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Trust and Russian money – Time for the city to Look in the mirror?

I’ve just read Catherine Belton’s excellent book ‘Putin’s People – how the KGB took back Russia and then took on the West’. I then saw the FT’s film ‘The London Laundromat’.

London, and especially the City of London, played a prominent part in Putin’s ascent. The early oligarchs, the beneficiaries of Yeltsin’s privatisations, laundered much of their new wealth in London and spent it on mansions, yachts, football clubs, political donations and philanthropy. Then Putin’s people moved in.

Those who were smart enough to avoid Putin’s displeasure included Roman Abramovich who bought Chelsea Football Club. Putin duly took control of the Russian judicial system, prosecuting his enemies for fraud or tax offences, creating fear and  obedience amongst the rest, and bringing privatised companies back under control. The dismemberment of Yukos – an oil company - and the ten year imprisonment of its expropriated owner and Putin challenger Mikhail Khodorkovsky marked the turning point in his assertion of total power. Abramovich, by contrast, was allowed to sell Sibneft to Gazprom for $13bn. That same Gazprom that has just turned off the gas taps to Poland and Bulgaria.

Belton comments:

‘The West’s backing of the Kremlin takeover of the company and its usurping of the rule of law facilitated the domination of Putin’s security men and furthered their integration into western financial markets. The weakness of the Western capitalist system, in which money ultimately outweighed all other considerations, left it wide open for the Kremlin to manipulate.’

Says one Russian magnate who spoke to Belton, ‘In London, money rules everyone. Anyone and anything can be bought.”.

‘The stark implication of “Putin’s People” is that England itself has been a silent and handsomely compensated partner in Putin’s kleptocratic designs.’

Belton describes how Putin’s people have used UK courts and UK law firms to silence those who expose corruption. It nearly happened to her. Alexei Navalny cited her in support of his own accusations against Putin. Lawyers in London commenced libel proceedings against her. Harper Collins stood by its author and the case was settled without the book being withdrawn.

Only this week Foreign Secretary Liz Truss has announced a ban on professional services to Russia by accountants, management consultants and PR firms. Yet for some reason there is no mention of law firms who have too often acted as Putin’s enablers.

This whole story makes me uncomfortable. There are others who are, I hope, feeling the same.

On behalf of Tomorrow’s Company I have spent many hours in the last 20 years collaborating with successive Lord Mayors and the Corporation of the City of London and the London Stock Exchange. In 2004 we focused on Restoring Trust in financial services. After the 2008 crash, we collaborated with the City Values Forum in promoting the importance of integrity and appropriate culture in financial institutions.

I worked with Charles Bowman when he was Lord Mayor. His mayoral theme was trust. In 2017 he said:

“If post-Brexit London is to remain the global hub for financial and professional services, then at a national level we have a responsibility to re-earn the trust of the society we serve.”

Yet in all those discussions, I don’t remember discussing Russian money and London. Why didn’t we connect these two issues?

Fund manager Bill Browder was deported from Russia in 2007 after battling on behalf of minority shareholders in Gazprom. His advisor Sergei Magnitsky had exposed a $230m tax fraud by Russian tax officials. He was arrested and ultimately beaten to death in prison. By 2015 Transparency International was already pointing to the amount of dirty money flowing into London. Russian IPOs came to London. Russian money flowed into our universities, charitable foundations, even our politics. In 2015 Lubov Chernukhin – wife of one of Putin’s former deputy finance ministers - paid £160,000 in a Conservative Party fundraising auction to play tennis with Johnson and (then Prime Minister) David Cameron.  (Her total donations to the party have exceeded £2million).

It is time for all of us who have talked about trust to hold up a mirror to our own actions. Were we too ready to follow the lead of successive governments who welcomed and engaged with Putin? Were we naïve to believe that greater engagement would increase our influence over Moscow rather than vice versa? Have we listened enough to voices like Transparency International? Is it true that, in London, ‘anyone and anything can be bought’? Can we be accused of wilful blindness?

I would like to see the next Lord Mayor set up an open process of listening and learning. This would be in the spirit of reform, not recrimination. This inquiry would invite all those professionals and organisations and politicians and NGOs involved to ask:

  1. What did the City and its institutions do right and what did we get wrong?

  2. What was the City’s role in the evolution of the London Laundromat?

  3. How could we all have been more effective in upholding integrity and trust?

  4. Are we comfortable with the suggestion that ‘In London money rules everyone’?

If the City were to initiate such a dialogue, and commit to acting on its conclusions, it could truly help to restore trust, and be the catalyst for co-ordinated action by government, political parties, regulators, financial institutions and professional bodies. The building blocks are there already  - the ethical codes; unexplained wealth orders; the aggressive seizure of assets; the fresh debate about the appropriateness of wealthy people being able to buy UK citizenship.

Let’s not concentrate on blame games. Just clean up London and learn the lessons for tomorrow.

Mark Goyder is Founder of Tomorrow’s Company and Senior Advisor to the Board Intelligence Think Tank. He is the author, with Ong Boon Hwee, of Entrusted -  Stewardship for Responsible Wealth Creation, published by World Scientific in 2020


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