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London remains at the heart of global corruption

The United Kingdom’s prestigious image as a financial hub is increasingly tarnished by its inability to adequately combat a severe “dirty money” problem, costing the economy an alarming £350 billion each year according to a new manifesto published by MPs on 16 April.

Despite possessing potent legal tools, the relevant authorities, notably the National Crime Agency (NCA) and the Serious Fraud Office (SFO), have significantly underutilised these resources, particularly unexplained wealth orders (UWOs), which have seen a meagre five cases brought forward by the NCA and none by the SFO. This lack of action signals a distressing failure in the UK’s commitment to clamping down on illicit financial flows.

The key issue at the core of this problem is the opaque system surrounding property ownership and corporate affairs in the UK. Current legislative frameworks allow for property to be held through obscure trusts, making it laughingly easy for criminals to engage in money laundering using pricey London property on a grand scale. Despite the introduction of the Register of Overseas Entities under the 2022 Economic Crime Act—aimed primarily at curbing the influx of illicit funds in the aftermath of Russia’s invasion of Ukraine—significant design flaws persist. As a consequence, anonymous property ownership through hidden financial flows remains the norm, thereby exposing to ridicule rhetoric about implementing stricter means to cleanse the UK of dirty money.

Artifices of money-laundering

Case in point are the evident inadequacies of the Register and related legislation, which were recently spotlighted by members of the All-Party Parliamentary Group (APPG) on Anti-Corruption and Responsible Tax. In their Economic Crime Manifesto, several MPs highlighted that Westminster’s record of thoroughly applying its criminal liability framework remains patchy, notably not applying criminal offence to companies that fail to prevent money laundering. And while the government has reduced the ability of law firms to engage in “lawfare,” such as vexatious litigation to prevent effective prosecution, the measures fall well short of what the scale of the problem would demand.

The persistence of these issues is underscored by the notable presence of Russian oligarchs who, despite sanctions, still own approximately £800 million worth of UK property. This includes substantial holdings like a £230 million property empire owned by Chelsea Football Club’s Roman Abramovich and a £65 million Victorian mansion in North London, equipped with amenities for a luxurious lifestyle such as a planned cigar room and wine cellar. The fact that such properties can be maintained in the face of international sanctions highlights critical gaps in enforcement and regulatory oversight.

Yet it’s not merely Russian oligarchs who exploit the London property market – it attracts kleptocrats and criminals from all over the world. The case of Sirwan Barzani, a prominent Kurdish businessman, Peshmerga leader and generally considered the “ruler” of Iraqi Kurdistan, illustrates the international nature of London’s attractiveness. Barzani’s involvement in a dispute between the Kuwaiti logistics firm Agility and the Iraqi Government sheds light on how London’s real estate market can be manipulated to facilitate corruption and entrench power within foreign political elites.

In 2011, Kuwaiti logistics company Agility invested heavily in the Iraqi-Kurdish telecom sector through Kurdish telco Korek Telecom, only to see its investments expropriated through questionable regulatory decisions by Iraq’s Communications and Media Commission (CMC). The subsequent acquisition of high-value London properties for key CMC officials – notably for the current chairman of the CMC and his family, as well as for the CMC’s former CMC director general – on Barzani’s behalf suggests that these properties were part of the scheme to expropriate Korek’s assets.

After initially filing a claim with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in 2017, Agility’s prolonged case managed to withstand an early dismissal, as an ICSID committee reversed the CMC’s ruling in February this year. This reversal will allow Agility to present its case before a new arbitration panel.

Change beyond legislation

There are many more such examples; however, what the above cases illustrate is the degree to which the UK helps enable the continuation of war and the propping up of corrupt regimes abroad. Russian oligarchs are only getting richer as their home country continues to press on Ukraine, all the while Iraq will find it impossible to escape the spiral of corruption and lack of reform. The systemic nature of these problems that link the posh British real estate market to hard realities abroad demands a robust and unflinching response from the UK government.

Lawmakers have rightly demanded greater transparency in property and corporate ownership and the establishment of stricter legal frameworks to hold high-level decision-makers accountable for failing to prevent money laundering. Beyond the real estate market, the UK Parliament has equally begun spotlighting the infiltration of ‘dirty money’ in litigation funding, with the Litigation Funding Agreements (Enforceability) Bill set to face its scrutiny over the coming weeks. Given the significant threat posed to this unregulated, £34 billion market, lawmakers are pressing for stronger, ECHR-compliant regulation in the Government’s proposed legislation to bolster the country’s defences against sanctioned and laundered money.

Doing so successfully requires not only the full application of the financial tools already in existence, but rather a fundamental shift in attitude at the highest levels of government and society. The UK must reconcile its economic reliance on the property sector—a pillar of stability in the post-Brexit landscape—with the urgent need to purge the system of illicit funds. This balancing act is crucial not only for maintaining economic integrity but also for preserving national security and upholding the rule of law.

The Economic Crime Manifesto is a step in the right direction in the way it highlights the creeping influence of corruption on Britain, and as the UK gears up for the next parliamentary session, the urgency to act is palpable. The incoming government must prioritise closing the gaps in existing laws and enhancing enforcement mechanisms. Without a committed crackdown, London risks remaining a global hub for financial malfeasance, its streets lined with monuments not just to wealth, but to a deep-seated corruption that threatens to penetrate the very fabric of British society.

