How Boris Johnson’s Party Shielded Russian Oligarchs’ Cash

Bankrolled by the finance sector, Boris Johnson’s Conservative Party has made the UK a safe haven for the dirtiest money in the world.

British prime minister Boris Johnson addresses the nation in the White Room at Number 10 Downing Street in London on March 23, 2020. (Andrew Parsons / No 10 Downing Street via Flickr)

Amid pledges to crack down on Vladimir Putin’s network of Russian oligarchs, the United Kingdom’s Conservative government this week began advancing loophole-ridden transparency legislation purportedly designed to reduce secrecy in real estate and company registration. The government has also proposed broad deregulation of markets that have been used to launder illicit assets.

“There is no place for dirty money in the UK,” declared British prime minister Boris Johnson in a statement. “Those backing Putin have been put on notice: there will be nowhere to hide your ill-gotten gains.”

Left unmentioned, however, is that the UK — which has been led by Johnson’s Conservative Party for the past twelve years — has allowed that so-called dirty money to imperceptibly flood into the country’s financial system, all while Johnson’s party has been vacuuming in campaign cash from finance industry moguls and donors connected to Russian oligarchs.

Known as the City of London, the UK’s financial industry has been a bastion of secrecy for decades — and a top destination for Russian assets. A recent report from Transparency International showed that more than 20 percent of the nearly $9 billion in total property value in the UK associated with potential money laundering is connected to the Kremlin.

The UK has become an attractive destination for oligarch cash thanks in part to laws that allow British property owners to hide their identities behind shell companies, and there is no common list of ownership. Plans for a public registry began five years ago with the goal of having one in place by 2021, according to London mayor Sadiq Khan, but Johnson and his predecessor Theresa May stalled the plan.

According to the UK-based Centre for Public Data, 250,000 overseas entities now own property in England and Wales, which is up from 88,000 when the Conservatives first took office in 2010.  Since the start of 2021, 623 registered companies have been set up by Russian nationals who live and work in Russia, according to a recent analysis in OpenDemocracy.

Dirty money is “breaking the social contract,” said Susana Ruiz of Oxfam, which works on transparency and tax issues. “It undermines trust in officials and the economy. It’s a system that allows oligarchs, not just Russians, to hide their assets from the scrutiny of revenue authority, and it creates a lot of disruption in society. In the end, the burden of taxation is falling on those that can’t escape. Why do we need a war to make us understand that we need to consider tracking and freezing global assets?”

Mark Bou Mansour, the spokesperson for the UK-based Tax Justice Network, said that financial secrecy across the world, and particularly in the UK, allows financial institutions to court dictators and other illicit sources of financing.

“The main concern is any efforts right now to track down assets of people who have been sanctioned are going to be hampered by loopholes in laws governing the global financial sector,” said Bou Mansour:

For decades governments have been courting dictators through ‘eyes wide shut’ regulations, which has made it impossible to track down assets held. The UK has been backpedaling on a lot of its transparency initiatives. A lot of measures have been started before and then put on hold.

Promises of Reform, but Glaring Loopholes

UK transparency advocates have been complaining about their country’s financial secrecy regime for years — but only now, after Russia’s invasion of Ukraine sparked an international outcry, are Johnson and his party signaling a willingness to try to look like they are listening.

This week, for instance, Johnson sanctioned billionaire Chelsea Football Club owner Roman Abramovich and six other wealthy Russians, including Oleg Deripaska. The two billionaires had been closely linked to the Conservatives by Lord Greg Barker, who was made a member of the House of Lords by former prime minister David Cameron in 2015. Barker had worked for Abramovich’s Sibneft oil group and had been until this week chairman of Deripaska’s En+ Group.

Meanwhile, Johnson and his party endorsed legislation that they say would help regulators sanction the assets of Russian billionaires, thereby pressuring Putin’s government to back down.

“We are targeting oligarchs’ private jets, we’ll be targeting their properties, we’ll be targeting other possessions that they have,” said Johnson’s new foreign secretary, Liz Truss. “There will be nowhere to hide.”

