Londongrad blockade. Britain questions transparency of Russian oligarchs’ money
In March 2018, the climate for wealthy Russians living in Britain has drastically worsened. After the Salisbury incident involving poisoning of ex-spy Sergei Skripal and enactment of the Criminal Finances Act, Foggy Albion ceased to be such a lucrative place for oligarchs and political emigrants as it used to be. The CrimeRussia was figuring out what do the Russian natives fear most of all in the UK – the so-called ‘hand of Moscow’ or economic sanctions against oligarchs and officials?
Being always uneasy, the Russian–British relations have, in fact, collapsed in spring 2018 causing a severe diplomatic crisis with unpredictable consequences.
The passions run high at all levels – the Russian and British Ministries of Foreign Affairs exchange seething memorandums and diplomatic actions (closures of consulates and commercial missions and expulsions of diplomats), while ordinary citizens of the two countries learning about the ongoing events from the media fall in each other’s estimation. British tabloids are intimidating football fans with atrocities expected during the 2018 FIFA World Cup in Russia. According to Levada Center, 51% of Russians think very poorly of the Great Britain, while only 9% consider the allegations brought by London against Moscow justified. In a month, the economic aspect of this conflict has come to the forefront – the official London became quite interested in the transparency of Russian oligarchs’ billions. Amid these events, the espionage scandal that has caused the spring escalation in the British–Russian relations was pushed into the background.
Slide from a presentation held in the British embassy for personnel of foreign diplomatic missions
Sergei Skripal, former colonel of the General Staff Main Intelligence Directorate, was sentenced in Russia to 13 years behind bars for espionage in 2006. In 2010, he was pardoned and extradited to the UK in the framework of the spy exchange program. On March 4, 2018, Sergei Skripal and his daughter Yulia were found unconscious on an bench in a Salisbury park. The British authorities, claiming that they were poisoned by A324 nerve agent Novichok developed in the USSR, have officially charged the Russian secret services with attempted murder and violation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction. Russia vehemently denies any involvement with the poisoning of Skripal and his daughter. The incident has caused a diplomatic crisis. The UK has expelled 23 Russian diplomats; Russia responded with a mirror image. 16 EU states, out of the 28, US, Canada, some other countries, UN, and NATO have upheld the UK stance and also expelled officials of the Russian Ministry of Foreign Affairs. On March 30, 2018, ambassadors of these countries received official notes of protest in the Russian Ministry of Foreign Affairs informing about forthcoming retaliation measures. However, on April 3, Gary Aitkenhead, Chief Executive of the Porton Down Chemical Weapons Research Center, said that, despite the stance of the British authorities, it is impossible to prove a "Russian connection" in the poisoning of Skripal.
The poisoning of Sergei and Yulia Skripal was not the sole incident that occurred in the Great Britain in March. On March 12, 2018, Nikolai Glushkov, a close associate of Boris Berezovsky and ex-Deputy General Director of Aeroflot, died under strange circumstances. Later Scotland Yard has found out that Glushkov died of suffocation and ruled his death a murder – although the Metropolitan Police haven’t linked it with the poisoning of Sergei Skripal.
Sergei and Yulia Skripal
However, no expert opinion was required to link the attempted murder of a double agent convicted in Russia for espionage and high treason with the death of a former business partner of Berezovsky sentenced in absentia in Moscow to 8 years behind bars for embezzlement of $123 million from Aeroflot. The British media used the murder of Glushkov as a missing link in the series of strange deaths in the period of 2006–2012: ex-colonel of the Federal Security Service (FSB) of the Russian Federation Aleksander Litvinenko, businessman Aleksander Perepelichny, and Badri Patarkatsishvili, former partner of above-mentioned Berezovsky.
Nikolai Glushkov, Boris Berezovsky, and Badri Patarkatsishvili
In addition, after the poisoning of Skripal, the Metropolitan Police decided to exhume the bodies of Patarkatsishvili and Perepelichny who, according to the investigation, had suddenly died of heart seizure.
Albion exhausts fog
The weird incidents and subsequent diplomatic conflict between the Great Britain and Russia have disturbed the Russians residing, either permanently or temporarily, in respectable and aristocratic London or other British cities. According to Zima Russian-language magazine published in London, 766 thousand people from Russia and other former Soviet countries are living or based for at least six months in the UK. According to Zima’s editor, Katya Nikitina, “a tiny, tiny number are extremely rich”.
