‘Bad Guys Getting Away’ With Laundering Dirty Money in UK, Committee of MPs Told

The City of London financial district can be seen as people walk along the south side of the River Thames, London, March 19, 2021. Henry Nicholls/Reuters

A committee of MPs has heard that a “fragmented and uncoordinated” approach by government departments and law enforcement has allowed too many “bad guys” to get away with laundering money in Britain.

The Foreign Affairs Select Committee, which is now chaired by Conservative MP Alicia Kearns, is investigating how effectively Britain is responding to the challenge of “illicit finance flows” across borders and follows a previous report (pdf), in 2018, into corrupt Russian money in the UK, or the so-called “Moscow’s gold.”

On Tuesday, Labour MP Liam Byrne, a former government minister under former Prime Minister Gordon Brown, suggested there was a “silo mentality” in Britain, with different parts of the government not talking to each other when it comes to tackling dirty money, and he asked, “Are bad guys getting away with things because we haven’t got our act together?”

Maria Nizzero, a research fellow at RUSI’s Centre for Financial Crime and Security Studies, said: “Basically, yes ... the UK has had a dirty money problem for a long time because of the lack of a coordinated response ... the UK has been pointing the finger at other countries without fixing the problems here.”

Nizzero went on to say: “For a long time the UK has adopted the approach of being global Britain, open for business, but the problem is that for a long time any type of business has been seen as good business and that is not true. There is good business and bad business and dirty money is not going to do anything but affect our economic growth, affect our way of life, and undermine the life of normal citizens.”

‘UK Lawyers … Earning Lots of Money … Advising on Sanctions’

Oliver Windridge, a senior adviser at The Sentry, a not-for-profit, said: “The UK has been on a journey since Brexit in terms of the UK’s use and implementation of sanctions regimes. One of the areas lawyers are becoming more and more au fait, and are frankly earning lots of money, is through advisory services around advising on sanctions.”

He said there was a need to address this “emerging” industry.

Windridge said when Britain was in the EU the country was a “leading light” in the use of sanctions, but he said that in the post-Brexit journey “the UK government has yet to properly embed its sanctions policy within the illicit finance approach.”

He said there needed to be more focus on countries which are “kleptocracies” and where “state theft” is endemic.

Undated file photo of the Foreign, Commonwealth, and Development Office in London. PA Media

Windridge said the Foreign Office designated sanctions and the Treasury implemented them, but there was a “chasm” between them and there was a need to create a “single force.”

He said sanctions should also be a “behavioural change tool” and there needed to be a road map to make it clear to sanctioned individuals how they can be “de-listed.”

Later Adam M. Smith, a former sanctions official in the United States Treasury and at the White House, said the UK and the United States have also worked closely together on the issue, but in the past there had not been a central “mailbox” in Britain.

“That has, in some respects, been solved by the creation of OFSI [the Office of Financial Sanctions Implementation] and the empowerment of OFSI, so some of the frustrations don’t exist any more” said Smith, speaking on a videolink from his office in New York.

Byrne asked him how widely known it was that London was a place where Russian money could be easily deposited without too many questions.

US Lawyer: ‘Rules Were Not as Strict as They Could Be’ in UK

Smith, who is now a partner at the U.S. law firm Gibson, Dunn, and Crutcher, said it had been an open secret that London, the Channel Islands, the Isle of Man, and British overseas territories such as the Cayman Islands and the British Virgin Islands were places where “the rules were perhaps not as strict as they could be or should be, and allowed activity that should not have been happening.”

Smith said the United States was not “innocent” and there were some jurisdictions, like Delaware, Nevada, and South Dakota, where it was “easier” to move money into and out of.

Asked by Tory MP Bob Seely why Britain and its overseas territories had allowed themselves to get into such a situation with “dirty money,” Smith said: “In many cases there was very little that you could point to that said what they—the lawyers, the bankers, etc.—were doing was illegal. It may well have been unethical but it was unclear to me that the law had caught up.”

He said: “At the end of the day a system like the UK and the U.S.—which are open political systems which allow participation by private sector actors—can be subject to capture by moneyed interests ... and we see that with election financing in the U.S. ... but we see the same thing in the UK.”

Smith said he agreed with Windridge that the challenge was to “incentivise” better behaviour from individuals who were seeking to embezzle money from their own countries and avoid taxes.

Kearns asked Smith what she thought about a suggestion Prime Minister Liz Truss had made when she was foreign secretary about seizing assets and using them as reparations.

Smith said if the assets of Russian oligarchs were seized and handed over to Ukraine it would still be a “miniscule” amount, compared to the “hundreds of billions” the government in Kyiv needed to rebuild the country after the Russian invasion.

He said, “It is not clear to me that it is worth risking a rule of law system that was built up over centuries, to do that unless there is very good reason to do so.”