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English courts ENABLING RUSSIANS to launder hundreds of millions of pounds in dirty money.

04/07/2022

Research reveals that corrupt Russian oligarchs are bringing lawsuits in English courts to launder hundreds of millions of pounds in dirty money.

Experts say that dirty money can be laundered when oligarchs agree to sue each other in the English courts, with the payment of damages being used to launder their funds. They can also arrange to bring cases against themselves using sham companies. British lawyers and academics claim that there is

  • “Ample evidence” that they have attempted to manipulate the UK judicial system to wash ill-gotten gains and settle old scores.
  • They accuse law firms and other City professionals of being “pin-striped enablers” of Russian manipulation.

Andrew Foxall, the author of a report [Russian Kleptocracy and the Rule of Law: How the Kremlin Undermines European Judicial Systems], published in January 2020 by the Henry Jackson Society, a foreign policy think tank, said

  • “Commercial disputes in UK courts often involved Russian individuals, the source of whose wealth is dubious, to say the least,”
  • “And these disputes provide potential cover for a range of activities many of which have taken place elsewhere in Europe, including money laundering,”

Mr Foxall, a former academic at Oxford University and Queen’s University Belfast said:

  • “Russian oligarchs may have used English courts to launder tens, possibly hundreds, of millions of pounds through various scams.”

Ben Emmerson, QC, who acted for Marina Litvinenko in the inquiry into the murder of her husband Alexander by Russian agents, said:

  • “Many of the companies involved in [commercial] litigation nowadays are either Russian state-owned or owned by proxies of the Kremlin.”

The report supports concerns that have been building for several years in the legal profession that City lawyers

  • “Are witting or unwitting participants in this type of scam”.

British lawyers and other professionals must make suspicious activity reports to the National Crime Agency if they suspect their clients could be involved in attempts to launder funds. But, Mr Foxall said,

  • “It is questionable whether they are taking their obligations as seriously as they might”.

The latest figures from the NCA showed that in 2018-19, lawyers filed 2,441 suspicious activity reports. That was 0.5 per cent of the total reports, with banks making nearly 384,000.

The NCA has complained that

  • “The number of reports from lawyers and accountants remains low”.

Case study: Dubious charge earns rebuke

  1. The Henry Jackson Society report highlights what it claims is the use by Russian officials of dubious criminal charges to influence rulings in Britain.
  2. It focuses on a 2015 case when a Russian businessman brought two claims in the London Court of International Arbitration (LCIA).
  3. He alleged that a
    • Kremlin-connected oligarch had conspired with local Moscow city officials to take over his stake in a property development, an allegation that the oligarch denies.
    • The businessman, who had fled the country, also claimed that he faced the threat of criminal prosecution if he did not sign over the rights to his $250 million investment in the development.
    • In response the Russians charged the exiled businessman in absentia with fraud after a complaint by a rival.
  4. In its report, the think tank criticises the arbitration court for not considering that the Russian investigation was conducted by officials sanctioned under the Magnitsky Act in the US, which relates to human rights offenders.

CASE STUDY

Marius Nasta, chief executive of Redress Solutions, a third-party funder of litigation, SAID:-

  1. “It is simple enough for any Russian oligarch to bring proceedings through a company registered in a territory where the beneficial owner is concealed,”
  2. A corrupt oligarch could concede a case brought against him by an offshore company in which he holds all the shares.
  3. “He now has an English court judgment that allows him to remit money lawfully to the offshore company,”
  4. “If the tax or monetary authorities inquire the reason for his sending a large sum to, for example, the British Virgin Islands, he can produce a judgment showing that he had no choice.”
  5. There has been a significant increase in cases offered to funders that involve Russian claimants wishing to sue Russian defendants.

CASE STUDY

Mr Foxall explained another method:

  • “Two individuals agreeing in advance that one would bring a breach of contract charges against the other.
  • Lawyers are instructed, proceedings are initiated, and the claimant wins after an expensive judicial process. The court awards damages and dirty funds are used to pay.
  • Those funds, precisely because they are awarded as a court settlement, are now clean — whatever their provenance.”

Mr Foxall wrote the report,

SOURCES

UNITED KINGDOM CASE STUDIES