UK anti-corruption laws aid kleptocrat regimes like Putin’s, report says

Government-fund­ed experts claim leg­is­la­tion to seize UK prop­er­ty bought with dirty mon­ey may do more harm than good

The UK’s tooth­less anti-cor­rup­tion laws risk strength­en­ing klep­to­crat­ic regimes like Vladimir Putin’s, a British gov­ern­ment-fund­ed report has found.

Since 2017, author­i­ties have been able to use unex­plained wealth orders (UWOs) to con­fis­cate UK prop­er­ty from klep­to­crats who fail to prove they bought assets with legit­i­mate funds.

But the leg­is­la­tion has been used only four times, with no UWOs issued since 2019. None has ever been issued against any Russian nation­als, despite MPs last month warn­ing that the UK is the ‘des­ti­na­tion of choice’ for Russians look­ing to stash dirty mon­ey in property.

Now, experts from the Anti-Corruption Evidence Research Programme have warned that UWOs may even do more harm than good because it is too easy for klep­to­crats to beat them in court. The claim was made in a damn­ing new report, ‘Criminality Notwithstanding’, fund­ed by the Foreign, Commonwealth and Development Office.

Kleptocrats can “spin that the [court] vic­to­ry ‘clears’ their funds [and] absolves them of cor­rup­tion”, which legit­imis­es them, allow­ing them to fur­ther their wealth, said Tom Mayne, one of the report’s authors.

Prior to UWOs’ intro­duc­tion, author­i­ties had to obtain evi­dence that assets were bought with the pro­ceeds of crime before they could launch civ­il recov­ery pro­ceed­ings. UWOs shift­ed the bur­den of proof onto own­ers, who are now required to pro­vide evi­dence that a pur­chase was made with law­ful­ly obtained wealth.

But the report found “a dan­ger that UWOs sim­ply rein­force the sta­tus quo of cor­rupt regimes”. It said it was “extreme­ly unlike­ly” that UK law enforce­ment bod­ies could ever win a case against a klep­to­crat sup­port­ed by their country’s rul­ing powers.

“If you retain pow­er in your home coun­try, that means you can main­tain a whole load of polit­i­cal con­nec­tions, which allows you to acquire the evi­dence you need. And that’s how a klep­toc­ra­cy works,” John Heathershaw, a pro­fes­sor at the University of Exeter and a co-author of the report, told openDemocracy.

“And it works also for the chil­dren and asso­ciates of peo­ple in pow­er too.”

Mayne, a research fel­low at the University of Exeter, added that there is also a risk UWOs could be used by cor­rupt regimes to cement their posi­tion against dis­si­dent exiles.

“If I was a klep­to­crat and I knew that my polit­i­cal ene­my had a house in the UK, you could leak some info about this prop­er­ty to the press, poten­tial­ly forc­ing a UWO to be issued,” he explained.

Dubious proof

The report found that the National Crime Agency (NCA) has been out­matched by the multi­na­tion­al law firms hired by klep­to­crats, which spe­cialise in con­struct­ing ali­bis for sus­pect wealth.

Kleptocrats can win UWO court cas­es with dubi­ous proof, claimed the authors of the report, which said the “mere pres­ence of infor­ma­tion about wealth could pre­vent a UWO from being upheld, irre­spec­tive of the legit­i­ma­cy of the claim or the nature of the wealth”.

The report high­light­ed a 2019 case involv­ing Nurali Aliyev, the grand­son of Kazakhstan’s for­mer auto­crat leader, where it said the judge was “sur­pris­ing­ly will­ing” to accept the argu­ments and evi­dence put for­ward by Aliyev’s lawyers.

Information from Aliyev’s LinkedIn pro­file was cit­ed in the judge’s rul­ing as part of the proof that a prop­er­ty was pur­chased inde­pen­dent­ly of his con­nec­tions to Kazakhstan’s regime.

The NCA had issued UWOs against sev­er­al fam­i­ly mem­bers of Nursultan Nazarbayev, an auto­crat who ruled Kazakhstan for near­ly three decades. The agency believed three mul­ti-mil­lion-pound London prop­er­ties were bought with wealth acquired by Nursultan’s for­mer son-in-law, Rakhat Aliyev, who is Nurali Aliyev’s father.

