Free flow of dirty money in the United Kingdom

United Kingdom
United Kingdom

Policymakers in Britain would ask, why do the world’s criminals come to London to launder their dirty money? Friedrich Lindenberg of the Organized Crime and Corruption Reporting Project (OCCRP) has the answer. He said, “It’s a great place for people to settle. You’ve got people who want stable investments in real estate, and want to bring their families and children to a more stable regime. You’ve messed up Russia, right? So where do you want your kids to grow up? Not Russia.”

Analysts and academics argue too much of the money flowing around the UK is the result of crime, corruption and tax dodging. The House of Commons Foreign Affairs Committee has gone further still, calling on the government to make it a “major UK foreign policy priority” to stop the use of London as a base for Russian corruption.

The current provisions for fraud monitoring in the UK financial system are ineffectual, says Tom Keatinge, director of the Centre for Financial Crime & Security Studies at RUSI, an international security think tank. There is the Joint Money Laundering Intelligence Task Force, a partnership between government and private industry, including international banks such as Citigroup and HSBC (who were approached for this story, but declined to provide anyone for interview or offer a comment). However, this work is a best a minor move against a massive problem.

Many transactions across Europe are monitored, and all banking systems across the world have methods of reporting suspicious activities. Every transaction above €10,000 should be checked for nefarious activity, and reported to the authorities if it smacks of criminal activity. In the UK, banks every year produce huge numbers of these suspicious activity reports (SARs), which then go to the National Crime Agency (NCA). “But the question is, what happens with the SARs?” says Friedrich Lindenberg. “The answer most of the time is: not very much.”

In all, 634,113 SARs were received by the NCA in the 18 months to March 2017, nearly 18,000 of which were defence against money laundering (DAML) SARs. In all, £56 million of cash was blocked from being transferred to criminals as a result – only a small fraction of the “trillions” of pounds of supposedly illicit money washing through London. “There’s a lot of data, but it may well be total garbage,” says Keatinge, who lambasts the fact that data privacy means banks that operate around the world can only give a small fraction of what they know to UK regulators.

Anti-money laundering is big business: some banks employ thousands of people to monitor accounts looking for potential fraud. In total, British financial institutions are estimated to spend £5 billion every year fighting financial crime; that’s more than what the government spends to run its prisons.

In 2017, Rob Gruppetta, the head of the Financial Conduct Authority’s financial crime department, warned that “any bank hoping for a black box in the corner that will sniff out the launderers will be disappointed”. It’s not for want of trying. HSBC has integrated AI developed by British company Quantexa into its anti-fraud systems. The software will cross-check HSBC customers’ transactions against publicly available data to spot and stop any fraudulent activity. (HSBC did not respond to a request for comment for this story.)

The demand for a silver bullet to solve the money-laundering problem has resulted in a huge numbers of startups entering the so-called “regtech” space. More than 700 people visited the RegTech Expo in London on 20 November, with plenty of startups trying to sell their wares to banks. “I struggle to say whether any of them are doing anything truly groundbreaking or innovative,” says Lindenberg. “I think most of them do fancy string matching.”

Last year, Robert Barrington, the Executive Director of Transparency International UK in an article said London has become the money laundering capital. Due to failure or intentional ignorance of the issue of huge inflow of black money and dirty money into Britain, London truly is now becoming the epicenter of black money. While we know about Jeremy Corbyn’s or many of his party comrade’s direct affiliation with anti-Semitic forces, very surprisingly, dodging the law enforcing and security agencies of the country, the United Kingdom is currently a safe haven for corrupt individuals looking launder the proceeds of their illicit wealth, enjoy a luxury lifestyle and cleanse their reputations. Surprisingly the UK economy sees trillions of pounds flow through it every single year. Inevitably most of this money is corrupt wealth – stolen public funds and bribes – which are given a seal of approval by passing through the UK.

According to media reports, the UK’s professional services industry plays a central role, unwitting and complicit, in this money laundering process. They help make corrupt wealth appear clean before it is invested into the UK or elsewhere.

Before corrupt wealth is laundered through the UK it is often moved through complex corporate structures based in secrecy jurisdictions. This includes the UK’s Overseas Territories and Crown Dependencies, such as the British Virgin Islands and Jersey.

There are no public records of companies based in secrecy jurisdictions, which helps conceal the origin of their funds and information about their owners.

Once illicit wealth has been cleansed, the UK offers a range of opportunities for corrupt individuals to enjoy it: high-end property, sports clubs, legitimate businesses, residency visas, expensive cars, yachts, jewellery and art can all be purchased with impunity. At the moment the UK is recovering just a fraction of the corrupt wealth moving through its economy.

With the help of defamation lawyers and public relations experts corrupt individuals can start their life afresh and hide their past crimes. With the help of the UK’s exclusive educational institutions, they can embed their children in society’s élite and mix in the right social groups, gaining valuable access and influence.

Facilitating global corruption comes at a cost, both to the country where it occurs and to the UK.

There already is a call by the Transparency International (TI) for detecting, freezing, and seizing corrupt funds that moved through the UK economy. Britain can apply its existing laws for these purposes.

South Asians entering Britain with dirty money:

For past many years, several individuals from South Asian nations have entered the United Kingdom with millions of laundered money. Recently, National Crime Agency was surprised knowing about the case of a Bangladeshi national, who had laundered huge amount of cash from Bangladesh and invested in the United Kingdom in properties and other businesses. He also has invested huge amount of money in the United Arab Emirates, Malaysia and some other nations.

According to media reports, Md. Shahid Uddin Khan (Army No: BA002428, Course: 8-BMA, Commission Date: 10-06-1983), who along with his wife Farjana Anjum and daughters had smuggled out millions of dollars from Bangladesh and invested in various business ventures in United Arab Emirates and United Kingdom.

Shahid Uddin Khan, his wife Farjana Anjum and daughters Shehtaz M Khan, Pinas M Khan and Parisa Pinaz Khan have obtained immigrant status in Britain under Visa Tier 1, Vide VAF Number 511702. As per the existing immigration rules of the United Kingdom, anyone willing to obtain immigration under the investor’s category are required to invest at least One Million Pound in any business venture.

Policymakers in Britain may boast of being one of the law-abiding nations in the world, the reality is just the contrary. Lethargy of the British authorities in taking action against those foreigners who had brought dirty money into the country clearly proves – United Kingdom is the current save have of dirty money and there even are specific allegations against some of these money launderers of using the money towards militancy and terrorism.

Damsana Ranadhiran is a retired intelligence official.

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