From London
Miracles do not exist. Russian invasion could have revolutionized global financial secrecybut behind the harsh rhetoric of the Boris Johnson government against the “Russian oligarchs” and their real estate emporium in London, there is black holes legal sanctions, ridiculous sanctions and incredible delays in the implementation of a law that will begin to be debated on Monday in parliament, after spending years in the freezer.
It’s not by chance. “The United Kingdom lost its empire at the end of the Second World War but, in return, it set up a financial empire with a network of tax havens that dismantled the regulated post-war global financial system until we reached the situation we find ourselves in today. . This new model, dominated by the City of London, has taken root at an economic, political, institutional and regulatory level. It is not dismantled overnight with a government of these characteristics”, pointed to Page 12 Nicholas Shaxson, author of “Treasure Islands”, a seminal book on tax havens. Rhetoric and reality.
Boris Johnson promises
Boris Johnson promised the day of the invasion of Ukraine an immediate and forceful response that had as its central axis, a bill against Financial Crimes to prevent Russian billionaires from hiding their fortunes behind ghost companies in tax havens. A few days later, like a player who drops to the ground to waste time at a key moment in the game, He presented a “White Paper” in Parliament, a preliminary step in British legislation in which he specifies the government’s position on the issue, a position that was much softer and more blurred than the rhetoric.
One of the top experts on British financial crime, a harsh critic of the current regulatory regime, Graham Barrow, condemned on Twitter on Tuesday the exasperating slowness of the government. “We don’t need a White Paper. We need a bill that parliament debates immediately. We know what must be done. Parliament knows it too. Now they have to do it and without further delay,” Barrow tweeted.
The time is gold
In the opaque and super-digitized world of tax havens like the City of London, time is of the essence. At the heart of the bill outlined in the White Paper is the “registration of foreign entities” which incorporates the obligation to provide the real name of owners of companies registered as owners of real estate in the United Kingdom that have their headquarters in abroad.
The project was presented in 2018 during the government of Theresa May and boxed in by pressure from the City on the grounds that it would negatively impact the business climate in the UK. Boris Johnson was not interested when he took office in 2019, nor when he won the elections months later, nor during the pandemic: the Russian invasion dusted him off from oblivion.
If parliamentary approval is obtained, the project would apply to all property acquired in the last 20 years, which would reach a good part of the fortunes amassed in this century, although not those that came from Putin’s predecessor, Boris Yeltsin, during the hard times of privatization and the “shock therapy” promoted by the United States and the International Monetary Fund to turn Russia into a capitalist country overnight. But according to critics of the White Paper the weakness of the sanctions and the temporary elasticity for the entry into force of the law dilute its real impact.
On properties and ghosts
The head of investigations at Transparency International UK, Steve Goodrich, highlights that the value of the fines is ridiculous. “If the real owners cannot be brought to justice because they live in Russia, a country that does not extradite its citizens, the fine will be 500 pounds a day, something that for a billionaire is like a tickle. What we need are sanctions with increasing fines and the possibility of confiscation of the property in the event that the requirements demanded by the law are not met,” said Groodrich.
In addition, the implementation schedule of the law contains a “transition period” of 18 months for companies that own real estate based abroad and their real owners to adapt to the new rules. “This is like giving them permission to leave while we open the door for them to facilitate their exit,” Goodrich told the newspaper The Guardian.
The calculation is that there are 78 thousand properties in London that are registered in the name of shell companies in tax havenss: the total value exceeds 100 billion pounds. The estimate is that 20 percent belongs to fortunes of Russian origin.
Football, money and war
In the Prime Minister Question Time (PMQT) on Wednesdays in parliament – a weekly space in which the prime minister attends the chamber to answer questions from all the benches – the leader of the opposition Keir Starmer took aim at the UK’s best-known Russian billionaire: Roman Abramovic, owner of Chelsea, champion of the Champions League last year. “Last week the prime minister said there would be concrete sanctions against him. He then recanted. Can you tell why Roman Abramovic is not subject to sanctions?
Johnson replied, in that rapid back and forth that is the PMQT, that he could not comment on individual cases and defended the government’s conduct. Starmer replied that another who is still not on the list of possible sanctions and “has his hands full of blood”, is the former Prime Minister of Putin, Igor Shuvalov. “Shuvalov is the owner of two flats about five minutes from this parliament worth 11 million pounds. Shuvalov is on the European Union sanction list, but not on the UK sanction list,” Starmer said.
European Union and United Kingdom
Debating a law can be laborious in the UK. Only if there is political will from both chambers – the House of Representatives and the House of Lords – can progress be made with some haste. In the PMQT Keir Starmer promised to propose tougher measures in the debate that begins on Monday. In a rare indication of harmony, Boris Johnson congratulated the Labor leader for his willingness to work together against Putin.
In a nation that is still living in the cold war, there is not much political margin at the rhetorical level and grand gestures. The day after the PMQT, the government announced sanctions on Igor Shuvalov. That same Thursday versions circulated that Abramovic was looking for buyers for his most visible property, Chelsea.
In the European Union (EU) they are making it clear that none of this is enough. “The UK is trying to follow our lead on this matter. And I have no doubt that they will continue to do so because the pressure of their public opinion is very strong. I think that now even parties that accepted financing from oligarchs understand that they have to change their position,” he said. Frans Timmermansthe first vice-president of the European Commission, the executive body of the EU.
One of the strongest indicators of the penetration that the logic of tax havens – dictated by the City and the large law and accounting firms – has in the political and institutional fabric is that the Conservative Party has benefited from donations from Russian billionaires in the last 10 years. In the EU, lists of 680 sanctioned have been published. In the United Kingdom, with the same rhetoric, only 10 are reached, despite the fact that it is the recipient of the bulk of this investment by shell companies in tax havens on behalf of figureheads.
Esperando to Godot
Is there a chance that this invasion could be the starting point to start reforming a key global hub of planetary tax evasion like the City of London? The law would not be limited to “Russian oligarchs” but to any company registered abroad, which would therefore include even the British (or Saudis, Chinese, Latin Americans, etc.) who hide their wealth in a network of shell companies in tax havens.
According Alex Cobhamdirector of Tax Justice International, the law is a first step, but much will depend on the fine print. “Overseas property registration is a useful step, but we lack full transparency that encompasses all forms of companies and trusts and partnerships. There should be sanctions for the facilitators of this whole system, especially real estate agents. In short, it should be clear that we are not going to recognize the property rights of anyone who does not first declare that they are the owner of a property”pointed to Page / 12 Cobham. “We are far from that point.”