Policemen in chemical protection suits at the place of discovery of Sergei and Yulia Skripal
As The CrimeRussia wrote earlier, a few days after the murder of Glushkov, the British police became anxious about the safety of political emigrants and fugitive businessmen having problem with the Russian justice – although earlier the danger impending over them was considered minimum. Police protection was reportedly provided to a number of Russian citizens in London; the sources had reported police cars parked near their residences and meetings with Scotland Yard officers inquiring about any threats or suspicious proposals.
The authorities intend to demolish the home of Sergei Skripal in Salisbury, as well as two restaurants visited by him and his daughter on the day of poisoning
“Overall, the situation in Britain is pretty nervous today for wealthy Russians. The country can hardly be considered a comfortable place for Russian oligarchs anymore,” – notes The CrimeRussia source, a business emigrant residing in London for the last few years. According to him, the security upgrade applies mostly to Russians who may testify against the Russian authorities and Kremlin.
Evening Standard wrote, citing the concierge service of Rokstone Estate Agents affordable only for millionaires, that most susceptible members of the Russian community in London started panicking. On the next day after the announcement that Glushkov was murdered, the number of requests for 24-hour-guarding, medical supervision, food monitoring, and personnel security screening from Russian clients has drastically increased. One of the customers has even ordered an air filtration system a la ‘nuclear bunker’ for his apartment in Knightsbridge.
Valery Morozov, former co-owner of Moskonversprom company currently residing in Surrey, has been granted state protection by the British authorities after stating that he receives e-mails with murder threats.
Sergei Kapchuk, ex-Deputy of the Sverdlovsk Legislative Assembly, has absconded from Russia after being charged with fraud with state assets. He has also got state protection – but still left the UK after the death of Glushkov.
Kapchuk, guarded by British policemen, gives an interview by Skype
In 2014, London has declined a request to extradite him submitted by the Russian authorities – but now Kapchuk believes that the British secret services are plotting a provocation against him. He said that Sky News journalists had attempted to provoke him to make an anti-Russian comment claiming that, according to their sources, he is “the next victim”. Upon arriving to Europe, Kapchuk has found out that his bank cards are not working; he was told in the bank that in order to restore their operation, he must return to the UK. Kapchuk believes that somebody it trying to put pressure on him but does not intend to return because “life is more valuable than any money”.
On the contrary, Yevgeny Chichvarkin, former owner of Euroset mobile phone retail chain living in the UK for almost a decade, expects a blow from the other side. According to The Guardian, Chichvarkin was shocked with the death of Glushkov he was familiar with and retained 24-hour-guarding for all his family members.
Neighbors in Chelsea started avoiding Yevgeny Chichvarkin after the poisoning of Skripal and death of Glushkov
The concerns of the businessman are linked with his active anti-Kremlin stance. Chichvarkin combines running a Mayfair wine business, Hedonism, with anti-Putin campaigns for the Russian expatriate community. On March 18, 2018, he organized a protest outside the Russian embassy in central London, where Russians were queuing to vote in the Presidential election; in addition, Chichvarkin provides financing to the Anti-corruption Foundation of Alexey Navalny. According to the businessman, there are at least 300 FSB agents in the UK and he had seen them following him. He told The Guardian that there were six separate incidents where his assistants’ laptops have been searched or stolen over the past few years.
The most recent incident occurred this spring – a laptop used by Chichvarkin to transfer £100 thousand to Navalny’s foundation was stolen from his associate. The businessman says that it is much safer for him to be in London than in Moscow, but he can’t be 100% relaxed.
However, for the majority of Russian natives, it is premature to pack the bags yet. According to sociological poll held by Zima magazine on March 24, the diplomatic conflict does not really affect the everyday life.
When asked: “Has the attitude towards Russians worsened in Britain after the diplomatic scandal? Do the people treat you worse?”, only 10% of the 360 respondents answered: “Yes. People ask me about Putin and hint that I should leave following the diplomats”. 61.5% of the respondents didn’t notice anything special except for more frequent talks about politics. 9.5% of the people believe that “the personal attitude towards them hasn’t changed, but the business may be affected”. Almost 20% of the Russian natives living in Britain believe that “everything is fine in the kingdom”. Concurrently, the magazine notes that on the next day after the fire in Kemerovo, very few people have brought flowers to the Russian embassy following the old tradition.
The Russian embassy in London on March 26, 2018
However, with the current deterioration of the political climate, the dangers posed by economic sanctions against oligarchs and their assets in the UK are much more real than the semi-mythical ‘Moscow hand of vengeance’ – because the legislative basis for this is already in place.
