Wednesday, April 17

The oligarch’s guide to getting round the UK’s economic crime bill | Oliver Bullough

The economic crime bill being debated today in the House of Lords does not, as the home secretary, Priti Patel, insisted, show Britain’s determination to root out Vladimir Putin’s “mob of oligarchs and kleptocrats”. On the contrary, it demonstrates ingrained complacency towards dirty money that is so complete it begins to resemble complicity.

This bill tweaks the sanctions regulations to remove some of the bottlenecks that have made the UK lag behind its allies; and it updates the rules around “unexplained wealth orders”, to fix some of the flaws in the last measure that was supposedly going to tame the oligarchy. What makes the bill important, however, is the fact that it imposes transparency on offshore companies that own property in the UK. This is why the legislation is so urgent it was rushed through the House of Commons in a single day on Monday – a process that would usually take months.

If the plans work as intended, oligarchs will no longer be able to anonymously own mansions and estates. Their secrets will be revealed, and they will either scuttle away like cockroaches from an overturned rock, or face prosecution from our brave police officers. Britain will cease to be a willing fence for the stolen wealth of the world; a butler to the Kremlin’s cronies.

There is just one problem with the plan, however, which is that – unless some astonishing amendments appear out of nowhere – it’s rubbish.

If you’re an oligarch, and you want a completely legal way to avoid the provisions of the bill, own your offshore company in equal shares of 16.67% with five close relatives. That way, none of your shareholders reach the 25% ownership level required to count as the person of “significant control”. Here is another, also completely legal way: own your company via a professional corporate trust provider, who will act as a nominee, and thus be named in your place on the ownership documents. You’re welcome, and I’m not even a lawyer; imagine what a skilled enabler could do with this colander masquerading as a piece of legislation.

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And here is another, illegal way to evade the new measures: just provide false information. There are no checks on the information that the shell companies’ owners declare, so, if an oligarch was prepared to lie – and, if there’s anything we’ve learned about the Kremlin, it’s that it’s prepared to lie – they could pretend they didn ‘t own the property at all. This should not be a surprise to the Home Office, because it’s exactly the same loophole that for decades has led to British-registered companies with falsified ownership being used to hide the ownership of billions upon billions of pounds laundered out of Russia

Patel appeared to realize that her bill had flaws because, in addressing the Commons on Monday, she spoke almost as much about a second economic crime bill she intends to introduce as she did about this one. She said the government was hurrying this legislation so as to “send a very strong signal that the UK will not be a home for corruption”. To anyone who has been following this issue, however, the signal it sends is exactly the opposite.

The British government first promised this very policy on offshore-owned property in 2016, when David Cameron hosted an anti-corruption summit. The necessary legislation was published in 2018, following a full consultation, when Theresa May was prime minister. It has been sitting on a shelf now for almost four years. The need to hurry it through parliament was created solely by the government’s failure to introduce it earlier. Expecting to be congratulated for that is like demanding plaudits for running for the bus because you’ve overslept. If the government actually cared about oligarchs owning Belgraviarather than about bad headlines, it would have passed this bill – with proper scrutiny – years ago.

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Of course, if the government does indeed bring in a second, better economic crime bill, as Patel said it would, that’s all for the good. There are, however, reasons to doubt its newfound commitment to this cause. It is less than two months since an actual minister resigned, at the dispatch box in the House of Lords, over the government’s decision not to introduce this same economic crime bill. When in 2016 Scottish MP’s drew ministers’ attention to the flaws in the rules around Companies House, and how they had allowed the so-called Moldovan Laundromat to wash dirty cash through Edinburgh-registered limited partnerships, the government’s response was to deregulate further, so as to protect the competitiveness of the City of London.

Even if the new measures are introduced, the National Crime Agency (NCA) and Serious Fraud Office are still disastrously underfunded, and lack the people, resources or political cover to go after financial criminals wherever and whoever they might be. This new bill does limit the costs that targets of unexplained wealth orders can claim back from the NCA after an unsuccessful filing, but that just restricts how much money it can lose; it doesn’t give it any new resources to fund investigations.

Tackling the oligarchs is suddenly urgent because Putin has invaded Ukraine, but when this crisis is over, which hopefully it soon will be, I do not believe Boris Johnson will keep waving this flag. He’s a man who dismissed the intelligence and security committee’s sober warnings about Russian interference as the moans of Islingtonian Remainers. Would you really bet against the lobbyists for deregulation managing to persuade his government that now is not the time to impose tighter restrictions on property sales or company formations?

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Overcoming Britain’s willingness to take money from anyone and anywhere will take more than one day’s hurried debate, and I see no sign that this government has even begun to realize the scale of the changes to legislation, enforcement, culture and politics that are required to rid this country of its butlering habit.

  • Oliver Bullough is the author of Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals

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