Tackling Money Laundering
Evidence shows that money laundering and illicit finance are problematic in the UK.
Below is our assessment of the government's response based on what was written in its July 2020 document. We will reassess how this in the light of how well the intended response has been implemented in July 2022.
The grid gives our evaluation with a score. Below is the relevant text from the report and the response.
The grid gives our evaluation with a score. Below is the relevant text from the report and the response.
Russian Money and Illicit Finance
Report Recommendations
“[Paragraph 49] …The UK welcomed Russian money, and few questions – if any – were asked, regarding the provenance of this considerable wealth. It appears that the UK Government at the time held the belief (more perhaps in hope than expectation) that developing links with major Russian companies would promote good governance by encouraging ethical and transparent practices, and the adoption of a law-based commercial environment.”
“[Paragraph 50] What is now clear is that it was in fact counter-productive, in that it offered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat’. […] This level of integration – in ‘Londongrad’ in particular – means that any measures now being taken by the Government are not preventative, but rather constitute damage limitation.”
“[Paragraph 53] … The Government must ***, take the necessary measures to counter the threat and challenge the impunity of Putin-linked elites. Legislation is a key step and is addressed later in this Report.”
“[Paragraph 50] What is now clear is that it was in fact counter-productive, in that it offered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat’. […] This level of integration – in ‘Londongrad’ in particular – means that any measures now being taken by the Government are not preventative, but rather constitute damage limitation.”
“[Paragraph 53] … The Government must ***, take the necessary measures to counter the threat and challenge the impunity of Putin-linked elites. Legislation is a key step and is addressed later in this Report.”
Government Response
“The Government is clear that tackling illicit finance and driving dirty money and money launderers out of the UK is a priority. The UK has one of the world’s largest and most open economies. These factors make the UK attractive for legitimate business, but also expose the UK to money laundering risks. The Financial Action Task Force praised the UK as a “global leader in promoting corporate transparency” with a “comprehensive legal framework”, and that the UK “aggressively identifies, pursues and prioritises money laundering investigations and prosecutions”.
However, we are not complacent, and we will ensure the full weight of law enforcement bears down on dirty money. In recent years through ground-breaking legislation such as the Criminal Finances Act 2017, the Government has introduced new powers and tools making it easier to seize criminals’ money from bank accounts with billions taken from criminals, set up the National Economic Crime Centre within the National Crime Agency (NCA), expanded civil recovery powers, led the world on introducing public registers of beneficial ownership of companies and, crucially, we have ramped up law enforcement capabilities to specifically tackle illicit finance with over £48 million funding in 2019 to 2020.
Post Salisbury, the Government made its intentions clear that we will crack down on dirty money in the UK. Led by the NCA, we continue to bring the full capabilities of law enforcement to bear against serious criminals, corrupt elites, and their assets. The Foreign Secretary reaffirmed this stance when he announced the UK’s new Global Human Rights sanctions, which will target those individuals involved in human rights abuses, be they linked to the state or not, who seek to siphon dirty money through British banks or other financial institutions.”
However, we are not complacent, and we will ensure the full weight of law enforcement bears down on dirty money. In recent years through ground-breaking legislation such as the Criminal Finances Act 2017, the Government has introduced new powers and tools making it easier to seize criminals’ money from bank accounts with billions taken from criminals, set up the National Economic Crime Centre within the National Crime Agency (NCA), expanded civil recovery powers, led the world on introducing public registers of beneficial ownership of companies and, crucially, we have ramped up law enforcement capabilities to specifically tackle illicit finance with over £48 million funding in 2019 to 2020.
Post Salisbury, the Government made its intentions clear that we will crack down on dirty money in the UK. Led by the NCA, we continue to bring the full capabilities of law enforcement to bear against serious criminals, corrupt elites, and their assets. The Foreign Secretary reaffirmed this stance when he announced the UK’s new Global Human Rights sanctions, which will target those individuals involved in human rights abuses, be they linked to the state or not, who seek to siphon dirty money through British banks or other financial institutions.”
Assessment of Progress
Not clear how well-targeted measures are, or whether ‘open economy’ aim compromises them.
4/10 – MH
New Statutory Framework
Report Recommendations
“[Paragraph 12] The clearest requirement for immediate action is for new legislation: the intelligence and security community must be given the tools they need and be put in the best possible position if they are to tackle this very capable adversary, and this means a new statutory framework to tackle espionage, the illicit financial dealings of the Russian elite and the ‘enablers’ who support this activity.”
Government Response
“The Government is also considering legislation which, when implemented, would strengthen the UK’s defences against illicit finance in general, and not specifically in relation to Russian elites. This includes reforms to strengthen the powers of Companies House; to the law governing Limited Partnerships, to make them less open to abuse in money laundering; as well as to establish a register of beneficial ownership information of foreign companies owning UK property.”
Assessment of Progress
Legislation being considered but not yet drafted.
2/10 – H
Individual Sanctions
Report Recommendations
“[Paragraph 120] There appear to be similar concerns in relation to sanctions. The NCA told us that sanctions have “a powerful impact” on members of the Russian elite and their professional enablers, and “provide a significant primary disruption when imposed, and also open up a range of effective secondary disruptions through sanctions evasion offences”. However, the NCA also underlined that there are several ways in which the Sanctions and Anti-Money Laundering Act 2018 is too restrictive. The NCA outlined changes they would wish to see to the legislation:
- including serious and organised crime as grounds for introducing sanctions; and
- providing for Closed Material Proceedings to protect sensitive intelligence in the granting of, and any appeal against, sanctions (the Special Immigration Appeals Commission procedures offer a useful model for this).
We note that the Foreign Secretary stated that he is “quite enthusiastic about sanctions against individuals because we are all quite sceptical that sanctions against countries have a huge effect and they often hurt the very people that you are trying to help.” We agree and strongly support NCA’s suggested amendments to the legislation.”
Government Response
“As mentioned in our response to paragraphs 125, 132 and 136 above, the Government has introduced new legislation – the UK Global Human Rights sanctions regime – that enables the UK to sanction individuals for serious human rights abuses. Among the first listings, twenty five Russian Government officials have been sanctioned for their involvement in the death of Sergey Magnitsky whilst in detention. The Sanctions and Anti-Money Laundering Act (2018) also includes relevant provisions that would allow for sanctions in the interests of national security, in the interests of international peace and security and to further a foreign policy objective of the Government.”
Assessment of Progress
Magnitsky Act enacted and used.
10/10 – L
No change to Sanctions & Anti Money Laundering Act.
1/10 – H
Addressing Financial Recommendations
The Russia report includes various recommendations about tackling money laundering.