Image credit: Paul Buffington via Unsplash

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London remains at the heart of global corruption

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    London remains at the heart of global corruption

    The United Kingdom’s prestigious image as a financial hub is increasingly tarnished by its inability to adequately combat a severe “dirty money” problem, costing the economy an alarming £350 billion each year according to a new manifesto published by MPs on 16 April.

    Despite possessing potent legal tools, the relevant authorities, notably the National Crime Agency (NCA) and the Serious Fraud Office (SFO), have significantly underutilised these resources, particularly unexplained wealth orders (UWOs), which have seen a meagre five cases brought forward by the NCA and none by the SFO. This lack of action signals a distressing failure in the UK’s commitment to clamping down on illicit financial flows.

    The key issue at the core of this problem is the opaque system surrounding property ownership and corporate affairs in the UK. Current legislative frameworks allow for property to be held through obscure trusts, making it laughingly easy for criminals to engage in money laundering using pricey London property on a grand scale. Despite the introduction of the Register of Overseas Entities under the 2022 Economic Crime Act—aimed primarily at curbing the influx of illicit funds in the aftermath of Russia’s invasion of Ukraine—significant design flaws persist. As a consequence, anonymous property ownership through hidden financial flows remains the norm, thereby exposing to ridicule rhetoric about implementing stricter means to cleanse the UK of dirty money.

    Artifices of money-laundering

    Case in point are the evident inadequacies of the Register and related legislation, which were recently spotlighted by members of the All-Party Parliamentary Group (APPG) on Anti-Corruption and Responsible Tax. In their Economic Crime Manifesto, several MPs highlighted that Westminster’s record of thoroughly applying its criminal liability framework remains patchy, notably not applying criminal offence to companies that fail to prevent money laundering. And while the government has reduced the ability of law firms to engage in “lawfare,” such as vexatious litigation to prevent effective prosecution, the measures fall well short of what the scale of the problem would demand.

    The persistence of these issues is underscored by the notable presence of Russian oligarchs who, despite sanctions, still own approximately £800 million worth of UK property. This includes substantial holdings like a £230 million property empire owned by Chelsea Football Club’s Roman Abramovich and a £65 million Victorian mansion in North London, equipped with amenities for a luxurious lifestyle such as a planned cigar room and wine cellar. The fact that such properties can be maintained in the face of international sanctions highlights critical gaps in enforcement and regulatory oversight.

    Yet it’s not merely Russian oligarchs who exploit the London property market – it attracts kleptocrats and criminals from all over the world. The case of Sirwan Barzani, a prominent Kurdish businessman, Peshmerga leader and generally considered the “ruler” of Iraqi Kurdistan, illustrates the international nature of London’s attractiveness. Barzani’s involvement in a dispute between the Kuwaiti logistics firm Agility and the Iraqi Government sheds light on how London’s real estate market can be manipulated to facilitate corruption and entrench power within foreign political elites.

    In 2011, Kuwaiti logistics company Agility invested heavily in the Iraqi-Kurdish telecom sector through Kurdish telco Korek Telecom, only to see its investments expropriated through questionable regulatory decisions by Iraq’s Communications and Media Commission (CMC). The subsequent acquisition of high-value London properties for key CMC officials – notably for the current chairman of the CMC and his family, as well as for the CMC’s former CMC director general – on Barzani’s behalf suggests that these properties were part of the scheme to expropriate Korek’s assets.

    After initially filing a claim with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in 2017, Agility’s prolonged case managed to withstand an early dismissal, as an ICSID committee reversed the CMC’s ruling in February this year. This reversal will allow Agility to present its case before a new arbitration panel.

    Change beyond legislation

    There are many more such examples; however, what the above cases illustrate is the degree to which the UK helps enable the continuation of war and the propping up of corrupt regimes abroad. Russian oligarchs are only getting richer as their home country continues to press on Ukraine, all the while Iraq will find it impossible to escape the spiral of corruption and lack of reform. The systemic nature of these problems that link the posh British real estate market to hard realities abroad demands a robust and unflinching response from the UK government.

    Lawmakers have rightly demanded greater transparency in property and corporate ownership and the establishment of stricter legal frameworks to hold high-level decision-makers accountable for failing to prevent money laundering. Beyond the real estate market, the UK Parliament has equally begun spotlighting the infiltration of ‘dirty money’ in litigation funding, with the Litigation Funding Agreements (Enforceability) Bill set to face its scrutiny over the coming weeks. Given the significant threat posed to this unregulated, £34 billion market, lawmakers are pressing for stronger, ECHR-compliant regulation in the Government’s proposed legislation to bolster the country’s defences against sanctioned and laundered money.

    Doing so successfully requires not only the full application of the financial tools already in existence, but rather a fundamental shift in attitude at the highest levels of government and society. The UK must reconcile its economic reliance on the property sector—a pillar of stability in the post-Brexit landscape—with the urgent need to purge the system of illicit funds. This balancing act is crucial not only for maintaining economic integrity but also for preserving national security and upholding the rule of law.

    The Economic Crime Manifesto is a step in the right direction in the way it highlights the creeping influence of corruption on Britain, and as the UK gears up for the next parliamentary session, the urgency to act is palpable. The incoming government must prioritise closing the gaps in existing laws and enhancing enforcement mechanisms. Without a committed crackdown, London risks remaining a global hub for financial malfeasance, its streets lined with monuments not just to wealth, but to a deep-seated corruption that threatens to penetrate the very fabric of British society.

    Image credit: Paul Buffington via Unsplash

    Read more:
    London remains at the heart of global corruption

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