On March 16, Queen Elizabeth II of the United Kingdom signed the Brexit bill into law. The world’s leading economists still argue whether or not the British will benefit from this. But our interviewee – Duncan HAMES, Director of Policy at the UK chapter of Transparency International, a global anticorruption network, – is convinced: having decided to live on their own, the British should be still more cautious about such things as citizenship and foreign investments, especially in London’s real estate. Mr. Hames is a pubic activist now, but his opinion about effectiveness of the British governmental machine is not the view of an outside observer. Hames served as Parliamentary Private Secretary to Nick Clegg, Deputy Prime Minister in the David Cameron cabinet, from September 5, 2012 until March 30, 2015.
A high-profile trial of Roman Nasirov, former head of the Taxation Service, is going on in Ukraine on the initiative of the National Anticorruption Bureau. As our superrich (most of whom are former governmental officials) like to go to law in London, would you tell us what punishment high-ranking officials, such as Nasirov, face under the British law if they are caught in an act of corruption?
“I’m obviously not familiar with the details of this particular case. What I do know is that people in the United Kingdom do face jail sentences for corruption offences and fraud.
“Just the other week someone very senior in a part of our health service was found guilty (she and her husband) of corruption offenses, and they both received suspended sentences. So she won’t actually be in jail now, but her career is over. And that for offences which involve relatively small amounts of money. In her case I think it amounts to somewhere between 10 and 20 thousand pounds. But nonetheless, this went through a criminal trial.
“The other end of the spectrum is large businesses that come under the effect of the law. So a large British aerospace manufacturer was investigated by the Serious Fraud Office under suspicion of bribery offences all around the world over a period stretching across three different decades. A huge amount of activity was investigated, a very big case. And we wait to see if individual people – directors, agents, intermediaries – will be prosecuted for criminal offences. But the company itself has admitted its wrongdoing and agreed a penalty with the government: hundreds of millions of pounds. That was their fine.”
TEN YEARS OF “BLIND FAITH” IN THE UNITED KINGDOM
The Nasirov case is also interesting because the Anticorruption Bureau claims he has British citizenship…
“Do you know how he came to be a citizen of the United Kingdom?”
No.
“There are a number of ways someone can become a UK citizen, most commonly by marriage. But it takes a long time.
“But there is a route to having a freedom to reside in the United Kingdom which is not that old, about 10 years, and it’s called an ‘investor visa.’ Some business people, with a lot of money to invest in the United Kingdom, can apply for one of these visas. I say ‘a lot of money,’ like one-two million pounds sterling. By making an investment and contributing to the UK economy, after a period of time, they could apply for an indefinite leave to remain in the United Kingdom and ultimately, apply for the citizenship. Depending on how much money is invested, it can take 5-10 years.
“As I said, I do not know the details of this particular case, what his [Nasirov’s] connection is to the UK or how it has come about, but there are routes to citizenship in the UK. We as an organization, Transparency International United Kingdom, are concerned that that scheme, which the government set up about 10 years ago, is open to abuse. The rules were changed just a couple of years ago, and until then is the period we could call the ‘blind faith’ period. It appears that the government was assuming that banks were making money laundering checks on these individuals, and the banks were assuming that it because the government had awarded these individuals investor visas, the government had done checks on these individuals. But in actual case, neither had. And that’s a substantial money laundering risk.
“When the rules were tightened up to make sure that the award of these visas doesn’t even in itself entitle you to a bank account in the United Kingdom, the number of people applying for these investor visas dropped very substantially.
“The largest groups by nationality to have been applying for visas before the rules were tightened, and not since, were Russians and Chinese nationals.
“We are calling on our government to conduct retrospective checks on all of the individuals awarded investor visas in that period, some of whom may have since applied for British citizenship.”
“BRITISH POLICE CAN APPLY FOR UNEXPLAINED WEALTH ORDERS”
The UK looks so far like a beneficiary, not a victim, of corruption. Huge amounts of money get into your economy. Corrupt politicians from such countries as Ukraine buy the most expensive real estate, send their children to schools, and hire the highest-paid lawyers in London. In other words, they spend the money they stole from taxpayers in their own, poor, countries in the United Kingdom’s rich economy. Past year I interviewed Daniel Thelesklaf, chairman of the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), who is also Director of the Financial Intelligence Unit of Liechtenstein. I raised the question of whether first-world countries, such as Lichtenstein and Britain, are interested in eradicating corruption in Ukraine. The answer of my interlocutor, who admitted that the law of Lichtenstein envisages no severe punishment for using its financial system for laundering stolen money, brought me to the conclusion that affluent countries are not interested in putting an end to corruption because they stand to gain from this. Is this true?