However, when the draft of the legislation was released last week, transparency advocates panned the proposed legislation for being full of loopholes. It contained an eighteen-month implementation timeline, and fines of just £500 ($668) per day for noncompliance with the disclosure requirements — chump change for billionaires.

Even that meager fine was stripped from the bill that passed the House of Commons this week, with any fines being deferred to a regulatory process, although the implementation timeline was reduced to six months after vocal complaints from advocates.

The ruling Conservatives also rejected proposed amendments from the opposition Labour Party that would have strengthened the bill, including amendments that would have called on the government to reveal how it would reform the UK’s error-ridden business registry, known as Companies House, as well as a proposal that would have mandated a study as to whether or not enforcement agencies have sufficient funding to enforce the new legislation. Johnson’s party also rejected Labour Party demands for the bill to be implemented in twenty-eight days, rather than in six months.

“Prosecution isn’t really an option, because for instance the owner lives in Russia, which doesn’t extradite its citizens,” said Transparency International’s Steve Goodrich.

He added that the transition period means that holders of potentially illicit funds “looking to make a swift exit for the door have it held wide open for them.”

A similar gap between tough rhetoric and action seems to be evident in the regulatory arena. There, Johnson’s minister for financial services, John Glen, recently pledged that “we will not hesitate to take further action as it is needed, including by strengthening the Treasury’s powers to enforce financial sanctions.”

But he then said that the British government would change existing transparency laws aimed at derivatives — which are already notoriously opaque and poorly regulated — to make the rules less difficult for the country’s finance sector.

“(I) said that we would amend the scope of the transparency regime for fixed income and derivatives markets. This will ensure our regulation is more effective and less burdensome,” he said. “I’m very aware some critical voices say that these changes will result in a more opaque market, with trading not properly reported or scrutinized. I strongly disagree.”

A Flood of Cash to Johnson and His Party

Johnson’s slow-walking on wealth transparency reflects the influence that the City of London has in the Conservative Party that has ruled the UK for a dozen years.

Unlike in the United States, political parties in the UK are allowed to accept donations of any size, with Johnson’s Conservatives receiving more than $14 million in contributions from City tycoons since December 2019, including leading private equity and hedge fund managers.

Lobbying firm Squire Patton Boggs, which represented Russian banks Gazprombank, Sberbank, and VTB Bank in 2014, donated more than $30,000 to British Conservative MPs in 2015.

Lubov Chernukhin — the former wife of a former deputy finance minister of Russia, Vladimir Chernukhin — has donated more than $2.6 million to the Conservatives since 2012, including over $100,000 in 2021, according to Sky News. Vladimir Chernukhin is a former director of Polyus, a Russian gold mining firm closely tied to Putin-connected billionaire Suleyman Kerimov.

Other major donors to the Conservatives likely have vested interests in maintaining the veil of secrecy on ownership in the country. They include:

  • Alexander Temerko — a director at Aquind, a company proposing a power link between the UK and France — has donated more than $921,000 to the Conservatives since 2011, with the company itself donating over $320,000. A BBC investigation in October 2021 into prior deals done by Aquind’s owner, Victor Fedotov, found that Fedotov “secretly benefitted from the alleged $4bn fraud in Russia.” (Fedotov’s lawyers said “there is no evidence whatsoever” to suggest that he had acted inappropriately.)
  • Mohamed Amersi — a UK citizen who began to amass his fortune in the world of US-backed privatizations of Russian industry in the 1990s and early 2000s, where he worked closely with a company that was alleged to be controlled by a Putin associate — has donated nearly $1 million to the Conservatives since 2017.
  • New Century Media, a PR firm founded by a former member of Parliament from a Northern Irish party that is closely tied to Johnson’s Conservatives, has represented pro-Putin Russian and Ukrainian figures and has donated $232,000 to the Conservatives since 2009.

In addition to the generous donations from hedge fund and private equity tycoons to the Conservative Party, Johnson himself has been on the receiving end of that support.

Jon Wood, who runs a Bermuda-based hedge fund, donated $98,000 to Johnson’s successful 2019 effort to lead the Conservative Party. Wood has also donated over $1.3 million to the Conservatives since 2019.