Britain’s sanctions against Vladimir Putin are too little, too late. Too late because Russia’s President has already invaded Ukraine. People have already been killed, displaced and fired at. There is already a war – an unnecessary and avoidable conflict that will incur a pointless loss of life.
Foreign Secretary Liz Truss promised the “toughest sanctions regime against Russia we’ve ever had” if it invaded Ukraine. But it does not close an important loophole: property ownership.
The sanctions currently in place allow the British government to penalise individuals they believe are involved with destabilising, undermining or threatening “the territorial integrity, sovereignty or independence of Ukraine” or “obtaining a benefit from or supporting the Government of Russia” by freezing their assets.
In theory, this means their properties too. There’s a flaw in this plan, though. The properties might not be in their name.
It is difficult to know exactly how many properties in the UK are owned by wealthy Russian individuals or corporations linked to Putin. Why? Because in Britain it is possible to buy up homes and buildings anonymously through offshore structures based in places like the British Virgin Islands (BVI).
This way of buying property is entirely legitimate but enables corruption, serving as a mask for financial crime. It can be a means of tax evasion or money laundering and also means that the money and those it belongs to are untouchable – unsanctionable. You can’t put economic sanctions on a property if you don’t really know who owns it.
If you were a wealthy person who happened to be in Putin’s circle and you wanted to get money out of Russia, how would you do it? The answer is, more easily than you ought to be able to.
You would buy property in the UK, likely in London’s borough of Kensington and Chelsea or in Westminster, right on Parliament’s doorstep (as this map shows, these are the most popular areas for offshore buyers).
According to Transparency International, an independent, not-for-profit anti-corruption group, £1.5bn worth of British property has been bought by Russians who are accused of corruption or have Kremlin links.
It is often claimed that buying property in London is a better investment than buying gold. For anyone in Putin’s circle who has invested via an offshore entity, that may certainly have proven to be true. British real estate is a safe bet – if someone wants to hide money in it, they can. They’re also likely to see decent returns.
In 2021 the estate agents Knight Frank reported that the super-rich bought more super-prime homes in London than in any other city in the world, including Hong Kong and New York, during the height of the pandemic, in the year 2020/21. We are talking about properties with a price tag of $10million (£7.5m) or more here: they are desirable, they hold their value, and they are investments.
The most egregious thing about this situation is that it would have been prevented were it not for government inertia. Back in 2016 David Cameron promised to close this gaping loophole and stop offshore funds buying UK property, but legislation has yet to materialise.
In 2020, a Home Office and Treasury report noted there has been “a significant volume of Russian, or Russian-linked illicit finance,” spent in the UK on things like luxury property. The report described the way funds can be transferred through the international finance system anonymously to make these purchases as a “vulnerability” which is “regularly exploited to move Russian-linked illicit finance to the UK”.
More from Opinion
And so, here we are. Looking on as Russia invades Ukraine, unable to issue sanctions effectively. Boris Johnson can give all the rousing statements he likes but the fact remains: Britain has long been a soft touch. We have asked too few questions, made it too easy to hide money here, and been too slow to do anything about it.
“I can’t give you an overall number for Russian property ownership in London,” Powell-Smith told i. “No-one can. Findings like Transparency International have to be pieced together from leaks and as they say, this is just the tip of the iceberg.”
“It’s urgent that we sort this out,” Powell-Smith continued. “We have seen that senior Russian people have been able to move money into the UK property market in a way that other countries are extremely uncomfortable with. The lack of transparency allows this to continue.”
Putin and his circle’s grip on British property is unlikely be loosened any time soon. As Labour leader Keir Starmer put it: “the tendrils of the Kremlin have been allowed to wrap around the UK.”
The Mayor of London, Sadiq Khan, has expressed his distaste too.
He has said that all assets owned by Putin allies in the capital ought to be seized and suggested a levy on overseas property buyers which, he reckons, could raise up to £370m a year.
This money, the Mayor says, could be used to build council and genuinely affordable homes to tackle London’s housing crisis.
Ordinary people in Britain struggle to find decent homes. We can’t allow London’s housing market to be exploited by people who want to hide money.
Britain’s property market is unequal and unfair at the best of times but, right now, it is providing safe harbour for funds associated with the war-mongering perpetrators of severe injustice as conflict unfolds in Europe.
Far from being ostracised or turned into a pariah, Putin and his friends have been welcomed into Britain with open arms.
Vicky Spratt is i’s Housing Correspondent
Credit: Source link