“Well, I don’t know about Lichtenstein, but I believe that people are victims of corruption all around the world. And even when corruption occurs in one country and the assets are then hidden in another country, there are still victims in the country where the illicit assets, the proceeds of corruption, are stored.
“We have recently published a report about the effects on London’s housing market of overseas corruption. And we tried to map out the scale of investment in London property that comes from what you might call ‘suspicious wealth.’ Some higher and premium London property is so expensive that very quickly the amounts of money involved become very large, indeed. We’ve looked at around a hundred and fifty properties, which between them are worth around four billion pounds sterling. We consider the wealth used to buy these properties raises suspicions, and we are inviting the UK police and law enforcement to investigate that, to look for the proceeds of corruption.
“There’s a new law that we have been doing a lot of the policy thinking behind, and urging Parliament to adopt. It contains a measure called an ‘unexplained wealth order.’ And what it would enable the police in the United Kingdom to do, is to apply to a court for this ‘unexplained wealth order’ in circumstances when, for example, a politician or senior public official from a country outside of the European Economic Area, for whom there is a known income (they are public officials and it is known what their incomes are likely to be) and where they have assets in the United Kingdom that appear to be beyond their lawful means. It raises legitimate questions about how they came to be able to purchase these assets. And in these instances the court would require that individual to give an account to the court, to justify the source of funds they used to acquire these assets. And then this investigatory power, in the event that they fail to comply with the order of the court, would be taken as a presumption to facilitate the process whereby the police would be able to seize those assets. And ultimately, in cases of corruption, return the value of those assets to the people in other parts of the world, from where they come.
“This is a complicated process, it’s not something we can fix overnight. But we in Transparency International United Kingdom are concerned about corruption in the UK and ways to prevent it. But we are also concerned about preventing the UK from offering impunity to people who are guilty of corruption around the world. And we don’t want to see London and London property act as safety deposit boxes for the corrupt, wherever in the world they commit their crimes.”
Getting ready for this interview, I read some interesting statistics of your organization, Transparency International, which says that about 41,000 real estate items in London were bought by foreign companies and 90 percent of them are registered in offshore areas. In what way is the British law tackling this problem today?
“In the example I just gave you, of the police being able to pursue unexplained wealth, it is required that the police know who the owner of the property is, to know that it is suspicious that they are able to own that property. And when people create companies that they register in jurisdictions where the details of the ownership of the company are not published, are not available to the public, and then use those companies to buy property in the United Kingdom, we cannot know who the owner is. That is a major problem in being able to crack down on illicit wealth. So we have been supporting legislative measures to set a time-table by which Britain’s own overseas territories should be required to publish registers of beneficial ownership of companies in their jurisdictions. That is something that the United Kingdom already does for companies registered in the United Kingdom. That register is available on the internet, there is no charge for inspecting it, you can search for the name of a company and find out who are the individuals who have significant control over that business. And we think that that is good not just for the police and the law enforcement, but it is good for businesses to know who is behind the other businesses that they are trading with, and it is good for people seeking to keep businesses accountable for their conduct to know where these are privately run businesses, who is really pulling the strings behind that company.
“We consider it the gold standard that should be followed globally. But as the first step, something that the British government can do, (and last year, at the London Anti-Corruption Summit, it said it would do) is to produce its own register of overseas companies that owned property or wished to buy property in the United Kingdom. So, those 40,000 dwellings in London that you have just asked me about, the companies behind them will have to register with the UK authorities their beneficial ownerships, even if they are registered in a place like British Virgin Islands, where there is no obligation for that information to be public.”
According to Transparency International, the Russians are the most active foreign investors on the British real estate market. Are you not worried about the glut of Russian money in your country? Is the example of America not instructive to Britain? The Americans had never thought that the Kremlin would dare intrude into the holy of holies – the US presidential elections. But it did. Do you feel safe, sitting on this powder keg?
