Credit;PA
When in 2018 the British government proudly implemented its Unexplained Wealth Orders (UWOs) law, analysts at the time believed that London was finally ready to turn a page on its addiction to foreign oligarchs, most prominently from Russia. Three years on, however, a recent Home Office report revealed that the UWO policy – far from packing a punch – ended up being a toothless initiative, given that no UWO had been handed down for two years.
Designed with the intent to crack down on illicitly acquired wealth trickling into Britain’s financial system, and particularly London’s highly sought-after property market, the report deals an embarrassing blow to Whitehall’s credibility in the fight against money-laundering. Indeed, London has gained notoriety in recent years for being the choice safe haven for criminals from Russia and other post-Soviet spaces, thanks to lax financial oversight and the UK’s golden visa scheme, which make money-laundering and acquiring citizenship all too easy.
A look at the policy’s stats makes it evident that the UWOs have fallen flat. As of 2021, merely 15 UWOs in five cases were issued, all the while “the level of money laundering has increased during the same period.” As a result, Whitehall has little to show for all the pomp under which UWOs were launched. Instead, the combination of the aforementioned factors has created a toxic mix of greed and convenience for those high-net-worth individuals hoping to escape justice for corruption, money-laundering and other financial crimes in their home countries.
The desire to exchange a cozy townhouse in Mayfair or Belgravia for a stark prison cell in Russia is a common pattern among the criminally rich, who often live large in the City while they’re under investigation abroad. A prime representative of this path is Georgy Bedzhamov, the former chief executive of Russia’s Vneshprombank, who, along with his sister Larisa Markus, is accused of perpetrating one of the biggest banking frauds in Russian history.
Together, the siblings are thought to have engaged in document forgery and siphoned off loans to 286 shell companies, ultimately causing the bank to collapse under the weight of a £2.5 billion hole in it balance sheet in 2016. Bedzhamov was declared bankrupt in 2018 and had assets worth more than £1 billion frozen by order of the British High Court in 2019. Thus purportedly destitute, a recent find of previously unknown assets now belies the real state of his finances.
Russian investigative news outlet RBC reported that previously unknown assets of Bedzhamov’s were found in the shape of two glass factories in Russia, worth nearly £25 million. The report quotes Lyubov Kireeva, the court-appointed financial manager of Bedzhamov’s debts with the authority to seize his assets, who describes the intricate operation behind hiding these assets for so long: in 2018, the already indebted glass factories were transferred to Istochnik, a straw firm registered in the Marshall Islands and belonging to Bedzhamov. The transaction amounted to €1– 30 million times less than the amount of the transferred rights of claim. “The transfer of rights of claim in favor of Istochnik was intended to conceal Bedzhamov’s property from his creditors,” Kireeva states.
This discovery is only adding to the string of embezzlement and fraud accusations against him. Bedzhamov has so far avoided sentencing by escaping from Cote d’Azur to London where he has been living in a Mayfair mansion and has applied for citizenship of a UK overseas territory, arguing that the prosecution by Russian authorities is politically motivated. Lately, Labour peer Lord Judd has raised alarm bells about Bedzhamov and other “fugitives from justice” trying to get UK citizenship with their wealth.
Bedzhamov’s tale is in many ways a mirror image of that of Anatoly Motylyov, another former Russian banker who evaded justice in Russia by quietly escaping to the UK. Just like Bedzhamov, he’s responsible for yet another record-breaking fraud operation in Russia, based on setting up four banks, “sucking in” deposits from unsuspecting citizens by promising double-digit interest rates and subsequently embezzling the funds to finance his various business ventures.
The modus operandi of the operation, dubbed “vacuum cleaning”, netted his banks more than one billion dollars in deposits from about one million Russians – until the scheme collapsed in 2015 after Russia’s Central Bank found a $1.5 billion hole on the balance sheets of Motylyov’s lenders.
With the heat coming down on Motylyov, the banker skipped town and settled in London. Meanwhile, litigation is ongoing in Russia, where several defrauded creditors of Motylyov’s, including the Russian Credit Bank and Flowery Development Limited, are claiming a total of roughly 42 billion rubles ($639 million) of debt from Motylyov.
Even though these cases are just the tip of the iceberg, they reflect accurately how London is providing a quiet sanctuary for financial criminals. It is a matter of fact that the UK is steadfast in its refusal to extradite high-profile Russians, most often on the ostensible grounds that the Russian authorities’ prosecutions are politically motivated and that the defendants’ human rights cannot be guaranteed in Russia’s prison system.
In light of the fact that many rich Russians are not only well-connected to London’s high society but to important political players as well, it might not be too surprising that these arguments are falling on open ears. Large sums of cash investments are the primary means of influencing decision-makers and remaining on the good side of the British justice system – to the extent that a number of British lawmakers have warned of dirty Russian money undermining the government’s foreign policy objectives and international confidence in Britain’s justice system.
“The UK cannot be a haven for criminals, no matter how much money they spend and regardless of where they may have stolen it from”, asserts MP Andrew Bridgen, for example. “They should all be returned to Russia…to face their accusers. Instead, they continue to live lives of outrageous opulence using money stolen from their own people. […] And our intelligence services have expressed deep concern about Russia’s activities. However, little seems to be done.”
Such accusations are not unfounded. Indeed, the Tories were shown to have received “significant” cash injections from “Well-connected Russian oligarchs and companies heavily involved in lobbying for Russian interests”, according to Open Democracy. The largest of these donors is Lubov Chernukhina, wife of a former deputy finance minister, who donated close to half a million pounds to the party in 2018 alone. This is on top of the £160,000 she paid to play tennis with both Boris Johnson and David Cameron four years earlier.
Labour isn’t immune to Russian donations either, yet there is a broader point to be made here, namely that in light of recent revelations regarding UWOs, there’s little evidence to suggest that the policy is being genuinely pursued. More than two years into Boris Johnson’s premiership, the UK is farther from tackling its status as a hiding spot for wealthy criminals than ever before.
