A tour across London’s ‘Red Square’, tracing roots of dirty money

A mansion at Eaton Square owned by Russian businessman Andrey Goncharenko.  

“Welcome to Red Square,” says Mark Hollingsworth, the author of Londongrad: From Russia with Cash; the Inside story of the Oligarchs, as the coach, packed with journalists, passes through Eaton Square, a smart garden in the London neighbourhood of Belgravia. A 2016 report by Lloyds Bank named Belgravia as the most expensive street in Britain, with the average home costing £17 million.

The street earned the ‘Red’ nickname because of the high density of Russian money that had unobtrusively gone into the square in recent years. “[The people who bought them] don’t actually live there… they launder it via Cyprus, the British Virgin Islands... an offshore company owned by an offshore trust and it ends up in London,” he said. “It’s not about making more money... it’s about preserving it.”

Mr. Hollingworth is one of the transparency campaigners who take part in regular “Kleptocracy” tours of London, that focus on the way dirty money from across the world has wended its way to the city’s hot property market.

It’s run by the Campaign for Legislation Against Moneylaundering in Property by Kleptocrats (ClampK), formed in 2015 by Roman Borisovich and Arthur Doohan, both bankers turned activists, and supported by a host of anti-corruption organisations.

Skripal attack

Past tours have largely adopted a more general theme, but the most recent one on Russia felt particularly relevant in the context of the poisoning of the former double agent, Sergei Skripal, and his daughter in Salisbury in early March.

Speaking at the House of Commons, Labour leader Jeremy Corbyn had said earlier this month: “We must... expose the flows of ill-gotten cash between the Russian state and billionaires who become stupendously rich by looting their country and subsequently use London to protect their wealth.”

“London has become the home of dodgy money and we need to change that,” says Chris Bryant, the Labour MP who heads the all party parliamentary group on Russia, on board the bus.

Transparency International estimates that of around £4.4 billion of property in the U.K. is owned with suspicious wealth — that is to say from individuals either with existing charges of corruption against them or facing suspicions of it. Around £940 million comes from Russian investors, making Russia the second largest source of such funds after the UAE.

However, with the group relying on data from openly accessible records and occasional leaks such as the Panama Papers, “we believe these figures are just the tip of the iceberg…the real figure is probably a lot higher”, says Rachel Davies Teka, the head of advocacy at Transparency International (TI), as the coach stands by two flats close to Parliament, believed to be owned by a senior Russian politician, and worth over £11 million. It’s a figure that would take 76 years for him to pay off if he used his entire annual salary, to pay off, she estimates. “You may be asking yourself: Why is London such a magnet for this money,” she asks, pointing to a host of factors, including Britain’s close ties to key secrecy jurisdictions across the world, the “blanket” range of services to corrupt individuals — from PR to estate agents that “may be complicity or unwittingly” help them launder their cash, and holes in its anti-money laundering system.

“Let’s pretend... I’m a Health Minister for a foreign government... siphoning money from the health budget — unfortunately London makes it pretty easy to get that money in anonymously. All I have to do is open a couple of shell companies where my true identity is obscured, and I can come and buy some London property is and the crazy thing is I wouldn’t even have to tell the Land Registry who owns that property upon purchase.”

Tighter rules

Transparency is crucial to this: under the current system, properties can be registered to offshore companies, with nominee shareholders acting on behalf of the actual owners — making the money almost impossible to trace. Moreover, TI believes that for the first few years after the government brought in a new “investor” visa scheme in 2008, tying the speed at which residency was accorded to large investments into the U.K., a low threshold of checks enabled dodgy money to flood in to the city. Of £3 billion that entered Britain between 2008 and 2015, just under a quarter came from Russia, before rules were tightened up, and once the tougher checks regime came in, appetite for the visa dwindled.

Vladimir Ashurkov, a Russian political activist granted asylum in Britain three years ago, who joined the tour, argued that London’s “permissiveness’ when it came to illicit money had been a factor in enabling Russia to be more aggressive outside its border.

Recent changes have offered campaigners some hope: last year, a watered down version of the U.S. Magnitsky Act, which allows individuals suspected of human rights abuses to be denied entry and have their assets frozen, was passed. The measures could be toughened in the wake of the Skripal poisoning.

At the end of January, a new investigative tool became available to U.K. enforcement authorities as Unexplained Wealth Orders came into force, which requires individuals, in certain specific circumstances, to explain how assets were lawfully acquired, or face the loss of their property.

Even more important could be legislation further down the pipeline: laws that would require the ultimate owners of properties to be disclosed. With some disquiet about it among Conservative MPs, there are questions of whether and when it will come into effect.

“We need to deal with the money,” says Labour politician Helen Goodman, who briefly joined the tour, highlighting the over 86,000 properties identified by Global Witness that are owned by anonymous companies. “We just don’t know who they are…we have to have the register in public.”

“It’s often assumed that there are no votes on the issue... but it is a domestic issue too,” argues Mr. Doohan, as the group strolls through Kensington Palace Gardens, a leafy avenue by Hyde Park that is home to embassies as well as some of the city’s grandest privately owned properties.

With the high prices paid by often dodgy money at the top end impacting the London’s property market, it has helped push the city to become among the most unaffordable cities to live in globally.

It also poses an “existential” threat to governance in Britain, in the long run, he warns. “Dirty money has no scruples abroad or at home…”

This article is closed for comments.
Please Email the Editor

Printable version | Apr 13, 2021 4:08:01 AM |

Next Story