“Firstly, on premium property that Russians own in London, for example. Our research shows that wealthy individuals from different parts of the world who invest in London and in London property have different tastes. So, the brand-new shiny glass-towered modern flats in London tend to be bought up by Far Eastern investors or Middle Eastern investors. And the Russian investors tend to be more interested in older-period property, still premium, luxury – town houses, mansions. They would more commonly buy property in places like Mayfair or Knightsbridge.
“The United Kingdom’s economic strength has been born of free trade and enterprise. And now as the United Kingdom is going to be leaving the European Union, it is going to be more important than ever that we are an outward-facing nation, and we do trade with all. So, there is nothing to be gained from saying to people from one country or other that that country’s people, business, money is not welcome. What we need to do is to set very high standards on the legitimacy of that business. So that wherever it is in the world, whether it is Russian, or Chinese, or Malaysian, or American, for that matter, that money is earned lawfully.”
“FOR HUNDREDS OF YEARS, BRITAIN HAS BEEN ADDRESSING THE PROBLEM OF GOVERNMENTAL OFFICIALS’ ETHICS AND STANDARDS OF BEHAVIOR”
The United Kingdom scored 81 points on the 2016 Corruption Perceptions Index reported by Transparency International. Thanks to what?
“The Corruption Perceptions Index is a very interesting research tool to try and understand how prevalent corruption is in the government sectors of societies around globe. So it tells a very particular story that essentially comes down to people’s expectation based on their own lived experience of needing to pay a bribe to a public official in order to get access to public service. That’s just one of the things that are researched by the Corruption Perceptions Index, but it is, I think, a very helpful way of thinking of that research.
“It doesn’t, for example, measure corruption within the private sector, and it is very much about the presence of corruption in the public sector, in government.
“The UK is tenth, has a relatively high score, which is a positive thing, it means it is a country which in the government sector has relatively less corruption perceived by its own people than others.
“But this is a product of a very long journey. For hundreds of years, people in the United Kingdom have been grappling with questions of ethics and standards of integrity in public life, the behavior of people who hold public office, and what they should and should not do with their privileges and power that is entrusted to officeholders. So, this is not something that Britain has achieved overnight. But it remains a hot topic in the United Kingdom, people are still concerned about levels of corruption, and the government is still talking about what we need to do in the United Kingdom to protect against that. And so I think it would be fair to say – especially in light of things like the Anti-Corruption Summit that was hosted in London last year – that not everyone is satisfied that we have rooted out corruption in the United Kingdom. There is a heightened awareness that it is a policy issue that government is grappling with, and that surely contributes to a positive score we have in that index. But this is no reason for complacency: I am pleased to see other countries improving their scores, and the British government recognizes that it needs to do more if it wants to stay in the Top 10.”
Do you think you have eliminated corruption in your government?
“We still, as an organization, identify risks, vulnerabilities in our institutions that make them prone to corruption. The example I earlier gave you of a conviction in our health service, had to do with our private sector. Someone there was allotting funds, public money, for not providing any service, because of the family interest of people who were responsible for those moneys in our health service. It was a relatively small amount of money, but what was exploded in this case, is the abuse of entrusted power for private gain. And that is what we recognize as corruption.”
As far as the Corruption Perceptions Index dynamics are concerned, Britain has been steadily improving its figures since 2012. You’ve been adding two points annually. What is the secret? What steps has the UK taken in the past five years to eliminate corruption?
“In 2009, there was a major scandal in British parliament about the way the MPs used taxpayers’ money to support their own lifestyles, and to pay for mortgages, and some MPs were arrested, charged, tried, and even sent to do prison time for various offenses. After that scandal, there was a new system introduced to provide total transparency to the public of funds that are made available to MPs to run their offices. And so this part of the public standards, which back in 2009 the public had a very dim view of, has been strengthened.
“Similarly, UK Bribery Act was introduced, became law in 2010, and it included new provisions to require organizations to prevent bribery taking place in their organizations. It requires organizations to train their staff about how bribery can slip into their business practice and the measures they must take to prevent that happening.”
What advice would you give to your colleagues, Ukrainian corruption hunters?
“My first advice is that the British experience has been one that has taken a long period of time and has faced setbacks along the way, so the fight against corruption in any society needs to be determined and it needs to be sustained. My advice is that you should recognize that this is endeavor that requires a long haul. And I wish you much faster progress than we enjoyed in the United Kingdom nonetheless.”
