Britain’s “dirty money” problem, with Joe Powell MP

0:03You only need to take a short stroll through London's wealthiest postcodes to understand just how much foreign money has flowed into Britain in recent years. The value of unoccupied properties is estimated to be£50 billion. So how big of an issue is money laundering and will Britain ever get clean from its dirty money reputation? Hi and welcome back to The Standard Podcast. I'm Tamara Kormornick. If you're new here, hit follow and give us a rating. For all the latest news, head to standard.co.uk. Coming up, Britain's dirty money problem with Joe Powell.

0:50Over the past few years, the UK government has promised a tougher stance on money laundering. But with Britain's long ties to offshore finance and new challenges from cryptocurrency and soaring gold prices, is it really getting a handle on the problem? Before Rachel spoke to Jo, I wanted to hear about her investigation and understand why London is beloved by money launderers.

1:17Rachel, thank you so much for joining me on The Standard podcast. Thanks for having me. So we're having this conversation off the back of your special report that you compiled for The Standard on money launderers. You've done all the research. why do criminal money launderers like London? Yeah it's a good question you know there has been quite a history particularly from the 90s of rich often foreign millionaires and billionaires buying up property and things in London. I think one of the reasons behind that is that they could be bought through shell companies, which are often registered to offshore tax havens who obscure who the true owners are.

2:06We had something called the tier one investor visa that was introduced in 2008, which was specifically designed to tempt rich foreign investors by offering them fast track residency in exchange for two million pounds investment in Britain. And that meant that there was a sort of flood of people that came into the country and bought up expensive property. Transparency International said the lack of effective checks on applicants made the scheme a target for corrupt individuals looking to launder their wealth. Britain did become a kind of laundry mat for ill-gotten wealth because, you know, we've always had a very big history of being involved in financial services.

2:49It's one of the big economic drivers in the UK, But it was so easy for people to buy at properties with very few questions being asked. I did a dirty money tour of the City of London led by the APPG on anti-corruption. Even just walking around the City of London, it felt like the MPs leading the tour were pointing out properties all over the place. And these are often in London's most exclusive addresses, right in the heart of the city, in places like the City of London, in places like Kensington, in Westminster and Chelsea. You know, when you look around these sort of very British areas that are seen as the big sort of heart of the capital and the kind of places tourists and workers and residents walk past every single day.

3:43And it does feel many of them are actually been brought up by people where you don't actually know where they've got their money from. These, you know, investors who are linked to fraudulent scams all over the world. It's time for Rachel's interview with Joe Powell. This interview was recorded remotely and Joe was in his parliamentary office. So you may hear some road noise and the interview is actually cut off at the end by the sound of a bell, beckoning Joe back to the chambers for a vote. Hi, Joe. Thanks for joining us. Hi, Rachel. So, Joe, you started the Kensington Against Dirty Money campaign.

4:22Can you tell us more about that and what prompted you to found it? Well, we started it just after the full-scale invasion of Ukraine, so in February 2022. And the reason was because there was this huge kind of outpouring of solidarity for Ukraine and questions about what the UK could do to support in terms of military support and so on. But I felt like part of the picture was the UK's role in facilitating dirty money linked in particular to Vladimir Putin, but obviously to other autocrats and dictators around the world too. And we wanted to make the point that actually acting on dirty money in property in London, increasing sanctions, making sure that there was proper kind of transparency and accountability over where money was coming from that was often moving through the city, whether that's through kind of professional services that were being used, accountants, lawyers and so on.

5:21And I, for a long time, have felt like London needs to clean up his act. But this felt like a turning point where people were actually prepared to pay more attention to this issue. Yeah, you're right. That full scale invasion of Ukraine did really sort of shine a spotlight on the amount of money that was circulating in London. And there was also, you know, BBC programmes like McMafia and things like that. Why do you think that, that tackling money laundering and dirty money has not maybe been seen as a priority for previous governments? I often feel like it's put in a category of kind of too difficult to solve, too big, you know, billions and trillions of international flows involving jurisdictions that we don't have control over, although of course it also involves lots of British overseas territories and Crown dependencies that actually act as havens for some of this money.

