Hide, park: Russian money in London

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Hello and welcome to the Intelligence from the Economist. Today in London, I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. For years, the punk group Pussy Riot have been Russia's loudest voices of dissent. We check in again with one of the band's members, learning how two of them escaped yet another arrest with a daring plan to sneak out of Russia. And in Britain today, it's all street parties and bunting for the platinum Jubilee. It's 70 years that Queen Elizabeth II has been on the throne. We look at the long history of Royal Jubilees and how they've reflected a changing British society. First up though.

Welcome on board the.

Twin Star ferry service between Doubletree Hilton.

And Canary Wharf Pier.

So just down from my house, I can take a ferry across the Thames river to Canary Wharf, which is one of London's financial centers. The Square Mile is another, but the newer and decidedly more skyscrapery one is Canary Wharf.

We are now arriving at Canary Hall.

You can see hsbc. You can see Deutsche bank, you can see Credit Suisse. You can see all of the world's major financial outlets. Fitch Ratings, the works. Finance types are attracted to the capital's tax rates, its time zone and educated workforce. But there's a lot more than just straightforward banking money here. All these skyscrapers are set amid what used to be working docks. A lot of it's been filled in, but it is a lot of water and, and a good sized handful of ships and boats. But I've come here to find one ship in particular. Okay, is that it?

Yes, that's it.

What's it called? It's called Phi, like the Greek letter. Phi as in the Greek letter?

Yeah.

You can already tell how enormous it is.

It's very blue.

Hmm.

Teal.

I'd say it looks poised to conquer the seas. Several decks hanging off the back. It's really sleek, aerodynamically designed from the front. It has this pouncy aspect to is lush this massive Superyacht is what £38 million will buy you. It's been parked here since March, when it was impounded by the British Maritime Investigation Bureau as part of the government's efforts to track down and seize tainted foreign money from Russian oligarchs.

We will not stand by whilst the Putin's cronies are allowed to sail around the world in these kind of yachts. And people in Ukraine are suffering.

Britain's Secretary of State for Transport, Grant Shapps, spoke on the day of the impounding. But there's far more than just stunning super yachts as a sign of Russian money. In Britain's capital, London has been dubbed.

Londongrad because since the 1990s, since the collapse of the Soviet Union, the city's been awash in Russian money. You've seen rich Russians, including oligarchs, flocking to London for all sorts of reasons.

Matthew Valencia is deputy Business affairs editor at the Economist.

Some of them were looking for somewhere to put their legitimate wealth. Britain has very competitive tax rates. It also offers special benefits to rich foreigners that are very attractive to oligarchs. Some of the others were frankly seeking to launder dirty money.

So. So the primary motivation here for all these people bringing Russian money in was tax breaks.

Well, there are lots of reasons why they like London. One is Britain's economy, which is relatively open to foreign investment. Britain also has the City of London, a huge financial district with relatively light touch regulation. It crucially provides a huge pool of capital where it's relatively easy for foreign money of all shades to blend in. Dirty money, the clean variety. On top of all of that, London has lots and lots of really nice luxury property. That's an ideal sort of asset to park. Large amounts of money that needs to be laundered. On top of all of that, you've got Britain's legal institutions, which are set up to deal with enormous wealth. Lawyers, bankers to accountants, estate agents and so on. So that's a combination of factors that makes London very attractive to plutocrats and to other rich folks.

So if we focus in just on the dirty money, though, is there a good estimate? Is it possible to derive an estimate for just how much tainted money is in London?

Well, by definition, dirty money is hard to track, so it's really difficult to pin down. There are various estimates out there. The National Crime Agency thinks that the country has a money laundering problem that amounts to around 100, 100 billion pounds a year. That's around $125 billion. But some experts think that it's more than that, whatever the actual amount flowing in, what's clear is that we've seen successive British governments become dazzled, if you like, by the allure of foreign money, a bit like magpies attracted to shiny objects. So for a long time, governments have made it fairly easy to bring money in and have done not very much, to be honest, to stamp out the dirty money problem.

So you say that governments have made it easy to bring in money, presumably of all types, but there's an implicit suggestion there that governments have somewhat looked the other way as regard to the dirty kind.

Yes, I think they have. And I think this has been a problem that's gone on for decades. There's been strong rhetoric about clamping down, about insulating the city and the rest of the economy from dirty money, but the action's fallen far short of that. But we're seeing signs that that's changing now.

How so?

Well, the war in Ukraine, it's made a huge difference to how the government views this. Britain has gone big on sanctions against Putin cronies, and that includes, of course, some of the oligarchs. We've seen assets being frozen, in some cases being seized. And on top of that, we've seen the government push through an economic crime bill which had been delayed for years, and that should make it easier to prosecute international corruption cases.

So, clearly, in the wake of Russia's invasion of Ukraine, that kind of action is simply good optics. Is it more than that, though? Will these changes make a real difference, do you think?

