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British Foreign Secretary Liz Truss said this weekend that new sanctions would mean that “there would be nowhere to hide for Putin’s oligarchs or Russian companies involved in propping up the Russian state.” But for years, the moneyed streets of the British capital and its surroundings have been a really great place to hide if you’re a Kremlin-linked oligarch.
Russian millionaires and billionaires have bought up so much of wealthy areas like Belgravia in Central London that certain British neighborhoods have gained their own Soviet-inspired nicknames like “Londongrad” or “Red Square.” Activists gave “kleptocracy tours” of empty mansions suspected to be linked to the “London laundromat” for cleaning dirty money. And while the British government has used sanctions to target Russians abroad, it’s so far been wary of looking at problems closer to home.
Oliver Bullough, a British writer formerly based in Russia, said he knew close relatives of Putin’s “very good friends” had property in London. Though famous oligarchs such as Chelsea soccer team owner Roman Abramovich garner headlines, lesser-known Kremlin-linked figures including Vladimir Yakunin, an old neighbor of the Russian president and former Russian Railways boss, has been linked to a $47 million house.
“There are a lot that I know of and I’m sure there are plenty of others because these things are very well hidden,” Bullough told me.
London’s main appeal is its lack of oversight. Julia Friedlander, director of economic statecraft at the Atlantic Council, said it was “mostly the use of trusts and blind trusts [and] the ability to use derivatives and other financial products to bring money into the country” that attracted oligarchs to London, as well as “the ability to use the U.K. as a lily pad jurisdiction to invest in other parts of the world and, of course, high-end real estate values.”
Add the favorable time zone, widely spoken language, faded imperial charm and the company of other oligarchs — and you have a winner. “London has this broad-spectrum offering that no one else can really rival,” said Bullough, whose 2018 book “Moneyland” looked at the global world of illicit money. “On top of that, we have an unusually amoral government that doesn’t seem to take this issue seriously at all.”
Critics of the British government say now is the time to take it seriously. Edward Lucas, a British journalist and political candidate for the opposition Liberal Democrats party, has called on Johnson’s government to do more. “Loudly proclaiming new sanctions on Russia will do very little to curb the laundering and fraud,” Lucas wrote for the Times of London this week.
London’s looseness with financial oversight has been a feature since at least World War II, and suspiciously large amounts of Russian money began passing through the city in the 1990s. They were highlighted once again last year by the Pandora Papers and in prior U.K. reports. “The use of London as a base for the corrupt assets of Kremlin-connected individuals is now clearly linked to a wider Russian strategy and has implications for our national security,” a parliamentary committee wrote in 2018.
Despite foreign policy disputes with Moscow on Ukraine and a string of apparent assassination attempts of Kremlin foes on British soil, the British fight against illicit Russian money has been half-baked. The most notable move was a 2017 law that granted courts the power to issue “unexplained wealth orders” that compel those investing in Britain suspected of overseas corruption and criminality to explain the source of their money.
But results have been fleeting. In 2020, two members of Kazakhstan’s political elite won a court battle that had asked them to explain how they had bought three London homes worth more than $100 million. The decision was a humiliation for Britain’s National Crime Agency, which had brought the case against the daughter and grandson of former Kazakh president Nursultan Nazarbayev, highlighting just how limited their resources were compared to their targets.
Friedlander, who served in senior positions at the U.S. Treasury Department and the National Security Council, said that the opacity and complicated nature of financial markets made investigations inherently difficult. “It’s hard to trace something because you can move money through 40 different jurisdictions at the speed of light,” she said.
Britain isn’t the only country in which oligarchs store money, nor are Russians the only ones who park illicit money abroad. But the Ukraine crisis has led the British government to try to square the contradictions between its foreign policy and London’s loose oversight. Asked on Sunday if the government would go after the London properties owned by Russians, Truss said that “nothing is off the table.”
Mark Galeotti, a British expert on the Russian security services, said there was no evidence that targeting Russian oligarchs in London would positively influence Russian foreign policy in the near future. “Putin has been trying for years to ‘de-offshorize’ Russian money and bring it back within his grasp. I suspect that in the main, his view would be that if rich Russians have been keeping their money in London and lose some or all of it, then that’s their tough luck,” Galeotti wrote in an email.
The international nature of global finance means regulation has little short-term incentive. Oligarchs also have a wealth of other options should Britain crackdown. “Every European country and the United States has some role in this,” said Friedlander, pointing to the American tax havens of South Dakota as another cog in the machine.
Reform could be important for Britain, which has struggled with increasing economic inequality and the perceived rise of official corruption. At the least, tackling fraud and illicit finance in London could result in fewer empty mansions as property prices soar. In the longer term, a crackdown in London could spur a global crackdown on money laundering and fraud that would limit the ability of oligarchs from Russia and elsewhere to park illicit funding abroad as economies are exploited at home.
But these longer-term aims require more patience than splashy announcements of sanctions. And the British government has shown little interest. Just in December, Johnson promised President Biden a “year of action” on fraud, but promises to reform Britain’s corporate registry and impose transparency on offshore-owned property in Britain have been delayed.
Johnson himself can’t deny ties to Russian money, given links to businessman Alexander Temerko. Though accounts of the former Russian arms dealer’s closeness to the Kremlin differ, that may be beside the point. “This is not a pro-Russian government,” Bullough said. “It’s a pro-money government. And in this case, the money just happens to be Russian.”