HMRC and FCO action on Russian money laundering ‘held back by political lethargy’
Parliamentary report calls for better intelligence sharing between departments and stronger political guidance for FCO and HMRC
Committee says government is turning a 'blind eye' to money laundering by Russian president Vladimir Putin's kleptocrats. Credit: PA
Government departments are not doing enough to tackle Russian money-laundering in the UK because ministers use legal due process as an excuse for “inaction and lethargy”, MPs on the Foreign Affairs Committee have warned.
Despite tough rhetoric in the wake of the Salisbury nerve agent attack, the government was turning a “blind eye” to Russian “dirty money” flowing through the UK and risking national security, the MPs said.
In a report published on Monday, the Foreign and Commonwealth Office and HM Revenue and Customs were said to be lacking the political leadership necessary to sufficiently address “corruption stemming from the Kremlin”.
The committee called on the Foreign Office to set out a strategy on Russia and for government to enable departments and law enforcement agencies to share intelligence more easily. It also called for the sanctions regime to be extended and for plans to improve transparency of corporate ownerships to be sped up.
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The report stated that foreign secretary Boris Johnson, giving evidence to the committee, had “appeared to suggest… that there was no real role for government” or the FCO in stopping the flow of corrupt money into the UK.
Johnson pointed to unexplained wealth orders and the National Crime Agency’s growing list of persons of interest, but added: “This is not a country where we in the government can say, ‘Oi! We think this so-and-so deserves to have his or her collar felt.’ That is not how it works here.”
This attitude was echoed by evidence given to the Treasury Select Committee by chancellor Philip Hammond, who stressed that HMRC could only act on information if it had the legal basis to do so. He said: “HMRC does not operate on the basis of pounding down the door because it does not like the look of somebody.”
The report also quoted evidence from witnesses including Guardian journalist Juliette Garside who suggested that lack of political will was a more pressing problem to tackling money laundering than a lack of resources in organisations such as HMRC and the NCA. Garside said was “a question not so much of resource but of permission”.
The Foreign Affairs Committee concluded that ministers were right to assert the importance of governing by the rule of law, but argued that “observing due process cannot be an excuse for inaction or lethargy”.
It said: “There is a clear need for stronger political leadership to show the government’s commitment to ending the flow of dirty money into the UK.
“This must be demonstrated by allocating sufficient resources and capacity to the relevant law enforcement agencies, and by ensuring that those running the agencies are able to draw on information from across government departments.
“The government also needs to consider more effective ways to share intelligence between departments, including between the FCO and AML [anti-money laundering] supervisors such as the FCA [Financial Conduct Authority] and HMRC, and with the banking sector.”
The committee welcomed the clause in the Sanctions and Anti-Money Laundering Bill currently going through Parliament that allows sanctions regulations to be made to prevent or respond to human rights violations – and the government’s pledge that a list of sanctioned individuals will be published.
“This list should be published and maintained by the FCO and should be distinct from the general list of individuals under financial sanction that is maintained by HM Treasury,” the MPs said.
They called for their committee to be allowed to scrutinise the government’s use of sanctions. Only the Foreign Office has the “network and intelligence necessary to identify individuals and entities who should be subject to sanctions”, making the Foreign Affairs Committee the most appropriate committee to review usage, they said.
Committee chair Conservative MP Tom Tugendhat, said: "The scale of damage that this ‘dirty money’ can do to UK foreign policy interests dwarfs the benefit of Russian transaction in the City. There is no excuse for the UK to turn a blind eye as President Putin’s kleptocrats and human rights abusers use money laundered through London to corrupt our friends, weaken our alliances, and erode faith in our institutions.”
He called for clear and united action on tackling “corruption stemming from the Kremlin”, and for a joint position to be taken by the City, government policy and allies in the US, G7 and EU.
He added: “We call on the Foreign and Commonwealth Office to set out a coherent strategy on Russia that clearly links together the diplomatic, military and financial tools that the UK can use to counter Russian state aggression.”
Russian ambassador to the UK, Alexander Yokovenko, said that Russians in the UK were preparing to take the government to court if they were targeted by sanctions.
“This Conservative government should really examine its policy towards Russia and why it has reached this level. Some British politicians should also think about the kind of language they use, there are some people who are determined to make matters worse instead of better,” he said.
He added: “If the British government brings in these laws targeting Russians in the UK then the Russians can take the matter to court, I believe a lot of them are preparing for this already and preparing legal cases. This is something which should be open to them, after all we keep being told that the UK is a country of laws.”
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