Well, the problems run much deeper than just bringing in a new law or two. One problem is the law itself as it exists, and related to that, the lawyers who practise it. Britain still has a fairly high level of financial secrecy baked into its legal framework, and secrecy is one of the best friends a money launderer can have. On top of that, it remains fairly easy and very cheap to set up opaque shell companies and partnerships in Britain. And then another problem with the law is Britain's strict libel law, which makes life hard for anyone looking to scrutinize rich individuals whose finances are shady.

But you mentioned that Britain also has a sort of oligarch friendly class of people that includes lawyers.

Yes, I mean, this is a big area of concern. The richest Russian clients will pay more than double the going rate for top solicitors, which is around £500 an hour. And it's money that's just hard for some to say no to. This has interfered, let's say, with the moral compasses of some of the law firms in Britain. And lawyers are of course supposed to represent their client. That's a big part of the job. But they have other commitments too, such as serving as officers of the court. So I spoke with Robert Barrington. He researches corruption at the University of Sussex and he told me about some of the moral issues that lawyers face in this country.

There is a general problem of the erosion of ethical standards among British lawyers. The legal system's always been tilted in favour of those with more resources, but now it's been pushed further out of kilter through the allure of cash from oligarchs and kleptocrats who should fail any reasonable due diligence test.

So article 14 of the basic principles says that lawyers should uphold human rights and also that they should focus on the ethics of the legal profession when they're doing their work. But lawyers have a choice about who they serve, unlike doctors.

There are lots of good things about the British legal system and one of the good things about the system is that it's been long established and with behavioural checks and balances, this was upheld and carried by the lawyers themselves. But now what we're seeing is when those standards are upended, we see an erosion of the values, an erosion of the checks and balances.

Lawyers views of how they should act matter, particularly in Britain, because its legal system rests on the self policing of behaviour.

So given all of these structural problems, let's call them, and all of these misaligned incentives, let's call them, what's the way forward? How to rid London of more of its dirty money?

Well, one way forward is to bring in new laws, as we've seen with the Economic Crime Act. We've seen more of an emphasis on that since the war in Ukraine started. But to be honest, Britain already has quite a lot of anti corruption legislation. I think what it needs most of all is not lots of new laws, but better enforcement of what's already on the books. And they need the funding to bring more cases to trial. We also need to see higher penalties, I think, and it will also take political will, of course. But you have to ask, you know, if you look at what's happened in recent months, with everything that's gone on in Ukraine, if the government won't show real commitment to this now, when will they?

Matthew, thank you very much for joining us.

Thanks, Jason, great being with you.

My name is lucy stein, I'm 25 years old, I'm from Moscow.

We first met Lusa and her girlfriend Masha last year for Our BAFTA award winning film looking at the women resisting Russia's president Vladimir Putin. Both of them are members of the resistance punk rock group Lusa also had a government job as a municipal deputy in the Russian capital Moscow. Back then, we couldn't have imagined how things would change.

For two last years I was arrested many times. Firstly, it was a criminal case against me after the protest rally we were participating to support Alexina Walny. After that there was a trial and I was sent under house arrest and spent about half of a year under house arrest. After that I was sentenced for restriction of freedom. I had to wear an electronic bracelet on my leg which allows government to control your location during that. Sometimes police officers arrest me for 15 days, like several times for administrative cases. I don't know why exactly. When Russia invaded Ukraine, I still was under my sentence, but I decided that it's time to leave. I realized that it's not still relevant for me to come back to Russia. Even if I won't be prosecuted, even if I'll be safe in Russia, I just don't want to live there anymore. I decided that firstly because I just don't want to live in such a country. And secondly, I realized that I can't be silenced about what is happening. So I decided to leave. It was forbidden for me to leave Moscow and to leave my apartment at the night time, but I was able to leave it in the morning, so I had time to escape. But the problem was that there was some police officers waiting next to our house. It wasn't connected with our criminal case, but because there were some protest rallies in cities, they always was following us to prevent political actions. I had this food delivery uniform that I used it one time before it for escaping from these police guys. When I decided that I have to leave Russia, I used it. I just left our apartment in this costume with this huge green bag for the food. And I put there some of my stuff and my pet rat. I got in the car, we went through Russia Belarus border, but there is no actually a border because it's like huge friendship between our totalitarian countries. When I got to Europe, I just wanted to sleep because it was difficult trip. So I didn't had any thoughts like I'm free now. It was just. We succeeded. I don't really want to come back because almost all my friends already left the country and rest of them are going to leave. And my parents, they don't live in Russia and I lost my job. There are lots of people who actually support the war. So I just don't want to come back this time. I hope that something will change there. But now it's more comfortable to stay outside and to do whatever I can do, because inside Russia, I'm not able to do anything anymore besides be in prison.

Lusa's girlfriend Masha, escaped via a similar strategy a few weeks later, and they both reunited in Vilnius in Lithuania on May 16. Six weeks after she left, Russian authorities placed Lusa on a most wanted list. You can read more about her journey this week in Our sister publication, 1843.

