49. Whilst the Russian elite have developed ties with a number of countries in recent years, it would appear that the UK has been viewed as a particularly favourable destination for Russian oligarchs and their money. It is widely recognised that the key to London’s appeal was the exploitation of the UK’s investor visa scheme, introduced in 1994, followed by the promotion of a light and limited touch to regulation, with London’s strong capital
and housing markets offering sound investment opportunities. The UK’s rule of law and judicial system were also seen as a draw. The UK welcomed Russian money, and few questions – if any – were asked about 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.
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’. The money was also invested in extending patronage and building influence across a wide sphere of the British establishment – PR firms, charities, political interests, academia and cultural institutions were all willing beneficiaries of Russian money, contributing to a ‘reputation laundering’ process. In brief, Russian influence in the UK is ‘the new normal’, and there are a lot of Russians with very close links to Putin who are well integrated into the UK business and social scene, and accepted because of their wealth. 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.
51. It is not just the oligarchs either: the arrival of Russian money resulted in a growth industry of enablers – individuals and organisations who manage and lobby for the Russian
elite in the UK. Lawyers, accountants, estate agents and PR professionals have played a role, wittingly or unwittingly, in the extension of Russian influence which is often linked to
promoting the nefarious interests of the Russian state. A large private security industry has developed in the UK to service the needs of the Russian elite, in which British companies
protect the oligarchs and their families, seek kompromat56 on competitors, and on occasion help launder money through offshore shell companies and fabricate ‘due diligence’ reports, while lawyers provide litigation support. William Browder told the Committee that:
Russian state interests, working in conjunction with and through criminal private interests, set up a ‘buffer’ of Westerners who become de facto Russian state agents, many unwittingly, but others with a reason to know exactly what they are doing and
for whom. As a result, UK actors have to deal with Russian criminal interests masked as state interests, and Russian state interests masked by their Western agents.
52. The links of the Russian elite to the UK – especially where this involves business and investment – provide access to UK companies and political figures, and thereby a means for broad Russian influence in the UK. To a certain extent, this cannot be untangled and the priority now must be to mitigate the risk and ensure that, where hostile activity is uncovered, the tools exist to tackle it at source.
53. The extent to which Russian expatriates are using their access to UK businesses and politicians to exert influence in the UK is: it is widely recognised that Russian intelligence and business are completely intertwined. 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.
54. Several members of the Russian elite who are closely linked to Putin are identified as being involved with charitable and/or political organisations in the UK, having donated to political parties, with a public profile which positions them to assist Russian influence operations. It is notable that a number of Members of the House of Lords have business interests linked to Russia, or work directly for major Russian companies linked to the Russian state – these relationships should be carefully scrutinised, given the potential for the Russian state to exploit them. It is important that the Code of Conduct for Members of the House of Lords, and the Register of Lords’ interests, including financial interests, provide the necessary transparency and are enforced. In this respect, we note that the Code of Conduct for Members of Parliament requires that MPs register individual payments of
more than £100 which they receive for any employment outside the House – this does not apply to the House of Lords, and consideration should be given to introducing such a requirement. A ‘Foreign Agents Registration Act’ (an issue which is addressed in the section on Legislation) would also be helpful in this respect.
55. The Government effort on the disruption of Russian illicit financial activity in the UK is led and co-ordinated by the National Crime Agency (NCA). Its work also encompasses the investigation of UK-based professional enablers in the financial and property sectors, with the aim of hardening the UK financial and property markets from the proceeds of crime, and challenging any perception that the UK is a safe haven for illicit funds. The extent to which this money has now been invested, and reinvested, calls into question the efficacy of the recently introduced Unexplained Wealth Orders when applied to the investigation of individuals with such long-established – and to all intents and purposes now apparently legitimate – financial interests in the UK. Whilst the Orders appear to provide the NCA with more clout and greater powers, the reality is that it is highly probable that the oligarchy will have the financial means to ensure their lawyers – a key
group of professional enablers – find ways to circumvent this legislation (we return to this issue later in the Report). By contrast, the NCA lacks the resources required in terms of financial investigators, technical experts and legal expertise – this must be rectified.