(iNews) - As the Government prepares to clamp on the billions of Russian oligarchs tucked away in British tax havens, it’s worth considering how much is actually there.
As the i revealed on Tuesday, UK Government officials are in talks with the UK’s 14 overseas territories and three Crown dependencies in an attempt to ensure they are ready to act quickly against billionaires suspected of having close ties to the President Vladimir Putin.
While we know there are billions of Russian cash spread across British tax havens it’s impossible to be sure quite how much.
For the most detailed analysis we need to go back to 2018. In the wake of the poisoning of former Russian double agent Sergei Skripal and Mr Skripal’s daughter Yulia in Salisbury, human rights group Global Witness had a closer look at where the wealthiest of Russians put their money, whether dirty or not.
While much has been written and spoken about their love of high-end luxury properties in West London, Russian billionaires have a clear preference for Britain’s tax haven islands when it comes to hiding what many suspect to be their ill-gotten gains.
In the decade to 2018 more than seven times more money flowed from Russia to the British tax havens than to mainland UK. Over this period, £68bn from Russia was invested in them – and the British Virgin Islands (BVI) was the second most popular destination for the oligarch’s cash with Cyprus in top spot.
In 2018 alone, Global Witness found that Russian oligarchs had around £34bn hidden in British tax havens, five times more than in the mainland UK.
By no means is all of this cash “dirty money”, but it will not necessarily have to be in order to attract the attention of the UK Government.
Last week, the Government strengthened the Sanctions and Anti-Money Laundering Act 2018, meaning “friends of Putin” with clean cash in British tax havens may well be legitimate targets for the UK authorities should the Russian president press the button on a Ukraine invasion.
The beefed up act means the UK can now sanction not just those linked directly to the destabilisation of Ukraine, but also individuals close to the Russian government and businesses of economic and strategic significance to Mr Putin, as well as their owners, directors and trustees.
But how easy will this money be able to find. While the British Overseas Territories, including the BVI and Cayman Islands, and the Crown dependencies of Jersey, Guernsey and the Isle of Man are required to implement any international sanction of the UK, it’s not always a simple process of finding who owns what in many of these tax hideaways.
The Russian Laundromat revelations of 2014 uncovered a scheme that laundered at least $20.8bn (£15.4bn) from Russia. Two of the three Russian businessmen benefitting from the scam used BVI companies to receive over $100m of laundered cash.
Then there’s the “mirror trades” scheme which was one of the biggest Russian money laundering schemes ever exposed. This used BVI companies a whopping $10bn-plus out of Russia.
Global Witness found that many, if not all, of these schemes relied on the fact that the true ownership of the companies involved was hidden from view.
Its report found: “In lending the corrupt the opportunity to shroud their business dealings with a veil of secrecy, the Overseas Territories play a key role in the money launderer’s playbook.”
There is also a question mark over how much of that £34bn of Russian money in British tax havens is still being hoarded in places like BVI today, three years on.
As the West cranked up the rhetoric on financial sanctions on Russia following the Salisbury poisoning, Mr Putin decided to create some tax havens of his own in order to tempt some of that money back onto home soil.
The Russian President established the tax-friendly “special administrative regions” to help Russian billionaires avoid any potential financial sanctions. Located on Oktyabrsky island in the Kaliningrad area sandwiched between Lithuania and Poland, and on Russky island near the borders with China and North Korea, the two SARs have provided oligarchs an exit ramp from foreign jurisdictions.
While targeting dirty money now back in Russian-controlled bank accounts is clearly not an option, some also believe there is a reticence among many in the UK Government to go after oligarch cash even on our own tax dodging islands.
James Nixey, director at Chatham House’s Russia-Eurasia programme, suggests the benefits to the UK of hiding aways billions in its tax havens may, in the end, outweigh the arguments to clamp down on those “friends of Putin”.
“It’s not clear to me how far the UK wants to go in terms of stamping out the proceeds of kleptocratic insertion into the UK.
“I’m afraid the fact of the matter is, we’re in it up to our necks because our law firms, accountancy firms and hedge funds have basically had a no questions asked policy up to this point. The UK has more offshore tax havens than any other country in the world and as a result of which I feel we are quite frankly complicit.”
Mr Nixey added that he believed some in Government are concerned about the loss of revenue it ministers push ahead with targeting Russian money sitting in our own tax havens.
After all Jersey alone pumps around £14bn into treasury coffers every year, and if we start looking too closely at Russia’s questionable cash spread around the British tax haven empire, then other not-so-straight billionaires may begin to question whether the UK will be quite as friendly to them.
“I think some people in the Government are quite worried about the effect it would have on budget revenue if we were to choke that off. I remain sceptical that we are serious about this in the absence of frankly seeing it happen.
“I’d love to be proven wrong, we haven’t quite been in this situation before, but all the evidence so far has suggested that’s not what we want to do because it will go elsewhere.”
The question ministers have to ask themselves is whether or not they are willing risk the billions that Chancellor Rishi Sunak rakes in from these mysterious islands made of money in order to punish Mr Putin.
By David Parsley
February 15, 2022