I here present unto you Queen Elizabeth, your undoubted queen.

Britain is enjoying a long weekend marking the Platinum Jubilee. Seventy years ago, Queen Elizabeth II succeeded to the throne. A year later, she was crowned.

Therefore, I am sure that this, my coronation is not the symbol of a power and a splendor that are gone, but a declaration of our hopes for the future and for the years I may by God's grace and mercy be given to reign and serve you as your queen.

It's the first time that a British monarch has lasted for 70 years on the throne. And to celebrate, the British public is, well, today, probably sleeping late, perhaps with a hangover, because we've got not one, but two bank holidays.

Royal Jubilees are odd sorts of celebrations.

Catherine Nixie is a Britain correspondent for the Economist.

Unlike most royal events, weddings or coronations or funerals, a jubilee is really just a marker of stasis. It celebrates the fact that the current monarch isn't dead and hasn't died for a prolonged period of time. So in this case, we're celebrating that Queen Elizabeth II has made it to 70 years on the throne without dying.

And what's the background here?

Why?

Why are there Jubilees at all?

Well, Jubilees were created quite late. Until relatively recently, the monarchs of this scepter dial really specialized in untimely and frequently extremely unseemly deaths. So one was allegedly speared with a dagger while he was on the toilet. Another was speared allegedly through the eye, and another, and this has to be the most infamous, and the nastiest, was dispatched by an importunate poker. And so not kicking the bucket was really enough of a thing to celebrate, that English monarchs used to celebrate it every year. So they would have what was called accession celebrations. And then that practice only stopped when monarchs started to live so so long, 10 years, 20, 30, that people got a bit bored of annual celebrations. And so the practice of celebrating not every year at a time, but a whole bunch of years together began. And that was the start of Jubilees.

And when was that? What was that? Who was that?

So Britain's first Jubilee was held in 1809 for George III. And if you read accounts of it, it was amazing. It was celebrated first and foremost with absolutely vast quantities of drinks. And all the accounts of this Jubilee really focus on that above all. So in Ramsbottom there was roistering, beer and what they called rustic sports. In somewhere called Bletchington, people enjoyed roast beef and as much ale as they could drink. And in Llan Rosel in Wales, there were copious libations of cider. And when you read it, you become aware quite quickly that what you're reading are more or less all Georgian euphemisms for everyone got absolute, absolutely hammered. By the time of Queen Victoria, the mood had become, unsurprisingly, notably more Victorian. So in 1887, the Economist wrote an article that reflected on the celebrations for that Queen's Golden Jubilee. And it really approved of what it saw.

The English race was never a race cruel or unkindly at heart, but in manners, it undoubtedly passed through an epoch of brutality. When the Queen began her reign, gentleness of behaviour among the lower classes was certainly a rare virtue. In 50 years, the change has been complete. No one who saw the crowds on Tuesday during the procession or wandered through the streets while the town was illuminated could have been other than struck by not merely the good temper, but but by the politeness and civility of the people's behaviour.

And then other Jubilees you get other things. So some are marked by outpourings of charity. So the 1935 Silver Jubilee of George V, you get descriptions of Welsh coal mine owners giving their workers a pension fund. And in India, cattle rustlers say that they're going to full swear cattle rustling for the duration.

So what should we expect this Jubilee to reflect about British society?

Well, when you read the government plans for this Jubilee, you can see that these are celebrations that are less pleased with the present and more nostalgic for the past. If you read what's coming up, there is a lot of pageants, there are bandstands, the government plans, talk about village halls and they use the phrase pomp and circumstance. Even the entertainment has an air of nostalgia. So there's going to be a concert put on for the Jubilee and instead of freshly minted acts, we're going to get 150 national treasures. I mean, that's a lot of national treasures. And everywhere there's going to be bunting and street parties and Jubilee trifles and cucumber sandwiches. And this is the kind of ideal of Britain, that it's not today's Britain, it's not even Britain of 50 years ago. It's a sort of nostalgic, sepia tinted Britain that dates back to the Second World War, if indeed it ever existed really at all then. But if you look closely, actually in the government's plans for the Jubilee, you can see signs of authentic strain of Britishness, because Parliament has also passed an order to extend licensing hours in pubs, clubs and bars until 1am and you probably don't get a more authentic British Jubilee than that.

And how do you plan to be celebrating that? Doubtless getting heroically, patriotically drunk.

I'll be doing my national duty.

Love it, Catherine. Enjoy it. And thanks very much for your time.

Thank you for having me.

That's all for this episode of the Intelligence. The show's editors are Marguerite Howell and Chris Impey and. And our sound engineer is Will Rowe. Our senior producers are Sam Westrin, Jack Gill and John Jo Devlin. Stevie Hertz is our US Audio correspondent and our creative producer is William Warren. Our producers are Rory Galloway and Alize Jean Baptiste and assistant producer Abesoye Ocendairo, with extra production help this week from Emily Elias. We'll all see you back here on Monday. Ra.