LONDON -- The British Parliament's foreign affairs committee slammed the government Monday for "turning a blind eye" to the role London's financial center plays in laundering the proceeds of Russian corruption, saying it helps the Kremlin finance its aggressive foreign policy.
Despite the government's tough rhetoric after the nerve agent attack on a former spy in Britain earlier this year, President Vladimir Putin's allies have been able to do "business as usual" in London's financial center, according to a report titled "Moscow's Gold: Russian Corruption in the U.K." It said corrupt assets flowing through the city support the Kremlin's campaign to subvert the international rules-based system.
"This has clear implications for our national security," the committee said. "Turning a blind eye to London's role in hiding the proceeds of Kremlin-connected corruption risks signaling that the U.K. is not serious about confronting the full spectrum of President Putin's offensive measures."
The National Crime Agency estimates that hundreds of billions of dollars of criminal proceeds are laundered through U.K. banks every year, with an unknown portion of that coming from Russia. Britain needs to crack down on corrupt Russian money following the March 4 poisoning of Sergei Skripal and his daughter, Yulia, which the government has blamed on the Russian state, the committee said.
Both the U.K. government and the Kremlin rejected the findings of the lawmakers.
Downing Street said Britain had taken a "leading role," in the global fight against illicit finance. Vladimir Putin's spokesman Dmitry Peskov on Monday said that it sends a chilling message to international investors.
"We are witnessing an unprecedented Russophobic mania in Britain which has various manifestations including this one," Peskov told reporters in referring to the report. "What's more, I have no doubt that investors from other countries will not leave such actions unnoticed because after such steps by Britain, investors from any country could face a situation when their investments will be labeled 'dirty money.'"
The committee highlighted Russia's sale of $4 billion in Eurobonds, nearly half of which were bought by U.K. investors, just two days after Britain expelled 23 Russian diplomats in March. A day earlier, Russian natural gas giant Gazprom found strong demand in London for its sale of $880 million worth of bonds.
"Business as usual," the Russian embassy in London tweeted after the Gazprom sale.
In November, the Russian energy company En+ raised $1.34 billion on the London Stock Exchange. At the time, the company was controlled by Oleg Deripaska, a Russian oligarch with close ties to the Kremlin. Deripaska agreed to cut his stake in En+ and resign from the company's board after he was placed under U.S. sanctions in April.
"I think it is clear from the conversations in Moscow that the presence of loopholes in the existing sanctions regime is one of the things that they point to to 'prove' that the West is either not serious about sanctions, or just incompetent," Mark Galeotti, author of The Vory: Russia's Super Mafia, told the committee.
Russian investment has become entwined in the British economy. Wealth accumulated from the sale of state assets after the breakup of the Soviet Union, as well as Russia's vast energy and mineral resources, flows through British banks and investment funds, buoys the property market and boosts the sales of luxury retailers.
One anti-corruption expert told the committee that Russians have moved an estimated $134 billion into Britain over the last 20 years, although he said only a fraction of that came from crime and corruption.
The scale of such investments makes it difficult for the U.K. to impose meaningful economic sanctions on Russia for fear of harming British business interests and innocent Russians.
Following the Skripal attack, Prime Minister Theresa May promised to crack down on "serious criminals and corrupt elites," suggesting that Britain would use a new tool called "unexplained wealth orders" to seize the assets of wealthy Russians whose assets outstrip their legitimate sources of income.
Britain also pledged to review long-term visas of rich Russians -- a policy it defended after a controversy emerged this week over whether the visa for billionaire Roman Abramovich had been renewed.
Information for this article was contributed by Nataliya Vasilyeva of The Associated Press.
Business on 05/22/2018