Magazine article The World Today

The City Laundry

Magazine article The World Today

The City Laundry

Article excerpt

'The UK's role as a globai financial centre is important to the country's prosperity but can also be exploited by criminals. The 2016 National Strategic Assessment of Serious and Organized Crime notes that the UK is one of the most attractive destinationsfor laundering the proceeds of grand corruption and that professional enablers and intermediaries play a role in this. The National Crime Agency estimates up to ?90 billion of illicit funds are laundered through the UK each year.'

What do we learn from this interesting quotation? Three things: first, Britain is a key destination for global money-laundering, involving significant flows of funds; secondly, this is not just an accident - enablers and intermediaries play a deliberate part in it; and most significantly, the government acknowledges that this is happening. The passage quoted is not from an NGO campaign leaflet, but from the British government's own Anti-Corruption Strategy, published in December 2017.

One of the notable developments in the world of corruption over the past 25 years has been the inexorable rise of transnational crime and transnational corruption.

Organized crime increasingly ignores national boundaries - for example, trafficking in people and wildlife has joined narcotics as a huge cross-border activity.

The Financial Action Task Force, established by the G7 countries in 1989, notes that the criminal origin offunds can be multifarious, encompassing illegal arms sales, smuggling, embezzlement, insider trading, bribery and computer fraud schemes. The large sums generated by corruption and criminal activities have led to an equally large transnational industry in hiding and laundering the proceeds.

It is rightly pointed out that since such criminal activity is secret, nobody knows the scale of international money laundering, or indeed how much is laundered through a specific market like the UK. However, both globally and for Britain, there are estimates from reliable sources, which broadly coalesce even when using different methodologies.

Globally, the United Nations Office on Drugs and Crime estimated that in 2009, criminal proceeds amounted to 3.6 per cent of global GDP, with 2.7 per cent - or $1.6 trillion - being laundered. The International Monetary Fund had a decade earlier estimated global money laundering to be between 2 per cent and 5 per cent of global GDP.

Law enforcement agencies might be expected to have a particularly good insight into the scale, hence the importance of the estimate by the National Crime Agency for the UK of ?90 billion per annum. An unrelated 2015 study by Deutsche Bank estimated that over the course of a decade, around ?100 billion of Russian wealth alone had secretly flowed into the UK.

The Russian connections to London are particularly interesting due to the current political situation. It may be that the influx of Russian money into Britain is just a case of legitimate Russian business people trying to move their hard-earned money to a safer place than Moscow. There will be some of those. But consider also the case of Igor Shuvalov, Russian first deputy prime minister, who is reported to be the owner, through a Russian company of which he and his wife are shareholders, of an ?11.5 million property near the Houses of Parliament in Westminster. Shuvalov declared assets in 2014 of ?634,000, when his official annual salary was ?112,000.

There are no firm numbers for how much Russian money is laundered through London, but a couple of indicators suggest that it could be up to a quarter of the total.

In 2015, Transparency International did some research into who had been granted residency in Britain on the Tier 1 'golden visa' programme during the 'blind faith' period after the financial crisis. This was the time when no checks were done on the origin of the minimum ?1 million of funds necessary to secure a visa.

We found Russia was in the top two jurisdictions of origin with 23. …

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