For years, it’s been an open secret that Russian oligarchs have used ultra high-end London property to store and launder their wealth. Now, with the government looking for ways to hit Vladimir Putin where it hurts, the capital’s property sector is under scrutiny. On Thursday (3 March) the Financial Times reported that the cabinet minister Michael Gove is looking for ways to seize property assets owned by Russian oligarchs with links to the Kremlin without compensating them. This sounds simple in theory – but what are Gove’s options?
There’s a reason the UK capital is known as “Londongrad”: according to campaigning organisation Transparency International, since 2016 property worth £1.5bn has been bought by Russians accused of corruption or links to the Kremlin. Of that total, £830m is held by companies registered offshore, allowing their owners to remain anonymous. On Wednesday (2 March), Keir Starmer used parliamentary privilege to name Igor Shuvalov, Putin’s former deputy prime minister, who “owns two flats, not five minutes’ walk from this house”.
The government does have plans to target those using London property to launder money, including those with links to the Kremlin. The Economic Crime Bill, announced on Monday, is designed to target transactions like these by requiring foreign buyers to sign a register, preventing them from hiding their identities. But, as Starmer pointed out, under that legislation oligarchs will have an 18-month grace period after it comes into effect to make other arrangements. Given the urgency of the situation, Gove will need something else.
Cameron Brown, a QC at Red Lion Chambers who specialises in fraud and corruption, says Gove’s easiest option is to use Unexplained Wealth Orders (UWOs). These were introduced in 2017 to target money launderers, forcing the defendant to prove where their wealth comes from or face having it seized. But they’re not straightforward. Not only are they controversial, because the burden is on the defendant to prove why the state is wrong, making it effectively a “guilty until proven innocent” situation, but they’re also expensive. “[Defendants] throw huge amounts of assets at them to defend them,” says Brown. “They instruct expensive, high-end lawyers, and lots of them, because they have the resources.”
In a 2018 report published by the Intelligence and Security Committee, Lynne Owens, the head of the National Crime Agency (NCA) until last year, said the targets of UWOs were “wealthy people with access to the best lawyers” whose bottomless bank accounts were exhausting her team’s resources.
Another option, says Brown, is to legislate separately, although even if the government rushes that legislation through it will still take time.
London’s oligarchs are already concerned. On Sunday (27 February) the foreign secretary, Liz Truss, said the government has plans to impose sanctions on a “hit list” of oligarchs. On Thursday (3 March) Nigel Kushner, chief executive at W Legal, told the Today progamme that he had been approached by oligarchs who are worried about what will happen, even if it hasn’t yet: “90 per cent of those who… I have advised come to me after they’ve been sanctioned,” he said. “This week it’s been bizarre, because they’ve not yet been sanctioned.”
Meanwhile, the Times reported that Roman Abramovich is so anxious that he is not only flogging his football club, but he’s also looking to sell his £150m, 15-bedroom home next door to Kensington Palace and his £22m, three-storey flat on Chelsea Waterfront.
That might not be easy: Henry Pryor, a property buying agent who deals with high-end homes, says with sanctions on the horizon, any agent appointed by Abramovich would have to apply for approval from the National Crime Agency. “In the current climate I suspect they would be waiting a long time to get it,” he says.
While Gove looks at how to seize the properties, the government must sanction individuals swiftly. Because while it’s easy to empty a bank account quickly, selling off a property is harder. “In reality one cannot easily transfer or sell large holdings or any property overnight,” Kushner told me. But he cautioned: “The government also needs to make sure that there is a proper basis to apply sanctions on individuals. This cannot simply be based on a lousy reputation or hearsay.”
[See also: For companies that invested in Russia, unloading toxic assets is a difficult business]