Rakhat Aliyev was once one of the most pow­er­ful offi­cials in Kazakhstan. But in 2007, he fell foul of his father-in-law and his assets were trans­ferred to his ex-wife, Dariga Nazarbayeva, Nursultan’s eldest daugh­ter, in a divorce Rakhat Aliyev alleged was fraud­u­lent. He died in prison in 2015 while await­ing tri­al for the alleged mur­der of two bankers in Kazakhstan. Rakhat Aliyev main­tained his inno­cence, claim­ing the charges were polit­i­cal­ly motivated.

Nurali Aliyev did not respond to openDemocracy’s requests for comment.

If you retain pow­er back home, you can main­tain con­nec­tions that allow you to acquire the evi­dence you need

The NCA argued that the prop­er­ties, now belong­ing to Nazarbayeva and her son, Nurali Aliyev, should be seized because they were bought by Rakhat Aliyev, whose wealth, it alleged, was obtained through ille­git­i­mate sources.

However, a judge ruled against the NCA – mean­ing the UWOs were dismissed.

More reforms needed

Heathershaw said the UK gov­ern­ment had been forced to belat­ed­ly take action on cor­rup­tion because of the Ukraine war, which brought back into the spot­light past polit­i­cal dona­tions to the Tory par­ty from fig­ures con­nect­ed to the Kremlin – as well as Boris Johnson’s close rela­tion­ship to Evgeny Lebedev, the news­pa­per own­er and son of a KGB spy.

The gov­ern­ment this month brought for­ward its long-await­ed Economic Crime Bill after com­ing under fire for delay­ing reforms. Lord Agnew, the junior min­is­ter with over­sight of fraud pre­ven­tion, quit in January, accus­ing the gov­ern­ment of park­ing the leg­is­la­tion in his res­ig­na­tion letter.

The City has been able to write the laws of Britain and cre­ate a opaque sys­tem that ben­e­fits the own­ers of capital

“[The bill] seems to repeat pre­vi­ous errors where some­thing embar­rass­ing hap­pens and then the gov­ern­ment acts. In 2016, it held an anti-cor­rup­tion sum­mit and brought in unex­plained wealth orders after the Panama Papers leak. Now, with the Russian inva­sion, it’s real­ly embar­rass­ing because these things haven’t worked, so it’s rushed through anoth­er bill,” Heathershaw told openDemocracy.

While the report wel­comed some of the Economic Crime Bill’s changes to UWOs – which include cap­ping the legal costs of enforce­ment author­i­ties – Heathershaw said the gov­ern­ment has to go much fur­ther if it is to root out corruption.

“Structurally, you have to trans­form the whole sys­tem, as it’s real­ly devel­oped over about 60 years, with the emer­gence of the off­shore sys­tem, with the dereg­u­la­tion of the City in the Thatcher era,” he said.

“Effectively, the City has been able to write the laws of Britain and cre­ate a sys­tem which is finan­cial­ly opaque and ben­e­fits the own­ers of cap­i­tal, but does­n’t real­ly ben­e­fit the wider public.”

Highlighted com­ment, by stephenphilemon

People are not focus­ing on the fact that the Tories are using leg­is­la­tion to pro­duce the appear­ance of action against cor­rup­tion, abus­es etc. whilst bureau­cra­cy and a fail­ure to apply the law and act against wrong­do­ing mean that favoured peo­ple can car­ry on unchecked on their law­less and social­ly unde­sir­able paths.Legislation is used as a cov­er for inac­tion and is nev­er intend­ed to chal­lenge, change or penalise poor or law­less pat­terns of behav­iour. Compare this instance with pol­lu­tion. Controls and penal­ties are inscribed in statute, but the law and the rules are not enforced. When chal­lenged min­is­ters point to the law and divert atten­tion from their sys­tem­at­ic fail­ure to make sure the law is obeyed and penalise breach­es, how­ev­er flagrant.This is, in effect, a huge smoke and mir­rors exer­cise. On paper the gov­ern­ment are in line with pub­lic opin­ion. Actually, in their actions that’s to say, they are fol­low­ing a 180 degree dif­fer­ent, a quite oppo­site, agen­da. This is a key fea­ture of their over­all MO. Johnson’s lying is total­ly con­sis­tent with this approach and itself cal­cu­lat­ed to divert atten­tion from the sys­temic and sys­tem­at­ic dis­so­nance between the government’s words and their actions. Or the fact that their are actu­al­ly them­selves com­plic­it in wrongdoing.

Original source of arti­cle:opendemocracy.net