On April 27, 2017, the Queen of the United Kingdom has signed the Criminal Finances Act 2017 approved by the Parliament and aimed at combating money laundering operations committed by the organized crime and corrupt officials. The act provides a number of British organizations with wide powers to combat finances of criminal origin. On January 31, 2018, one of its key provisions, Unexplained Wealth Orders (UWO), enabling to freeze assets worth over £50 thousand and launch an inquest if the owner can not explain the origin of these assets has come into effect. After an UWO submission, Her Majesty's Revenue and Customs (HMRC), National Crime Agency (NCA), Serious Fraud Office (SFO), or Financial Services Authority (FSA) file a motion for an Interim Freezing Order with the Supreme Court of the United Kingdom that delivers the relevant verdict. The innovation applies to “politically significant persons”, including Deputies, former and current officials, former and current high-ranked heads of state enterprises, and businessmen having ties with circles of power. The act also applies to their assistants and relatives.
The CrimeRussia source in London believes that the UK is preparing a case to arrest and seize British assets of wealthy Russians whose origin can not be explained.
A popular chess tactics involving the sacrifice of a pawn or two in order to get strategic advantages is very popular in the politics as well.
It was not beneficial for Russia to kill an exposed, convicted, and finally pardoned former spy using a public and socially dangerous way in anticipation of the Presidential elections – this is how the Russian officials are trying to rationally explain that their country has nothing to do with the poisoning of Skripal and his daughter. But, according to a number of Russian political experts, the ‘Skripal case’ became a good excuse for practical application of the new Criminal Finances Act.
Boris Johnson, Secretary of State for Foreign and Commonwealth Affairs, and Theresa May, Prime Minister of the United Kingdom
This opinion is based on certain grounds. The CrimeRussia source notes that the American authorities are involved into the development of amendments to the British legislation. The imposition of sanctions against 26 Russian oligarchs and officials, including Oleg Deripaska, Viktor Vekselberg, Suleyman Kerimov, Igor Rotenberg, Kirill Shamalov, Vladimir Bogdanov, and Andrei Skoch, by the US in early April, confirms the close collaboration between the British and American authorities in this matter. According to The New York Times, on April 10, 2018, Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence and Acting United States Deputy Secretary of the Treasury, had a meeting with her British colleagues in London and directly warned them against dealing with persons put on the Washington sanctions list because this would be interpreted as blocking of the sanction regime.
According to Ben Wallace, Minister of State for Security and Economic Crime, the Unexplained Wealth Orders provision of the Criminal Finances Act 2017 has already been practically tested. On February 28, the National Crime Agency (NCA) has announced the receipt of two Unexplained Wealth Orders obliging the owner of luxury British real estate worth in total £22 million to disclose the source of funds used for its acquisition. Concurrently the assets have been seized until the end of the investigation. The owner’s name was not disclosed but, according to Financial Times, it was a politician from Central Asia.
It is well-known that there are many such people among owners of elite real estate in London. For instance, Leyla Aliyeva, the first daughter of Ilham Aliyev, President of Azerbaijan, lives in a luxury penthouse in Mayfair, one of the most expensive and prestigious districts in London. In early April, Quartz publication has carried out an inquest and found out that that legendary home at 221b Baker Street, where, according to the books by Arthur Conan Doyle, Sherlock Holmes and Dr. Watson used to live and work, likely belongs to relatives of Nursultan Nazarbaev, President of Kazakhstan. Not only this home, but a large section of Baker Street – street numbers from 215 to 237 – are linked with President’s daughter Dariga Nazarbaeva and her older son Nurali Aliev.
221b Baker Street
According to the National Crime Agency, up to £100 billion of ‘dirty money’ may be laundered in the UK on the annual basis. However, in their struggle against the money laundering and assets purchased on ‘non-transparent’ funds, the British authorities make no secret of the fact that their primary target are Russian oligarchs. In fact, the authorities had been waiting for this for a long time.
Since the late 1990s, the UK became the favorite ‘reserve airfield’ for Russian oligarchs and businessmen – both big and medium. A relatively cost-effective scheme of real estate acquisition by offshore companies registered in Britain and bypassing the so-called ‘stamp duty’ quickly became very popular because it enabled the owners to stay under the radar. As a result, very few oligarchs directly own their real properties in England.
Up to a certain time, the UK had encouraged the investments into its economy. The issuance procedure for Tier 1 Investor visas used until 2015 had contributed to the legalization of major capital owners and allowed the investors injecting at least £2 million into the British economy to obtain a residential permit and later citizenship under simplified procedure. In total, over 700 such visas were issued to Russian natives. Currently the Foreign Office is going to review all the documents pertaining to those because, according to Home Secretary Amber Rudd, not all such visas were issued legitimately.
