With eyes on ‘Londongrad,’ U.K. seeks to overhaul ties to Russian oligarchs

(LONDON) — To Daria Kaleniuk, a Ukrainian anti-cor­rup­tion activist, Russian President Vladimir Putin “has two armies.”

“One is vis­i­ble and obvi­ous, it oper­ates in Ukraine,” Kaleniuk said Wednesday dur­ing a con­gres­sion­al hear­ing in Washington. “But anoth­er army is invisible.”

As Ukrainian forces fight to defend their coun­try from Russia’s pro­tract­ed inva­sion, experts say a sec­ond bat­tle is being waged in London. In the 22 years since Putin swept into pow­er, many in Russia’s bil­lion­aire class have gone abroad. Critics say in many cas­es it is to laun­der their mon­ey and rep­u­ta­tion, find­ing a home in friend­ly real estate mar­kets and cul­tur­al hubs. Now, the wealth they’ve amassed abroad has come under great scrutiny.

According to the anti-cor­rup­tion NGO Transparency International, at least £1.5 bil­lion ($1.9 bil­lion) worth of U.K. prop­er­ty is owned by Russians with links to the Kremlin or those sus­pect­ed of finan­cial crime. Due to the preva­lence of opaque, off­shore com­pa­nies, the true scale of illic­it wealth is like­ly far high­er, hence the cap­i­tal city’s nick­name in some quar­ters: “Londongrad.”

Of course, not every wealthy Russian in London is an oli­garch or is linked to illic­it mon­ey. And wealthy oli­garchs in London are not uni­form in how close they are to Putin and how they accu­mu­lat­ed wealth, but many do have in com­mon ties to the Russian state, accord­ing to Thomas Mayne, an expert in cor­rup­tion stud­ies and vis­it­ing fel­low at Chatham House, a London-based think tank.

“It’s a ‘you scratch my back and I’ll scratch yours’ type sys­tem,” he told ABC News. “You’re allowed to become unfath­omably wealthy. But, on the oth­er hand, you will be required depend­ing on who you are at var­i­ous times to sup­port what­ev­er the Kremlin wants you to do.”

Roman Abramovich, the now-sanc­tioned own­er of Chelsea F.C., is per­haps the best known of these oli­garchs. For almost two decades he enjoyed a priv­i­leged posi­tion in British soci­ety, invest­ing a for­tune in the London soc­cer club, ush­er­ing in an unprece­dent­ed era of success.

But Abramovich has “had a close rela­tion­ship for decades” with Putin, accord­ing to the British gov­ern­ment, which has announced sanc­tions against a host of oli­garchs. Abramovich has repeat­ed­ly dis­put­ed reports sug­gest­ing his alleged close­ness to Putin. He has not been sanc­tioned by the U.S.

The Foreign, Commonwealth and Development Office specif­i­cal­ly men­tioned Abramovich’s deal­ings with Evraz PLC, a man­u­fac­tur­ing com­pa­ny that is said to be sup­ply­ing steel to make some Russian tanks used in the war with Ukraine. Abramovich has not com­ment­ed on the sanc­tions since they were imposed.

Abramovich has found him­self in a bizarre posi­tion, and his role at the Ukraine-Russia nego­ti­a­tions — where he suf­fered a sus­pect­ed poi­son­ing along with Ukrainian del­e­gates — has been the sub­ject of a great deal of media intrigue.

Another investor in U.K. cul­ture is Russian bil­lion­aire Alisher Usmanov, who was the top share­hold­er of yet anoth­er major soc­cer club, Arsenal, until 2018. He main­tained his deep ties to the Premier League until just last month, when Liverpool-based soc­cer club Everton sus­pend­ed mul­ti­mil­lion-dol­lar spon­sor­ship deals with Russian com­pa­nies linked to the oli­garch. He was sanc­tioned by the U.K. short­ly after.

The war in Ukraine has thrown London’s role as a hub for Russian mon­ey into sharp focus, spurring a response unseen after pre­vi­ous Russian actions, includ­ing the poi­son­ings of Russian defec­tors Sergei Skripal in 2018 and Alexander Litvinenko in 2006, the annex­a­tion of Crimea in 2014 and the Georgian war of 2008.

The U.K. has now sanc­tioned over 1,000 indi­vid­u­als and busi­ness­es it says has links to the Russian state, accord­ing to the for­eign office. The total asset val­ue of the banks sanc­tioned is upwards of $650 bil­lion, and the total wealth of oli­garchs and their fam­i­lies sanc­tioned is upwards of $190 bil­lion, accord­ing to offi­cial data.

“These oli­garchs, busi­ness­es and hired thugs are com­plic­it in the mur­der of inno­cent civil­ians and it is right that they pay the price,” Foreign Secretary Liz Truss said in announc­ing the lat­est round of sanc­tions. “Putin should be under no illu­sions — we are unit­ed with our allies and will keep tight­en­ing the screw on the Russian econ­o­my to help ensure he fails in Ukraine. There will be no let-up.”

In terms of tack­ling illic­it wealth and cor­rup­tion of Russian ori­gin, the response has been “robust” and “pos­i­tive,” Mayne said, though ques­tions remain about the sheer depth of Russian influ­ence in the U.K.