6:20and also I think often there wasn't a strong enough connection being made about how it harms our communities so one of the things we really tried to do was show that in the area that I represent where we have acutely kind of unequal housing that one of the factors behind that was money that we didn't know where it was coming from if it was legal or illegal driving up property prices, changing incentives for developers, often empty properties that then meant that people were not using local businesses, and a feeling of kind of hollowing out of London. So I think that is something that people absolutely care about and people feel.

7:08So I think when we make the connection to those issues, you're then able to kind of work back up to how to solve the problem. I'd say the other big issue at the moment, of course, is this is a multilateral problem. There are certain things the UK government can do alone, and they should do those things, and I think are doing some of them. But obviously, you need to work with partners in the geopolitical context for doing that at the moment is obviously more complicated. And you've sort of touched on it there. This underground criminal activity is actually affecting Londoners day to day. One of your colleagues on the APPG for anti-corruption, Phil Brickle, said that, you know, professional financial services are one of Britain's greatest economic strengths, but economic crime costs around£300 billion a year.

7:57And that's similar to the UK's entire health and education budgets combined. So it is actually affecting people day today? Absolutely. And we want London to be a competitive destination for investment. But I've never bought the argument that not properly regulating and putting in place the transparency around preventing dirty money is somehow going to harm London's competitiveness. I think actually people come to London because they respect the rule of law, the traditions that we have, quality of those services they don't want to come to London if they think it's actually you know this other side of things and it doesn't drive sustainable growth it in fact creates bubbles and speculation and so on because actually what happens especially in housing is a lot of the properties become effectively safe deposit boxes and that doesn't actually lead to us building the types of new homes that we want people to live in.

8:59So I think at a number of levels, it does cost Londoners, particularly since the full-scale invasion of Ukraine that has, you know, people's awareness of it has risen. We'll take a quick break. Coming up, which tools can the government feasibly use to crack down on criminal money launderers? And how realistic are ambitions to reduce the scale of the problem?

9:28Welcome back. Let's head straight back to the interview. There have been quite a few high profile sanctionings recently, notably the Chinese billionaire and who's been touted as a criminal mastermind, Chen Xi, was sanctioned by the UK government late last year alongside his cousin. Are sanctions enough to deter criminals away from London? No, they're not. Sanctions are part of the toolbox that we have, but I've never thought that sanctions alone was the answer. They can be an effective deterrent, I think, and the threat of sanctions often can be as important as actually putting the sanction on itself.

10:08But it has to be in combination with other things. And we know that, for example, one of our big weak points is we still have, you know, the British Virgin Islands, where it is quite possible to set up a company not in your name. You could be a family member or a fake director or so on and hide money that then can be invested back into London and we wouldn't know who the ultimate person was. So that person could be a sanctioned individual, but because we're not able to follow the money, we don't know that it's them. And that's one of the big issues that we have. I think we need to clean up our own act in terms of the UK overseas territories and Crown dependencies because a lot of the world's dirty money still flows through them.

10:48we saw just before Christmas as well David Lammy made a speech about how they were going to counter this problem and the Prime Minister as well had some pretty harsh words at PMQs for Roman Abramovich and the fact he hasn't actually transferred that money from the sale of Chelsea Football Club to Ukraine yet what is the government doing about high-scale money laundering well Abramovich is an interesting case because he is a former constituent of mine and we have a property that I think you know I've shown lots of people that is currently frozen and of course he cut a deal with the previous government that he was able to sell Chelsea Football Club if the profits from the sale went to humanitarian need for the Ukraine war and it's become a sort of totemic example because he hasn't released that money.

11:43And so that begs the question about the effectiveness of our sanctions regime. And I think that's why the Prime Minister chose to very clearly say that he was issuing a license to Abramovich that gives him 90 days to release the money. Otherwise, the government would consider going to court. I also have very strongly made the point in Parliament, that I don't think it is appropriate for the shadow Attorney-General to simultaneously be providing legal advice to shadow ministers and the leader of the opposition and to Roman Abramovich in a different case in Jersey. It's about a potential conflict of interest.

