The UK has a notorious reputation as a safe haven for the world’s dirty money and for the people who are looking to hide, clean and spend it. A confluence of factors contributes to this: weak supervision of money laundering in key sectors, the abuse of UK companies in corrupt schemes and challenges to the seizure of corrupt assets being just a few. On top of this, UK professionals have been rolling out the red carpet for the world’s corrupt and criminal individuals for decades.

 

Last year, Transparency International UK analysed over 400 corruption cases spanning 116 countries, amounting to economic damage in excess of £325 billion.[1] With the data available, we identified 582 firms and individuals offering services in the UK – often unwittingly – to corrupt individuals. This included UK professionals from a wide range of sectors, including finance, law and accountancy. 81 law firms and 62 accountancy firms, including all of the big four, showed up in our data.

 

Our analysis also highlighted how unregulated sectors such as universities and charities – which are not subject to anti-money laundering rules – have become targets for those looking to clean dirty money. For example, we identified 177 schools and other education institutions that have offered services to high-risk individuals.

 

When speaking with compliance professionals, we discourage them from taking the fact that their client was photographed with senior politicians last month, is a noted donor to a prestigious UK university or is involved in philanthropic activities as a reason to dismiss doing enhanced due diligence checks. These are specific tactics used by corrupt and criminal individuals to launder their reputations – in part because they want to have influence in the UK and they want a certain lifestyle – but also for the precise reason that professionals are less likely to ask questions if clients are seen to move in prestigious circles.

 

Our research adds to a growing body of evidence that points to the UK’s complicity in global corruption.

 

The scale of dirty money in the UK is almost beyond imagination, with billions of pounds in suspect funds already invested into our property market and estimates of around £100 billion in illicit wealth impacting the UK each year. The law enforcement response to this is vital for denying criminals of their ill-gotten gains and removing impunity for the corrupt who stash their wealth here. However, due to limited resources and the complexity of money laundering schemes used, the police simply cannot be expected to trace and recover every penny of dirty money.

 

An ‘enforcement gap’ risks the UK lacking a credible deterrent against the corrupt continuing to hide their money here. This is what makes the role of journalists uncovering corrupt funds entering the UK so vital. Investigations of this kind require expertise to trace money across borders, with an understanding of the UK financial system as well as corruption in origin jurisdictions. Journalists have shown themselves to be adept at following these money trails, with exposés like the Organised Crime and Corruption Reporting Project’s (OCCRP) series of laundromat investigations highlighting billions of pounds in suspicious funds flowing through the UK from former Soviet states.[2]

 

In addition to informing the public about the UK’s dirty money problem, these investigations are routinely used by law enforcement and regulators to inform their own inquiries. The OCCRP’s Azerbaijani Laundromat investigation was extensively referenced in the National Crime Agency’s (NCA) evidence for their first use of unexplained wealth orders.[3]

 

Journalists’ investigations into corruption and money laundering also play a key role in the UK’s defences against illicit wealth. The private sector – widely seen as the first line of defence against money laundering – are often reliant on the presence of ‘adverse media articles’ when carrying out due diligence on clients. If a media investigation raises too many red flags about a prospective or current client, private sector firms may choose not to take on that individual, or identify further suspicious activity, which is then reported to the police.

 

The financial benefits provided by journalists in the fight against corruption and money laundering are incalculable. What is certain however is that their work is crucial in giving the corrupt no place to hide, no one to help them and no impunity.

 

Transparency International UK works with journalists from across the UK and around the world, helping to uncover dirty money here as well as working together to push for stronger measures to tackle corruption.

 

One of the most effective ways Transparency International UK collaborates with journalists is working with those who have identified corruption overseas and are looking to trace the funds to the UK. After more than five years researching the weaknesses in the UK’s anti-money laundering system, we are well placed to help track down how funds have entered the UK and where they may be hidden.

 

As a result of our investigatory work, we face similar risks to journalists working to uncover corruption and money laundering, including receiving letters from those we have highlighted requesting we remove content naming them. Transparency International’s chapters around the world face altogether more severe threats, working in dangerous environments to expose corruption of often repressive regimes.