“It’s per­haps sur­pris­ing sim­ply because of readi­ness in the last 20 years to accept this cor­rupt cap­i­tal, this dirty cash,” he said. “You know, we’ve known for a long time Russia is a bad actor. But the big ques­tion is, you know, how did we let this hap­pen in the first place?”

Experts say the assets that have sur­faced like­ly reflect only a frac­tion of Russian wealth in the U.K. As with else­where in the West, many oli­garchs and oth­er wealthy indi­vid­u­als from for­eign coun­tries have hid­den their assets in a com­plex net­work of shell com­pa­nies or under the names of their fam­i­ly mem­bers. Critics say future sanc­tion pack­ages should take these loop­holes into account.

“In the U.K., sanc­tion­ing oli­garchs should include visa bans for [the oli­garchs them­selves] … but also for their fam­i­ly mem­bers,” Kaleniuk said dur­ing Wednesday’s hearing.

The Organized Crime and Corruption Reporting Project (OCCRP), a net­work of inves­ti­ga­tors and jour­nal­ists, found five prop­er­ties linked to Usmanov in the U.K., a net­work of inves­ti­ga­tors and jour­nal­ists, esti­mat­ed to be worth more than $200 million.

In announc­ing Usmanov’s sanc­tion­ing last month, the U.K. gov­ern­ment said two of Usmanov’s large prop­er­ties, Beechwood House, in London, and the 16th cen­tu­ry Sutton Place estate, in Surrey, were among his frozen assets. But some of his wealth has proved more elu­sive — with the OCCRP report­ing large por­tions have been trans­ferred into trusts, out of reach of the British gov­ern­ment, with his fam­i­ly hold­ing the ben­e­fi­cial rights.

In 2020, a par­lia­men­tary com­mit­tee released The Russia Report, which was com­mis­sioned fol­low­ing the poi­son­ing of Skripal on the streets of Salisbury with a Novichok agent. Skripal and his daugh­ter sur­vived, though one oth­er British nation­al died and anoth­er became severe­ly ill.

The report, which was crit­i­cal of gov­ern­ment mea­sures to com­bat Russian influ­ence, said many Russians with links to Putin had inte­grat­ed into London’s “busi­ness and social scene,” some with con­nec­tions to the “high­est lev­els” of British pol­i­tics. Lawyers, accoun­tants and estate agents helped enable Russian influ­ence, it added, describ­ing it as the “new normal.”

A Golden visa scheme, guar­an­tee­ing res­i­den­cy for for­eign investors, which report­ed­ly helped 2,600 Russian investors in the U.K. since 2008, was only revoked on the eve of the Ukraine war.

“The Russia Report said that the secu­ri­ty ser­vices have tak­en their eye off the ball when it came to the threat posed by Russia,” Mayne told ABC News. “And that has to be tied in with the obscene amounts of cap­i­tal flow­ing into London from Russia, which they’ve been quite hap­py to accept, even though it’s been dubi­ous­ly acquired. Now we’re only real­iz­ing that the fol­ly of that position.”

Downing Street offi­cials hope the new wave of sanc­tions — with poten­tial­ly more to come — as well as a new Economic Crime Bill, will fol­low through on Prime Minister Boris Johnson’s warn­ing issued at the out­set of war: that those attempt­ing to laun­der mon­ey in the U.K. have “nowhere to hide.”

The U.K. gov­ern­ment hopes that tar­get­ing Russian oli­garchs will have a dual effect: pre­vent­ing funds from reach­ing the Kremlin to finance the war in Ukraine, and also cur­tail­ing the lav­ish lifestyles of Russian elites who have enjoyed what their rich­es can buy them in the West. When the U.K. announced its first seizure of a Russian owned yacht in British waters at the end of last month, Transport Secretary Grant Shapps said it served as a “a clear and stark warn­ing to Putin and his cronies.”

By their nature, sanc­tions are a “freeze, not a seize,” Mayne said, but the nature of Putin’s gov­ern­ment means that tar­get­ing indi­vid­u­als could poten­tial­ly, as the gov­ern­ment hopes, have an effect.

The Economic Crime Bill will be paired with a National Security Agency tool, intro­duced in 2018 to tack­le alleged dirty mon­ey, called “Unexplained Wealth Orders.” When they have been used they have been high pro­file — such as to tar­get the wife of a dis­graced Azeri banker who went on a major spend­ing spree at Harrod’s — though so far only a hand­ful have been met­ed out.

In an extract from his new book enti­tled “Butler to the World” pub­lished in The Times of London, finan­cial jour­nal­ist Oliver Bullough said sanc­tions will like­ly be chal­lenged in court. The bill “con­tains noth­ing that will help to dri­ve klep­to­crat­ic wealth out of this coun­try,” he wrote.

“This real­ly comes back to the ques­tion of what London has become, and whether this will tru­ly be a line in the sand,” Mayne said. “Do we just sit back and con­tin­ue to be hap­py to accept this mon­ey? Or do we start to real­ize that cor­rup­tion pos­es a nation­al secu­ri­ty threat as Biden as iden­ti­fied in the U.S.? My sus­pi­cion is that, because London is the world’s largest finan­cial cen­ter, we will go back to the way it was, with per­haps a bit of a caveat on specif­i­cal­ly Russian cash.”

Original source of arti­cle: www.deltaplexnews.com