A few years ago, the situation started changing – Russian moneybags have significantly raised the real estate prices and started annoying most Britons amid the glaring social inequality. In 2013, Meet the Russians talk show has come out on TV grotesquely presenting to the British public Russian socialites and oligarchs wallowing in luxury.
Wives of billionaires participating in the show had boasted of their fur coats worth dozens of thousands of pounds, bathing in champagne, and other dolce vita attributes.
In 2015, Deutsche Bank experts have analyzed the data of the Russian and British Central Banks and concluded that some $129 billion were transferred from Russia to the UK in 9 years. Now London has to figure out what Russian funds were brought to the kingdom legitimately and what were smuggled through shady schemes.
The development of a bill targeting illegal finances has begun in the UK in 2016 – after the premiere broadcast of a high-profile TV-investigation entitled “Londongrad. From Russia with Cash” based on a non-fiction book by British journalists Mark Hollingsworth and Stewart Lansley published back in 2009. After the publication of Panama Papers, it became known that rich people from all over the world purchase British real estate via offshore companies in order to inter alia evade taxes, and this bill became especially actual.
British people believe TV series. By the way, Britons became aware of Novichok nerve agent from a TV show – Strike Back American-British drama series broadcast since 2010. This happened approximately a year before the poisoning of Sergei Skripal – at that time, this word meant nothing for the majority of Russians.
Screenshot from Strike Back drama series, Season 6
On January 1, 2018, McMafia drama miniseries starring Russian actors Aleksei Serbryakov and Maria Shukshina has come out on TV in Britain. The film about dirty affairs of Russian oligarchs became pretty popular. Ben Wallace, Minister of State for Security and Economic Crime, said in public that it shows “plenty of truth”; Wallace does make a secret of the fact that McMafia is used to attract the public attention to the problem of ‘dirty money’ coming from abroad.
Transparency International experts estimate the total value of suspicious real properties currently belonging to Russian oligarchs in the UK at £1.1 billion. Should London decide that the legitimacy of their acquisition can not be proven, a number of Russian natives may lose their castles and estates. According to Knight Frank Global Real Estate Consultants, 60% of properties purchased by Russians are residences worth £1–1.5 million.
Witanhurst, the second after Buckingham Palace largest mansion in London, belongs to ex-Senator Andrei Guryev
The experts believe though that real properties belonging to people posing special interest for the British authorities are much more expensive. Mikhail Abyzov, Minister of the Open Government, whose children have in the UK a residential home with a living space of 211 square meters; Vladimir Blotsky, Deputy of the State Duma from the Communist Party of the Russian Federation, owning a home with a living space of 312 square meters and a lot 1050 square meters in size; and Igor Shuvalov, First Deputy Prime Minister of the Russian Federation, having two mansions worth in total £15 million and several bank accounts with deposits totaling £45 million are likely among those who would have to explain soon the origin of funds used to acquire their mansions and castles in England.
Estate of Vladimir Lisin in Scotland
Elena Baturina, spouse of Yuri Luzhkov, owns a mansion in London worth over £50 million; Andrei Melnichenko, Chairman of the Boards of Directors of EuroChem, Siberian Coal Energy Company (SUEK), and SGK, has an estate in Ascot worth £25 million; Vladimir Lisin, Chairman of the Board of Directors of Novolipetsk Steel (NLMK), owns a castle in Scotland surrounded by private forest 285 ha in size worth £6.8 million; while Timur Artemiev, a partner of Yevgeny Chichvarkin in Euroset, has acquired an estate built by English poet Alfred Tennyson for himself in the beginning of the 20th century worth some £30 million.
Aldworth House estate belonging to Timur Artemiev
Roman Abramovich owns a mansion on Kensington Palace Gardens with a living space of 9 thousand square meters built in the 18th century and worth £115 million. According to some information, Ziyavudin and Magomed Magomedov, co-owners of Summa Group recently arrested on suspicion of creating an organized criminal group, have luxury real estate in London as well (a mansion near the London Zoo and an elite apartment in One Hyde Park residential complex).
One Hyde Park features the most expensive apartments in London
The list of people owning expensive properties in London includes businessman Vladislav Doronin; Grigory Guselnikov, owner of Vyatka Bank; Alfa Group shareholder German Khan; billionaire Alisher Usmanov; ex-banker and publisher Aleksander Lebedev; Ilya Yurov, former owner of Trust Bank; Anatoly Loktionov, ex-Vice President of Rosneft; Andrei Borodin, ex-Head of Bank of Moscow; Andrei Chernyakov, ex-President of Kosmos Research and Manufacturing Association; Sergei Pugachev, founder of Mezhprombank; Vladimir Makhlai, owner of TogliattiAzot’; Mikhail Slobodin, ex-Director of Beeline; and hundreds of other Russians.
