des­ti­na­tion for their ille­git­i­mate wealth.

Criminals, cor­rupt elites and indi­vid­u­als who threat­en our secu­ri­ty are not wel­come in the UK.

Dame Margaret Hodge
I am extreme­ly grate­ful to the Minister, but he has giv­en me a very gen­er­al response. I named more than 20 indi­vid­u­als, many of whom are mem­bers of the same fam­i­ly. Will he under­take to inves­ti­gate the cir­cum­stances that I briefly out­lined, and under­take that, if I am cor­rect, those indi­vid­u­als will face sanc­tions under the new regime?

James Cleverly
The right hon. Lady will, I am sure, under­stand that it can some­times be coun­ter­pro­duc­tive to go into details about what future sanc­tions des­ig­na­tions the UK Government might under­take, but I can absolute­ly assure her that my offi­cials, and indeed the House, will have tak­en note of the indi­vid­u­als she high­light­ed in her speech.

In rela­tion to Kazakhstan, or indeed any oth­er coun­try, our law enforce­ment agen­cies con­tin­ue to mon­i­tor and, if nec­es­sary, inves­ti­gate par­tic­u­lar cas­es where cir­cum­stances require. We know that cor­rup­tion and illic­it finance can have a dev­as­tat­ing impact on states and cit­i­zens by under­min­ing democ­ra­cy, bankrolling author­i­tar­i­an agen­das, and enabling seri­ous and organ­ised crime. The UK has shown, on the world stage, that it has both the means and the will to pro­mote respon­si­ble finan­cial behav­iour. We have shown that we stand ready to take action, domes­ti­cal­ly and inter­na­tion­al­ly, wher­ev­er nec­es­sary. I am sure you will agree, Madam Deputy Speaker, that we must now stand togeth­er to show that cor­rup­tion has no place in this country.

Question put and agreed to.

17:30:00

House adjourned.

Original text: UK PARLIAMENT