Legislation to crack down on dirty money will not stop oligarchs in Russia or elsewhere from using UK tax havens to hide their money, experts warn.
Activists and MPs say ‘significant loopholes’ remain in the government’s economic crime bill, which is expected to become law in days, as the government tries to root out illicit wealth linked to Vladimir Putin’s regime .
Anti-corruption experts say the oligarchs will continue to be able to use shell companies in Britain’s Crown Dependencies and Overseas Territories (CDOTs) – known to be centers of financial secrecy – to dodge UK authorities.
Anti-corruption organization Transparency International is calling on the government to strike emergency deals with these islands to gain full access to their records and prevent the sale of assets bought with ‘dirty money from Russia and elsewhere’ “.
Rachel Davies, Advocacy Manager for Transparency International, said The Independent“The government can’t freeze assets if they don’t know where they are.
“The oligarchs use front companies registered in these jurisdictions to hide their wealth in London.
“We need an agreement, even on a temporary basis, that law enforcement will have open and searchable access to corporate data in these offshore financial centers.”
Transparency International has linked £830m worth of property in the UK’s CDOT Islands people close to Putin’s government, or Russians accused of corruption.
Although the government has imposed sanctions on 20 Putin-linked oligarchs – as well as 386 members of Russia’s parliament – Foreign Minister Liz Truss said she has a long “hit list” of wealthy Russians in the part of a “continuing program” of sanctions.
The Economic Crimes Bill aims to impose greater transparency on the British real estate of the oligarchs through a new register requiring foreign companies to reveal the name of the “beneficial owner” of each property.
However, the owners have been given a six-month implementation period, raising fears that the oligarchs will have plenty of time to restructure their assets – or sell them – before they can be frozen under the law. new government sanctions.
Activists also fear that oligarchs have at least 18 months to use tax havens.
The UK Overseas Territories and Crown Dependencies of Jersey, Guernsey and the Isle of Man have agreed to set up a public register of business owners – but not before the end of 2023.
The Tax Justice Network is appalled that legislation due to pass this week does nothing to address arrangements in offshore jurisdictions.
“The bill is almost worse than nothing,” said Alex Cobham, the group’s chief executive. “It still allows [oligarchs] hide behind opaque corporate structures. And I would expect a lot of it to be in the Overseas Territories and Crown Dependencies. All it will do is formalize the UK’s continued acceptance of dirty money.
Tory MP Andrew Mitchell and Labor MP Dame Margaret Hodge – who campaigned against the finance secretary in tax havens – want the government to demand that those territories provide full access to their company records this year.
Lady Margaret said The Independent“Our tax havens are used as vehicles to hide money, as vehicles for secrecy. Without a doubt, the oligarchs can use these jurisdictions as tax havens until 2023.”
The Labor MP said the government will have to come up with new legislation to strengthen government law enforcement agencies and crack down on any ‘enablers’ helping the oligarchs protect their money.
“You also have to tackle the enablers – the accountants, estate agents and lawyers who facilitate this,” Dame Margaret said. “You have to hold them accountable properly. You have to create criminal offenses. It’s the only way to stop it.
Bill Browder, the anti-corruption campaigner who fought for Britain’s Magnitsky Sanctions Act, also wants the government to come up with more legislation. He said the oligarchs had been helped to make ownership of assets “almost impossible to prove” – both in the UK and in offshore CDOTs.
He said: “In order to access the wealth of the oligarchs, the UK needs to introduce legislation that would force the law firms and accountants who helped the oligarchs set up these schemes to come forward and share informations. Without it, we will fly blind.
MPs and campaigners fear the Economic Crimes Bill – which is due to be debated in the Lords on Monday and is expected to be passed on Tuesday – contains other glaring shortcomings.
Susan Hawley, executive director of Spotlight on Corruption, points to a “no beneficial owner” loophole, which could see some companies avoid naming someone on the new ownership register by hiding behind trusts.
She and others also worry that kleptocrats will use the stock ownership rules set out in the bill to avoid detection.
Someone has to own 25% of a property’s shares to be designated as the person of ‘significant control’ – raising fears that the oligarchs could simply offload some of the shares through their overseas entity.
“There are significant flaws in the bill that are truly concerning,” Ms Hawley said. “It’s going to be really difficult to verify entities overseas. There are so many ways for the wealthy to hide behind opaque corporate structures.
But with peers unwilling to delay the current bill, campaigners have admitted they may have to wait months for more dirty money legislation.
Home Secretary Priti Patel said earlier this week that there would be a second Economic Crimes Bill at the next session of Parliament in June or July as ministers ‘cannot get all the measurements for now”.
A government spokesman said the Economic Crimes Bill was part of a ‘wider package of legislative proposals’ to tackle illicit finance in the coming months, including reform of Companies House .
Asked about UK offshore jurisdictions, the spokesperson said: “We continue to lead the way in our fight against corruption, working closely with the private sector, international partners and Crown dependencies. and overseas territories to ensure there is no safe haven for criminals. hide their dirty money.
“UK law enforcement have good mechanisms for sharing information with Crown dependencies and overseas territories, including beneficial ownership information.”