British tabloids note with satisfaction that inquests into the legitimacy of funds may affect major UK-based businesses of Russian oligarchs, including Roman Abramovich’s Chelsea F.C., Aleksander Mamut’s Waterstones book retail chain, Mikhail Zelman’s Burger & Lobster restaurant chain, etc. The enactment of the Criminal Finances Act, in fact, means the advent of ‘presumption of guilt’ in the Great Britain – now owners must prove that their assets are hard-earned.
Not in London, please
Today British realtors are concerned about the possible loss of a certain segment of their clientele – although major players of the real estate market, including Knight Frank and Kalinka Group, keep calm and state that “nobody had cancelled showings yet”.
On the other hand, Gary Hersham, founder of London-based Beauchamp Estates, says that “Russian money are leaving the British real estate market”. According to him, just recently the company had received 20–30 calls per week, while now it is one or two calls at the best case.
The CrimeRussia source notes that because of the situation in the UK, wealthy Russians started putting the eye on such European countries as Portugal and Spain. In addition, in order to encourage the growing demand, Portugal has simplified the entrance rules for Russians by extending the validity of Schengen visas to 1 year since the beginning of April.
Experts expect a mass return of wealthy Russians back home due to the increasing legislative pressure in Britain. According to Metrium Group, as of the end of the 1st quarter of 2018, a 20% growth in the number of acquisition applications for expensive objects from Russian citizens living abroad has been registered. Experts believe that the majority of the returning emigrants are going to come from the UK. Re-emigrants from that country currently produce 66% of all applications. The interest of Russians living in Britain to the initiative dubbed “Titov’s list” must be taken into account as well.
In December 2017, Boris Titov, Presidential nominee from Party of Growth and Presidential Commissioner for Entrepreneurs’ Rights, said that many criminal cases instituted against Russian businessmen seeking asylum in London are questionable. Titov promised to ask President Putin to provide a possibility for these people to return home without the risk to be imprisoned. In early February, Titov had a meeting in London with more than 40 Russian entrepreneurs living in the British capital; following the results of that meeting, the so-called “Titov’s list” of persons potentially willing to return to Russia has been produced. The list includes Aleksei Bazhanov, Sergei Kapchuk, Evgeny Ryzov, Evgeny Petrov, Aleksei Shmatko, Leonid Kuraev, Georgy Trefilov, Azamat Kildigushev, Aleksander Delis, Pavel Vlasyuk, Andrei Kakovkin, Konstantin Dyulgerov, Vladimir Zyuzin, Aleksander Baigushev, Viktor Lamash, and Vasily Dyakun. According to Boris Titov, the list with 17 names has been submitted to the President. In late February, one of these people – Andrei Kakovkin suspected in Russia of misappropriation of 10 million rubles ($161.5 thousand) – returned to the motherland, was arrested in the airport and immediately released following a petition from Titov.
On March 30, 2018, Yuri Chaika, Prosecutor General of the Russian Federation, has commented the initiative of Titov. Chaika has upheld his proposal to pardon some Russian businessmen absconding abroad because they could flee from the pressure put on them by the Russian law enforcement authorities.
However, a week later, Chaika suggested the UK authorities to keep the fugitives if they want so. The Prosecutor General has mentioned the new provisions of the British legislation in an interview to NTV Channel on April 8, 2018. He has noted that many owners of British assets are expected to have hard time explaining their origin and expressed a hope that the UK opts to act as a civilized country and won’t follow the “rob what was robbed” principle. The Prosecutor General has also reminded that in the last 15 years, the UK has ignored 61 request to extradite Russian citizens suspected of or convicted in absentia for economic crimes resulting in damages exceeding 50 billion rubles ($807.4 million) and concluded as follows:
“You may keep the criminals, but please return the money. This is our money”.
Ismail Efendiev is suspected of exceeding authority in connection with the investigation of cases of detained earlier former First Deputy Prime Minister Ramazan Aliyev and nephew of the former head of Dagestan Askhabali Abdulatipov. Searches are being conducted at Efendiev's office and house.
The disappearance of an elderly Muscovite, who owns three rooms on Ostozhenka Street, and her disabled son, worried the neighbors, but the police refused to initiate criminal proceedings on their application. Housing in the elite area of the capital in the meantime was re-registered to a resident of St. Petersburg, who introduced herself as their relative.