In some of London’s most exclusive neighborhoods, you can suddenly sense the kind of unease that wealth usually keeps at bay. As the government talks about its determination to crack down on Russian oligarchs, a much wider shift may be afoot. The Financial Times quoted the chairman of Aylesford International on Friday, a Chelsea estate agent whose current offers include a four-bedroom flat in Cadogan Square, SW3, for the better part of £12million. “The severity of these sanctions is the start of a new world, a new market,” he said. “I don’t think you can hide anymore.”
On Monday, the House of Commons will debate the Government’s Economic Crimes (Transparency and Enforcement) Bill – first drafted four years ago, since subject to serial delays, but now finally revived thanks to the invasion of Ukraine by Vladimir Putin. Ministers say they want to tackle the tangle of secrecy and deceit that has long surrounded money stripped from foreign savings and poured into British property, assets and banks, and so pave the way for even tougher actions against people linked to the Russian government. Whether it does anything to stop the current slaughter and mayhem is rather more dubious than some people make out, but Boris Johnson insists the bill ‘will continue to tighten the noose around Putin’s regime “.
Among its other measures, the new legislation will create a public register of foreign interest owners who buy and sell property in the UK, to lift the veil provided by shell companies. There will be reforms to the Unexplained Wealth Orders system that will allow UK authorities to seize criminal assets without needing to prove criminal activity, and a new specialist ‘kleptocracy cell’ within the National Crime Agency to lend a particular attention to the issues around sanctions.
But the desired impression of resolution and determination does not quite hold; indeed, a series of last-minute amendments show just how sensitive Johnson and his colleagues are to accusations of weakness and foot-dragging. Although the government has previously suggested that judicial restrictions on its power should be lifted, it now insists that, for fear of legal action, any serious action against certain Russian individuals could take months – even as France, Germany and Italy seize Putin associates. yachts. The bill has apparently gone through four years of preparation, but any plans to insist on better checks on records filed at Companies House – also a factor, by the way, in fraudulent applications for loans and grants during the pandemic – is still not ready and will only appear in other legislation. Given that the National Crime Agency is at the heart of many plans, it should also be borne in mind that the supposed British equivalent of the FBI has suffered funding cuts in real terms over the past five years, and is seen by experts as not having the resources to recruit and retain the right people.
I recently spoke to Susan Hawley, executive director of Spotlight on Corruption, a UK charity that monitors the UK’s role at the intersection of crime and power in the UK and around the world. The new bill, she said, is being touted as a potential huge jab at dirty money and the secrecy it demands, but it’s really a set of tentative first steps. The changes he describes are limited, she told me, because a long history of oligarchs and kleptocrats has settled into deep groupthink, and while ministers’ intentions are serious, let this behind will take time and effort. “The problem is they’ve been obsessed with opening up and making Britain the easiest place in the world to do business,” she said. “And that made them complacent.”
Beneath all the hype, this is the fundamental reason Britain has become a haven for so much dirty money. To understand this in a moment, consider the ‘golden visa’ system the UK has used for over 25 years, allowing people to live in the country in exchange for investments in UK-registered companies. In 2014, the level of cash required doubled from £1m to £2m; on February 17 of this year, the program was canceled. But between 2008 and early 2015, to quote a report by the Chatham House think tank, “the vetting that was done on applicants was the sole responsibility of the law firms and wealth managers who represented them.” This has been called the period of “blind faith”. Twenty-three percent of requests during this period came from Russia; last year it was estimated that in the 11 years to 2019, only 9% of golden visa applications were rejected, compared to 42% of asylum applications.
In 2006, the same year that Putin critic Alexander Litvinenko was assassinated in London, the city’s then-mayor, Ken Livingstone, said he wanted “Russian businesses to see London as their natural base in Europe”, and his office set up a small department to attract Russian money to London. Five years later, David Cameron visited Moscow and told his audience that Britain was open to their design money. “The whole point of trade is that we’re baking a bigger pie and everyone can benefit from it and that’s especially true, perhaps, of Russia and Britain,” he said. He continued: “Governments need to remember that companies don’t have to invest in our country – they choose to. And we have to help them make that choice. This means minimizing the regulatory burden so that business and entrepreneurship can thrive. Late last year, Boris Johnson addressed a global investment summit at the Science Museum in South Kensington, and when told the people in the hall accounted for $24,000,000,000 of wealth, he exclaimed: “I want to say to every one of those dollars: you are welcome to the UK and you are in the right place at the right time. Such was the money-hungry mindset embedded branded London for decades: the levels of dirty money in the capital are not its unintended by-product, but exactly what this sort of approach was always going to invite.
In the daily experience of Londoners, a great sucker for often ill-gotten billions has had very visible consequences. Far too many streets are now teeming with homes and flats bought by absentees, while the peak boom in the capital’s property economy has accelerated the rise in prices and rents to utterly impossible levels. Russia is not the only country whose wealthy citizens are at the heart of these changes, but by putting down roots in London, the post-Soviet oligarchs have represented a kind of doubled inequality. The 500 Russians with a net worth of over $100 million control 40% of their country’s household wealth. And once large chunks of that money were pumped into London, the capital’s own inequality inevitably worsened.
It only worsened the jarring mix of exclusivity and deadly calm you now encounter on the streets of Belgravia, Knightsbridge, Holland Park, Highgate, Kensington, Chelsea, Notting Hill, Bayswater and everything in between. Some of these areas have always been dominated by great wealth, but in others there were once diverse and confident communities of relatively ordinary people who created the cultural vitality that is still used to sell London to the world. As the international billions began to pour in, the large sums of money were hailed as a new boost to the capital’s energy. But that was usually a downside: in addition to a few donations to art galleries and museums, London found itself in both awful moral darkness and silence. This is what happens when dizzying and often secret wealth excludes the people who really make cities thrive, and it brings to light a very topical question: why did it take a war for so many of our politicians even start to wake up?
We all know the answer. While all of this was unfolding, real estate agents, private schools and luxury goods retailers made hay. Shamefully, lawyers took huge fees to sue investigative reporters who were determined to expose the worst aspects of what was going on. Donations to the Conservative Party poured in, and too many peers and MPs reveled in another link to wealth and power. Now many of the same people who made it all happen are suddenly telling us the party has to end. That they are even half-sincere is something that all of us – including ordinary Londoners, people long driven out of the capital and kleptocrats nervously marking time behind their stucco facades and security barriers – we are about to find out.