12:21And I think if we're going to take this problem seriously, we shouldn't be kind of having business-as-usual type approaches where it was kind of okay for this mingling of politics and Russian money in the House of Lords and so on to be going on. And Ukrainians, of which many are in my constituency too, feel very strongly that that is not appropriate. And I do think the government's anti-corruption strategy that was released in December has some really good stuff in it, including Baroness Margaret Hodge leading a review of asset ownership in Britain that goes beyond property, but also thinks about things like football clubs, university endowments so on and so forth other ways that money could be laundered kind of at that intersection of politics money laundering and financial crime absolutely and you've you talked about Lord Wolfson there who's sort of acting for Abramovich there have been other cases as well, we saw the Reform UK former Welsh leader jailed after accepting bribes from Russia.

13:33There has been some cases with Labour as well, obviously Tulip Sadiq having to resign as a Treasury Minister after her links with the deposed regime in Bangladesh were brought up. Is it hard for the government to crack down on corruption, on this kind of corruption, when you have elected figures that have got such close links to some of these regimes or people that you're trying to crack down on? Well, I think they're very different cases, right? So in general, there is a question about kind of money in politics and kind of standards and integrity in UK politics. It is important that this Ethics and Integrity Commission, for example, has real teeth.

14:19I also think the elections bill coming up is quite interesting. For example, looking at crypto financing, which we think is a big risk now, because obviously, you know, crypto is much harder to track in terms of who's actually donated it. And our rules, I think in too many cases, are a little bit based on a different era of kind of people acting in good faith and kind of being proactively transparent. And unfortunately, we may not be in that era anymore. So I think there's a bunch of stuff in the elections bill that we need to see to toughen this area up. Yeah, you talked about crypto there. Reform, obviously doing very well in the polls at the moment.

14:57And Nigel Farage and their leadership has bigged up crypto as a currency. Is that worrying? Yeah, absolutely. I mean, I think you've got to move with the times. I'm not saying there couldn't be a system designed to allow it to work. But at the moment, I would have huge question marks over any donation made in crypto and the ability to track it and declare who the actual donation is from. And the reason why is because we know that previously reform were actively courting foreign donors, including Elon Musk, to donate to their party, something which is illegal. And there were talks about how he might evade that, for example, could you give a corporate donation from Tesla UK and so on and so forth.

15:47But none of that is in the spirit of the law. So I'm really clear we have to make sure those loopholes are shut down. And that's what the elections bill needs to do. And we've got this illicit finance summit coming up at Lancaster House over the summer. and there they'll seek to build an international coalition in a bid to sort of stem the tide of dirty money and strengthen Britain's national security. Will London though ever get clean from its dirty money reputation? I think it can and I think it has got better. You know so I you know relatively I think there is a lot more awareness around handling of potential dirty money.

16:27There is now the register of overseas entities, which basically means there is some data on foreign loan properties. We have a whole kind of strategy now about anti-money laundering supervision for the City of London. And again, the shorthand for that is that at the moment, a lot of professional services that are not overseen by the Financial Conduct Authority basically mark their own homework when it comes to money laundering. And that's going to change. That's a big deal. There's currently a transition period to the new system. But that, I think, will be great too. And what we want is smart regulation.

17:02I think one of the issues sometimes with anti-money laundering checks is they can be not that well targeted. So you end up with people who are very low risk having to go through lots of hoops and paper forms and so on to kind of do regular business transactions. and then people that are really high risk are getting around it because they can get the best advice to do that. It's not about creating a regulatory burden. It's about effective and smart targeting regulation. And I think that's what we need for London. Great. Thanks, Rachel. No, it's all right. Thank you so much for doing this. It's all right.

17:38The bell is literally gone. Great.

17:44And that's The Standard. For all the latest news, head to standard.co.uk. If you'd like to get in touch, email us at podcasts at standard.co.uk. We'll be back here on Monday morning. See you then.