1 March 2022

Laundry day in the City

As Ukrainian cities come under heavy bombardment, the UK government has finally introduced a bill to tackle dirty Russian money.

By Freddie Hayward

Photo by Jessica Taylor/Parliament handout via Reuters.

Russia has unleashed a fierce bombardment of Ukraine’s second city, Kharkiv, as officials warn that civilian deaths are set to surge. Boris Johnson is due to travel to Poland and Estonia today where he’ll visit British troops, while Liz Truss, the Foreign Secretary, is in Geneva to address the UN Human Rights Council.

Back in Westminster the government’s plans to punish Russia for the invasion are taking root. The long-awaited Economic Crime Bill will be introduced to parliament today. Overseas companies with property in the UK will have to declare who really owns the property or risk fines and a sales ban under the plan for a public register of landowners.

[See also: The fight for Ukraine is only beginning]

The government hopes that the register will lead to more corrupt oligarchs, who hide behind shell companies, receiving unexplained wealth orders, which allow authorities to confiscate assets without proving criminality. Russians with links to the Kremlin or who are accused of corruption own £1.5 billion of UK property, according to Transparency International UK. Once authorities know the true owner of a property they are, in theory, much better placed to enforce sanctions and punish money laundering.

It’s worth noting, however, that it has taken a brutal invasion of a European country for the government to act. The government first committed to the changes six years ago. Even in January, as Putin’s troops were amassing on Ukraine’s border, it was said to have pushed the bill back until at least 2023-4. Indeed the announcement in the Commons yesterday by Kwasi Kwarteng, the Business Secretary, was met with frustrated disbelief that the measures were only now being introduced. As one Labour MP put it to me, “If we hadn’t had the crisis in Ukraine, we wouldn’t have had it on the legislative agenda. That is sad, that is just tragic.”

Why the delay? In part because the government reveres light-touch regulation of what Kwasi Kwarteng yesterday called the “precious heritage” of London as a hub of international capital flows. Nonetheless, the flurry of activity over the past week marks an end to years of government inertia over corrupt Russian money in the UK. The question now is whether the government maintains its newfound enthusiasm for cracking down on dirty money over the months and years needed to pass legislation and create the regulatory structures it’s promised.