International

Is ‘Dirty’ Russian Money Undermining The UK Markets?

Brexit Impact On Small Banks

According to a new report from the British Foreign Affairs Committee, London has been awash in dirty Russian money since the fall of the Soviet Union.

“The scale of damage that this ‘dirty money’ can do to U.K. foreign policy interests dwarfs the benefit of Russian transaction in the city,” said member of parliament (MP) and chair of the committee Tom Tugendhat in a statement. “There is no excuse for the U.K. to turn a blind eye as President Putin’s kleptocrats and human rights abusers use money laundered through London to corrupt our friends, weaken our alliances and erode faith in our institutions.”

The report went on to note that while British leadership has spoken out forcefully against Russian activities — most recently the poisoning of former Russian double agent Sergei Skripal and his daughter Yulia in the British city of Salisbury in March — and tougher actions against Moscow have been called for, not much progress is being made.

“Putin and his allies have been able to continue ‘business as usual’ by hiding and laundering their corrupt assets in London,” Tugendhat said.

The MP went on to say that those funds were not being used for harmless purposes, but were, in fact, key to  “Putin’s campaign to subvert the international rules-based system, undermine our allies and erode the mutually reinforcing international networks that support U.K. foreign policy.”

Fixing the issue, however, will not come without complexity. Recommendations include extending sanctions to target more people who are found to be closely linked to the Russian president’s regime, increasing transparency when it comes to the true ownership of assets and closing loopholes around issuing debt as a means to skirt sanctions.

The report has drawn some internal controversy.

Security and Economic Crime Minister Ben Wallace said he had not been called to give evidence to the committee: “I fear such an omission weakens the foundation of the report.”

Wallace went on to note that the U.K. was “determined to drive dirty money and the money launderers out.”

“[We] will use all the powers we have, including the new powers in the Criminal Finance Act, to clamp down on those that threaten our security,” he added.

But the report noted that Russian influence is continually seen — even when the U.K. is putatively in the midst of a crackdown. After the U.K. and Russia ousted each other’s diplomats in response to the poisoning incident, reports stated that Russian gas giant Gazprom was able to trade bonds in London “days after the attempted murders” of Skripal and his daughter.

The speed with which business relations were back on line prompted the Russian embassy in London to tweet: “Business as usual?”

These signals, Tugendhat noted, are exactly why corruption is running unchecked: Russians believe they will ultimately withstand the symbolic protests and be able to get back to the business of profiting in the U.K.

“The U.K. must be clear that the corruption stemming from the Kremlin is no longer welcome in our markets, and we will act,” said Tugendhat.

Andrey Kortunov, director general of the Russian International Affairs Council, a think tank funded by the Russian state, said the report overestimates the degree to which Russian funds in the U.K. are connected to Russia’s international policy agenda.

“I don’t think we can argue that most of the Russian money, which is parked in London, is used to serve the interests of Russian foreign policy,” he said. “There are very different people, their stories are diverse and some of them are very strong opponents of the Russian leadership.”

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