22/07/20

UK: London’s finance sector under scrutiny over damning Russia report.

As published on fnlondon.com, Wednesday 22 July, 2020.

The damning parliamentary report into Russian influence in the UK has put London’s financial heartland under the spotlight, with politicians and anti-money laundering heavyweights calling on City firms to scrutinise business links with the Kremlin.

The 50-page report, published by the parliament’s Intelligence and Security Committee on 21 July, said that accountants and lawyers are among “enablers” in the UK who “wittingly or unwittingly” became de facto agents of the Russian state.

Bill Browder, a high-profile critic of Russia’s President Vladimir Putin, called on finance firms to conduct “thorough checks of sources”.

“The Russia report has recognised the threat posed by enablers of Russian interests in the UK. It has also identified the link between the Russian state and organised crime, and highlighted the lack of effective prosecution of money laundering cases,” the Hermitage Capital boss told FN.

“Finance firms should conduct thorough checks of sources and recipients of funds connected to Russia,” added Browder, who is widely credited for the creation of the Magnitsky Act that imposes sanctions for rights abuses.

The long-awaited parliamentary report noted: “Successive UK governments welcomed the oligarchs and their money with open arms, providing them with a means of recycling illicit finance through the London ‘laundromat’, and connections at the highest levels with access to UK companies and political figures.”

London is not the place to launder Russian money, transport Secretary Grant Shapps said on Wednesday.

“It is very very important that the good name of London, the City and the United Kingdom – when it comes to anti-money laundering legislation – is maintained,” Shapps told the BBC.

“This is not the place to come and launder money,” Shapps said. “It’s not welcome.”

The UK’s National Crime Agency estimates that over £100bn in illicit funds impacts the economy each year. More than a fifth of the £5bn in suspicious wealth spent on UK originates from Russia, according to corruption campaigners Transparency International UK.

Kevin Hollinrake, a Conservative MP who chairs the All Parliamentary Group on Fair Business Banking, pointed out that “most UK banks have been issued with fines”, citing Standard Chartered, which was fined £102m by the Financial Conduct Authority last year for anti-money-laundering breaches. At the time, it was the second-largest penalty ever imposed by the UK regulator for anti-money-laundering failures.

In April, the UK Treasury’s Office of Financial Sanctions Implementation ordered Standard Chartered to pay a £20.4m fine for violating Russia sanctions that the European Union imposed on Russia following its annexation of the Crimea region of Ukraine in 2014. The fine is the largest imposed yet by the agency, which was created in 2016.

“This [report] is clearly unacceptable and demands further investigation,” added Hollinrake.

“Existing corporate liability laws make it virtually impossible to prosecute banks for wrong-doing in the UK, including for money laundering. Regulatory fines in lieu of criminal sanctions are not working as an effective deterrent. Real action is needed to prevent UK corporates from committing and facilitating economic crimes.”

Standard Chartered was contacted for comment.

Labour MP Margaret Hodge, a global advocate for transparency and accountability for accountants who aid clients in avoiding tax, said: “The politicians, tax advisers, lawyers, accountants, and PR companies that enable corrupting Russian influences into the UK must be held to account.

“The Russia Report is absolutely damning of the approach taken by successive Tory governments on national security and corruption,” Hodge added. “They have allowed our capital to become a ‘London Laundromat’. The UK is now the money laundering destination of choice for all of the world’s crooks and kleptocrats.”

However, Ros Altmann, the former pensions minister, rejected claims that London is becoming the money laundering capital of the world.

“The ISC report has suggested that this [money laundering capital of the world] is what London is coming to be known as, but that is hard to judge. Given the nature of such transactions, the figures for other countries are not publicly available. The UK has put in place many safeguards and continually introduces new measures to try to combat money laundering,” she said.

Leading trade bodies for the accountancy sector noted that accountants and finance professionals are under constant threat from criminal activity.

A spokesperson for the Institute of Chartered Accountants of England and Wales added: “We have a strong partnership with law enforcement agencies, working with them continuously to develop and apply the key financial and business indicators that equip chartered accountants throughout the UK economy to identify and report criminal activity.”

The Association of Chartered Certified Accountants said: “The publication of this report is a reminder for the profession to remember its role as value creators, and to always act in the public interest.”

A report by Transparency International UK, published in October 2019, found more than 400 global corruption cases involving UK service providers and at least £325bn in funds “diverted by rigged procurement, bribery, embezzlement and the unlawful acquisition of state assets in 116 countries”.

The organisation found that 582 firms and individuals were “involved at some point, offering services in the UK or its offshore financial centres”.

Transparency International director Duncan Hames said: “Those that fall short in their anti-money laundering duties should face firm penalties from regulators with sufficient resources to pursue egregious offenders. Until this is the case Britain will continue to serve as a laundry for Russia’s dirty money.”