Why Britain’s Tories are addicted to Russian money?

For years, Britain’s Conservatives have promised to rid the country of dirty Russian money, but their own politics kept tripping them up.

With Russian troops now unleashing terror on Ukraine, the U.K. government is under pressure to show the world “Londongrad” is no longer a cozy place for dodgy billionaires to launder their money and their reputations via lavish properties and expensive schools for their children.

But while Boris Johnson’s administration is keen to explain they have imposed sanctions against individuals and companies connected to Vladimir Putin and accelerated the Economic Crime Bill, intended to target money laundering, some within his own party worry the government has left it too late.

Previous stop-start attempts to grasp the problem were hindered, insiders say, by a commitment to an economy in which money could wash through unchecked — a stance that suited both the party’s ideology and the need to buoy the British economy.

A key sticking point, one former No. 10 Downing Street adviser explained, is “this kind of Tory orthodoxy, which is also a Treasury orthodoxy, that the economy needs to be completely open.”

The Conservatives took a similar approach to their own finances, accepting donations from people who have ties to the Kremlin or made their millions in Russia and the former Soviet Union. While such gifts to the party were legitimate insofar as they had been properly declared, critics frequently drew lines between senior Tories and some pretty unsavory characters.

The politics driving the first two problems was then fueled by a divided political environment in which the legitimacy of the Brexit referendum was bitterly debated. Keen to push Brexit through, Johnson’s electorally victorious Conservatives resisted any suggestion of undue Russian pressure on British political life and questions about dirty money were, once more, brushed aside.

Hiding in plain sight

It’s not as though nobody has ever tried to grapple with these questions.

In 2016, David Cameron vowed at a U.K.-hosted anti-corruption summit that foreign companies owning property would be forced to make public who really owns them, a measure that if implemented would have closed one of the key routes into the economy for those looking to clean their money. 

In 2017, the U.K. brought in “unexplained wealth orders” and in 2018 the Sanctions and Anti-Money Laundering Act, along with the so-called Magnitsky amendment, which allowed sanctions on the grounds of gross human rights abuses. 

Although these measures represented progress, they have ultimately failed to deal with the full extent of the U.K.’s vulnerability as a clearinghouse for dirty money — detailed at length by various think tanks, journalists and even by a major report by the British parliament’s Intelligence and Security Committee in 2020.

That report found Russian influence in the UK is “the new normal” and “there are a lot of Russians with very close links to Putin who are well integrated into the U.K. business and social scene, and accepted because of their wealth.”

“This level of integration,” the report added, “means that any measures now being taken by the government are not preventative but rather constitute damage limitation.”

Publication of the report itself was repeatedly stymied and was, in the end, met with something of a shrug by the government, as ministers underlined their commitment to tackling illicit money while brushing off the suggestion of Russian actors playing a role in Brexit.

The legislation now being paraded as the solution — the Economic Crime Bill — has languished for some time. When a minister recently quit over the government’s record on tackling fraud, he went on to claim his former colleagues wanted to delay the bill for at least another year.

Transparency International has identified a number of weak points in the government’s plan, including an 18-month lead-in time, inadequate penalties for those who break the rules, and the absence of an accurate record of who holds what assets.

The raft of sanctions introduced since the invasion of Ukraine has also got off to an uncertain start, trickling out in a process that the Times reported could take months. Downing Street has stressed the need to meet all the proper legal requirements for what it describes as an unprecedented package of measures.

A No. 10 spokesman said last week that “we’re doing everything we can to crack down on illicit money” and “we shouldn’t just focus on individuals but what places most pressure on the Putin regime.”

Two former Cabinet ministers who have criticized the government on other issues said a gradual “ratchet” of sanctions was the right approach.

Many Conservatives, even those who want to see reform, complain that the whole debate around donations takes place in an atmosphere of hysteria. They defend the need for the party to attract donations, contend that their political impact has been wildly exaggerated and point out that it is not only a Tory issue.

Others attribute the lack of action over the 2020 Russia report to, at least in part, what it had to say about Brexit. Dominic Grieve, former chairman of the Intelligence and Security Committee, said there was an “embarrassment” that the outcome might have been influenced by hostile actors, which fed into an unwillingness to look too closely at it.

Political change

While it may have taken Russian boots on the ground to spur the government into action, the sands were already shifting in the Conservative Party. Individual Tory MPs are increasingly willing to question the pure free-market ideology associated with former Prime Minister Cameron and his then-Chancellor George Osborne, mainly in the direction of China but with an eye on Russia too. 

Bob Seely and Tom Tugendhat, both former soldiers with an interest in foreign affairs, are among the MPs who’ve called for the government to go faster with the clampdown. Seely last week used the legal immunity afforded to him as a member of the House of Commons to name lawyers who have defended oligarchs with links to Putin.

Nigel Mills, a Conservative MP and co-chairman of a parliamentary grouping on anti-corruption, said the government’s past ambivalence had left it weakened at precisely the point when it needed to move quickly. 

“We needed a war for the government to decide this was the ethical and moral thing to do,” he told a seminar hosted by the All-Party Parliamentary Grouping on Anti-Corruption and Responsible Tax. “Just think how much better a position we’d have been in last Thursday if we’d have these measures in place and we’d known where all these kleptocrats have their wealth and been able to move much faster.”

Politico