 

Journalists’ investigations have been vital in underlining the systemic problems which make the UK a safe haven for corrupt wealth. Stories like the Panama Papers reaffirmed the need for transparency over who owns offshore companies which hold UK property. Just a month after this investigation, the UK Government’s commitment to this measure was reaffirmed at the 2016 London Anti-Corruption Summit. Further investigations highlighting the use of secretive companies to hide suspicious wealth in UK property help hold Government’s feet to the fire on this commitment.

 

Similarly, it is unlikely to be a coincidence that two days before the FinCen files raised the ongoing issue of UK shell companies’ use in financial crime, the UK Government announced the next stage in an overhaul of the company formation system.[4]

 

The recent government commitments to empower Companies House to verify the data it receives and support investigations into suspicious activity come in the wake of years of work by Transparency International UK and others highlighting the abuse of UK companies for corruption and high-end money laundering. These changes are crucial to further the identification of corrupt assets in the UK.

 

Improving the quality and availability of information around who owns companies and property in the UK would be of direct benefit to journalists and Transparency International UK’s efforts to uncover corruption and returning stolen funds to where they belong.

 

Greater accuracy relating to UK company information will help identify where those with suspect funds are using British companies to manage their assets. Journalists from overseas will also be able to better understand who controls UK companies carrying out economic activity in their countries, which has been a major problem for some jurisdictions including Uzbekistan.[5]

 

A register showing the true owners of overseas companies owning UK property will also be a major benefit to journalists and NGOs alike searching for stolen wealth hidden in the UK property market. This register, and the subsequent journalistic investigations it will enable, will also help UK law enforcement identify targets for asset recovery efforts.

 

However, at present these reforms are nothing more than commitments waiting in the wings. There is some way to go to convert the promises into practice. TI-UK is urging the Government to legislate on pledged reforms at the earliest opportunity, as well as ensure that they are adequately resourced once in place. New legislation will be ineffective if there are limited funds available to enforce it. Only time will tell whether the Government has the political will to ensure that the UK fosters an environment conducive to uncovering corruption, rather than hiding it.

 

Ben Cowdock is the Investigations Lead in the UK Anti-Corruption Programme at Transparency International UK (TI-UK). He became a research officer for TI-UK in January 2016. He is responsible for leading research into corrupt money entering the UK. Ben joined TI-UK as an intern in September 2015, helping support the work of the UK advocacy and research team. He holds an MA in Governance and Corruption from the University of Sussex.

 

Rachel Davies Teka is the Head of Advocacy at TI-UK and focusses on the UK-related work on money laundering, political corruption, and open governance. Rachel is Co-Chair of the Bond Anti-Corruption Group, a collection of like-minded British NGOS who work on the issues of corruption, and sits on the steering group for the UK Open Governance Partnership Civil Society Network.

 

[1] Transparency International UK, At Your Service: Investigating how UK businesses and institutions help corrupt individuals and regimes launder their money and reputations, October 2019, https://www.transparency.org.uk/publications/at-your-service

[2]  OCCRP, The Russian Laundromat, August 2014, https://www.occrp.org/en/laundromat/; OCCRP, The Azerbaijani Laundromat, September 2017, https://www.occrp.org/en/azerbaijanilaundromat/; OCCRP, The Troika Laundromat, March 2019, https://www.occrp.org/en/troikalaundromat/

[3] Edward Robinson, Gavin Finch and Stefania Spezzati, Crooked Banker Tapped Professionals to Manage Web of Dirty Money, Bloomberg, March 2020, https://www.bloomberg.com/news/features/2020-03-05/crooked-banker-tapped-professionals-to-manage-web-of-dirty-money#:~:text=Election%20Results%20Watch-,Crooked%20Banker%20Tapped%20Professionals%20to%20Manage%20Web%20of%20Dirty%20Money,Smerelda%20is%20a%20billionaires’%20paradise

[4] Justin Parkinson, FinCEN Files: One of the world’s ‘dodgiest addresses’ is in leafy Hertfordshire, BBC, September 2020, https://www.bbc.co.uk/news/uk-54204053; Department for Business, Energy and Industrial Strategy, Corporate transparency and register reform, Government, September 2020, https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform

[5] Kristian Lasslett, How a Central Asian business empire dines out on British secrecy, openDemocracy, June 2019, https://www.opendemocracy.net/en/odr/how-central-asian-business-empire-dines-out-british-secrecy/