London Laundromat

A device that was meant to force rich investors to be more trans­par­ent has become the lat­est symp­tom of Britain’s addic­tion to secre­cy and dirty money

When a min­is­ter promis­es to bring the full force of gov­ern­ment to bear on organ­ised crime it is rea­son­able to expect results. In the case of the unex­plained wealth orders (UWOs) unveiled six months ago as the government’s new weapon against mon­ey laun­der­ing, it is pos­si­ble that results will emerge in due course. Indeed, it is essen­tial, because there is noth­ing to show for the minister’s bold words so far. They are begin­ning to look like bluster.

Unexplained wealth orders were first moot­ed last year as a way of forc­ing rich for­eign investors to explain the sources of their for­tunes. Ben Wallace, the min­is­ter of state for secu­ri­ty, announced in February that five gov­ern­ment agen­cies includ­ing the National Crime Agency and the Serious Fraud Office were empow­ered to use the orders as part of a “full-spec­trum” crack­down on the mis­use of British assets, and espe­cial­ly prime London prop­er­ty, as a giant mon­ey laun­der­ing machine.

If the crack­down is hap­pen­ing it is large­ly invis­i­ble. Since February only three UWOs have been grant­ed by the High Court. All tar­get the same fam­i­ly. The fam­i­ly is appeal­ing and all three are cloaked in a veil of secre­cy. Reporting restric­tions mean the fam­i­ly can­not be identified.

More than 120 oth­er for­eign oli­garchs and busi­ness­men are said to be under inves­ti­ga­tion with a view to seek­ing UWOs against them, but that is as far as the process has advanced. When the gov­ern­ment promis­es action but fails to fol­low through, its cred­i­bil­i­ty is under­mined. When legal pro­ceed­ings designed to get at the truth but also to deter are held in secret their deter­rent effect is close to zero. Open jus­tice is mocked. Public inter­est report­ing is muz­zled, and instead of gain­ing a rep­u­ta­tion for bring­ing tax havens to heel, Britain gains a rep­u­ta­tion for being one.

There is no sil­ver bul­let in the fight against mon­ey laun­der­ing. People tar­get­ed with unex­plained wealth orders are like­ly to come from weak juris­dic­tions like Russia’s, where the true sources of wealth are eas­i­ly dis­guised. Even so, the orders were envis­aged as a potent new weapon. Instead they have mere­ly pro­vid­ed more evi­dence that Britain is not seri­ous about end­ing its addic­tion to what David Cameron called “dodgy cash”.

The anti-cor­rup­tion watch­dog Transparency International esti­mates that since 2006 more than £100 bil­lion has been fun­nelled into Britain with­out full dis­clo­sure of its ori­gins or ben­e­fi­cia­ries. Much of this is in cor­po­rate vehi­cles that are hard if not impos­si­ble to tie to indi­vid­u­als, but the watch­dog believes that assets worth £4.4 bil­lion should be sub­ject to unex­plained wealth orders. Of those assets about a quar­ter are said to be owned by close asso­ciates of Vladimir Putin. Many in his inner cir­cle own London prop­er­ty worth mil­lions more than they might be expect­ed to afford on their declared salaries.

The cha­rade of strong words and inad­e­quate action on dirty mon­ey has been going on for many years. In 2002 Lord Blunkett, then home sec­re­tary, set up the Assets Recovery Agency to pur­sue “the homes, yachts, man­sions and lux­u­ry cars of the crime barons”. The agency closed in 2008. Mr Cameron repeat­ed­ly called for a reg­is­ter of ben­e­fi­cial own­ers of shell com­pa­nies in Britain and British over­seas ter­ri­to­ries. It has yet to materialise.

The sources of ques­tion­able wealth are becom­ing hard­er to trace, not eas­i­er. The EU’s new data pro­tec­tion rules do not help. British court pro­ceed­ings in cor­rup­tion cas­es are list­ed late, too often sub­ject to report­ing restric­tions and too expen­sive to review — a full tran­script can cost £20,000. This gov­ern­ment has said that it wants to cre­ate a hos­tile envi­ron­ment for ill-got­ten gains. Unexplained wealth orders were a means to that end but in prac­tice they serve mere­ly as a sig­nal to oli­garchs to call their lawyers. Those whom they were meant to scare are scarce­ly bothered.

London Laundromat

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