Boris Johnson is congratulating himself on doing so much to help Ukraine, but Britain is like a doctor treating a patient’s symptoms after causing the infection in the first place. The weapons shipments are crucial, as are plasters and painkillers when someone’s unwell, but there is no sign yet that Downing Street recognises how to treat the underlying condition.
The Kremlin is solely to blame for the horror it is inflicting on the Ukrainians, but its ability to wage war derives from the wealth it has accumulated. And that is something we share responsibility for, and something we should address as urgently as we are providing Kyiv with missiles to destroy Russian armoured vehicles.
For far too long, Britain welcomed the Kremlin’s companies and oligarchs and allowed them to raise funds on our financial markets. Our lawyers defended their interests, our accountants filed their accounts and our shell companies protected their assets. Our professionals may have dropped their oligarch clients in the past six weeks, but the damage had already been done: the Russian state would have nothing like the wealth it has now, and would thus not be able to wage this war, without the assistance they provided. And does anyone really believe that, once the memories of Bucha, Kramatorsk and Mariupol have faded, the City won’t sell its services to the Kremlin elite again?
If we wish to degrade the oligarchs’ influence and undermine Russia’s military in the long term, we need to stop them ever doing business in this country again.
There are two reasons why Britain has allowed Russian kleptocratic wealth to flow through the City of London in such vast quantities. The first is that we have cared only about the fees it generates, not about how it was earned.
The second reason is more complex, and lies in the nature of Vladimir Putin’s regime. The Kremlin controls everything in Russia, and it interchangeably uses whatever tools are available – the military, the FSB, the economy, organised crime, embassies, the media – either singly or in combination, for whatever task it wishes to address. This is fundamentally different to how the British state operates, and that has allowed the Russians to slip through the cracks in our system with ease: the threat is not purely criminal, so it’s not the police’s responsibility; it’s not military, so the Ministry of Defence doesn’t step up; it’s not run by spies, so our security services don’t step in.
For far too long, the threat posed by Russia has always been – for British officials – “somebody else’s problem”, and has thus never been adequately addressed. This is a shame, because there is one vulnerability in Putin’s system that the UK is perfectly placed to address. The Kremlin’s ability to move illicit wealth seamlessly through the offshore financial system, and therefore through London, underpins every aspect of its behaviour.
When British shell structures were used to hide the ownership of billions of pounds laundered out of Russia, the government did nothing about it, thanks to its failure to appreciate the security threat inherent in anonymous wealth pouring into our country. When Russian state companies raised capital in the City, British politicians did not recognise we were effectively funding the Kremlin’s war machine, and instead welcomed the business we were generating. When oligarchs bought up swathes of west London, we didn’t consider that we were providing them with a stable home for their wealth, so they could build a looting machine at home, and instead welcomed all the stamp duty they were paying.
The foreign secretary, Liz Truss, has this week been lecturing the Europeans about buying so much oil and gas from the Russians. But by protecting and managing the Kremlin elite’s money, Britain has been at least as complicit as Germany in helping Putin build his aggressive regime.
To expose, investigate and block the Kremlin’s money, we need three things, all of which are easily achievable if the political will can be found: proper transparency of shell companies, so we know who owns what; robust regulation of professional enablers, so crooked lawyers and accountants can be prosecuted; generous funding of law enforcement, so we can confiscate suspicious wealth.
And those three policies should be coordinated by a fourth: a single individual who is responsible for tackling illicit finance, who can force agencies to take action and can confront politicians who drag their feet, and who can stop the Kremlin’s infiltration of our economy being “somebody else’s problem”. We must take kleptocracy as seriously as we take terrorism, and that requires more than just an MP being named “anti-corruption champion”.
So far the government has relied on sanctions to block the oligarchs’ wealth, but sanctions do nothing to destroy the networks that moved that wealth in the first place. Taking more substantive action will mean enforcing greater regulation, which will undeniably cost us money, just like stopping any of the oligarchs’ companies from listing on the London Stock Exchange would have cost us money. But it will help protect our society from infiltration by kleptocratic wealth, undermine the Kremlin’s ability to threaten others and – in the long term – weaken Putin’s hold on power.
In the past, such policies have been blocked by the Treasury, which has prioritised maintaining the underregulation that it considers crucial to the competitiveness of the City over defending the integrity of our financial system. And new regulations will undoubtedly be unpopular with wealthy people who have for decades been using exactly the same tricks as the oligarchs to minimise their taxes and disguise their wealth.
The question now for government ministers is this: are they prepared to put their support for the Ukrainians ahead of the tax breaks and loopholes enjoyed by their friends, donors and – in the case of Rishi Sunak – wives? Because until they are, they won’t really be helping the Ukrainians at all.
Oliver Bullough is the author of Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals
