We must go further to root out dirty money in the UK for good
Last week, I sat in the House of Commons and listened as President Volodymyr Zelensky of Ukraine described the horrors faced by his people at the hands of Putin’s war machine.
It was an incredibly moving moment but at the same time I felt helpless and ashamed.
Ashamed that we sat there safely, while Ukrainians were being starved and killed. Ashamed that we were failing to open our doors to the refugees, mainly women and children, who were fleeing in terror from the war. And ashamed that for too long we have turned a blind eye to Russian dirty money.
Brave journalists like Catherine Belton have shown that Russia is a corrupt, mafia state. Oligarchs got rich at the expense of Russia’s people by seizing public assets as the USSR crumbled. Now they cling to wealth and power by propping up Putin’s regime, holding his assets in their names. But every kleptocrat needs somewhere to spend and launder their ill-gotten gains. That’s how our capital became “Londongrad”.
Sanctioning some Russian oligarchs is a welcome step but will do little to address Britain’s addiction to dirty money
Russia’s wealthy elite didn’t come to Britain for the weather. They came for our booming property market, our private schools, and for the luxury lifestyle. They bought their way into the country with much-abused “golden visas”. And they were helped in the process by our army of “enablers” – bankers, lawyers, accountants, estate agents and more.
Of course, it’s not just illicit finance from Russia that has flooded into London. Since the 1980s “Big Bang” in our financial services sector, successive governments have thrown open the doors of our economy and warmly welcomed foreign investment. But with deregulation, poor transparency and weak law enforcement, it was inevitable that dirty cash would find its way in with the clean.
Now the UK stands as a jurisdiction of choice for crooks and kleptocrats. Spotlight on corruption estimates that economic crime costs our economy an astonishing £290 billion each year. The National Crime Agency estimates that money laundering alone hits us for £100 billion annually. These are big numbers that need serious solutions.
Sanctioning some Russian oligarchs is a welcome step but will do little to address the underlying problem, Britain’s addiction to dirty money. It should not have taken war in Europe to see action on this front.
The much-vaunted “Economic Crime Bill” is in reality little more than a transparency measure first promised by David Cameron in 2015. We do need to know who owns the thousands of high value properties that have been bought through shell companies, often based in our tax havens. By following the trail, we can root out dirty money. But this measure by itself is not enough.
Now government is promising us the real Economic Crime Bill in Parliament’s next session. This should finally stop villains abusing the Companies House register by entering false data to create shell companies that hide identities or illicit financial flows. Staff need new powers to verify whether data is accurate or not. But we must go further still.
This upcoming bill must include new measures to tackle the enablers of economic crime, including criminal sanctions against the advisers that facilitate dirty money flows. And reform our outdated corporate liability laws so that we can finally get the banks who don’t crack down on dirty money.
Finally, all of this will be in vain unless we properly resource our law enforcement agencies. They need the money and the staff to properly enforce existing laws and hold wrongdoers to account.
If we fail to reform, Britain can only lose in the long run by sacrificing our reputation as a trusted jurisdiction. Until we close the lid on the “London laundromat” once and for all, we will be forever stained as complicit in the tragic violence in Ukraine.
Dame Margaret Hodge is the Labour MP for Barking and chair of the APPG on Anti-Corruption and Responsible Tax.
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