War in Ukraine: Illicit Finance

Jim Shannon Excerpts

Thursday 17th November 2022 Westminster Hall

[Clive Efford (in the Chair)]

I think it was a speech.

[Jim Shannon (Strangford) (DUP)]

Will the hon. Gentleman give way?

[Bob Seely]

I give way again.

[Jim Shannon]

I congratulate the hon. Gentleman on bringing forward this debate; I will speak for a wee minute in support of him. My understanding is that in earlier questions in the Chamber, the Government indicated that they were prepared to look at—I am not sure they committed themselves entirely—not just seizing the goods belonging to Russian oligarchs, but using that money for a purpose. The purpose we all asked for in the Chamber that day was for the money to be given to Ukraine. Would there not be some poetic justice if Russian money was used to directly help the Ukrainians?

[Bob Seely]

The hon. Gentleman makes a very good point. One of the things we were discussing yesterday was quite how that could happen. The initiative is being led by Bill Browder, who has championed the cause of Sergei Magnitsky ever since he was tortured and murdered 13 years ago yesterday. Ten years ago—a decade ago this month—the late, great John McCain brought in the first Magnitsky laws in the United States, and everyone else across the globe, or at least 35 nations, has followed suit.

The person dealing with this issue in Ukraine is a very powerful Ukrainian politician called Kira Rudik, who was also with us yesterday. She is in London today. She is trying to get a global coalition to do just what we have been discussing. I hope that we will soon have a draft law here that we can send to Government, debate and put down in some form to say, “These are the next steps.”

I pay tribute to Kyle Parker, too, who was also in the discussions we had yesterday. He is great man. A senior congressional staffer—these people have much more power in the US than they tend to in the UK—he wrote the Magnitsky Act and worked with Congressmen and Senators to get it through both Houses in the US system. We should be doing the same here.

Strategic lawsuits against public participation, or SLAPPs—it is a bit of a mouthful—are effectively the abuse of law by the rich to intimidate journalists, campaigners and others. SLAPPs are absolutely part and parcel of this system. Imagine the great caravan of wealth that flowed from the former Soviet Union to the tax havens of the Caribbean. It needed facilitators, which were the financial services companies, some of which are corrupt German and Scandinavian banks. I think their names are out there: Deutsche Bank, in Estonia, I think, and one or two others.

The system also needed attack dogs to protect the flow of that vast caravan of sometimes criminal wealth, and those were the legal firms. Those lawyers effectively built a business model of legalised intimidation whereby journalists and campaigners can be threatened. If someone in the Soviet Union, or Russia post the collapse of the Soviet Union, wanted to stop a journalist from trying to investigate them, they would ultimately just kill them. In the UK and the west, that is more difficult—not impossible, but it is more difficult to kill people and get away with it.

People are not physically destroyed in this country; instead, the legal system is used to financially destroy them. That has sadly happened to a number of people, including Charlotte Leslie, a former colleague of ours, and the wonderful journalist Catherine Belton. Various campaign groups have also been targeted. Most recently, Chatham House has been a target. Sadly, I understand it has given in to threats and is having to rewrite some of its reports.

This business model was set up to service the needs of the aggressive rich and powerful, including organised criminals and oligarchs, who did not want their affairs investigated. The three methods were the abuse of libel law, the abuse of privacy law—the right to privacy, meaning no one else can look into someone’s affairs—and data protection. The aim in all the cases was to mount up such staggering costs that even a technical victory would destroy the opponent, render them bankrupt or destroy their reputation. If they were a journalist, the aim was to make a newspaper or publishing house invest hundreds of thousands of pounds in defending them against the vast sums that oligarchs were willing to throw at them to make their lives difficult.

A slightly different case is that of the Maltese corruption journalist Daphne Caruana Galizia. It was a great privilege to recently meet her son, who works in the UK media. At the time she was murdered, she was facing 47 libel lawsuits, almost all of which were from UK law firms. That is staggering: before she was physically destroyed, she was being psychologically and financially destroyed.

I have discussed Catherine Belton and the costs of SLAPPs. My final point is that it is extraordinary that, as Spotlight on Corruption and Global Integrity have found, law firms in the UK currently face almost zero risk of criminal prosecution for money laundering, and there is a very limited prospect of their facing any meaningful fines. I was told privately that a number of UK law firms support that criminal money-laundering activity. Yet almost nothing is done, and almost nothing is investigated.

What are the solutions? First, close the loopholes in Companies House. I know that the Government have made strides on that, but there is more to be done. The right hon. Member for Barking is working with a number of Members on both sides of the House to tighten up the regulations. If the Government could be sympathetic, we would be grateful. Secondly, the UK’s economic crime enforcement system remains under-resourced. It needs to be better resourced, so that we can fight the bad guys and girls better.

Thirdly, we need to better supervise the so-called professional enablers, so that they cannot effectively operate outside money laundering regulations. Fourthly, as we tighten up regulations here, we need to expand our UK regulations to British overseas territories. It is absolute nonsense that criminal and organised crime and tax havens benefit people in the Caribbean.

We very much welcome the Ministry of Justice’s response to the call for evidence on SLAPPs and its proposals for legislative reform. The right hon. Member for Birmingham, Hodge Hill (Liam Byrne) and I—and perhaps others—will present a Bill on SLAPPs, so that a Bill is ready when the Government want to introduce one; we love saving Government time, and increasing the productivity of Government and politicians. We will provide a model for SLAPPs law. It will ensure that SLAPPs are disposed of more quickly in court, that the costs of being attacked by SLAPPs are kept to a minimum, and that the costs for SLAPP filers are higher, which will potentially deter further SLAPPs. There are other measures, but I will not go into them now.

In summary, as a result of the UK’s economic permissiveness, we have for too long become a safe haven for kleptocrats. That has to end. The situation is getting better, but it is a shame that it took a major war in eastern Europe for things to change dramatically. We take pride in the openness and transparency of speech, and in the UK’s open economic system. However, that freedom of speech and open economic system must be better protected. A laissez-faire, criminalised free-for-all is not an open economic system; it is a corruption of that system. We need to clamp down on the sources of illicit finance coming through the UK. I urge the Government to continue reforming Companies House, to resource our enforcement bodies, and to read and take in the many excellent recommendations in the Foreign Affairs Committee’s report.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

First, may I say what a pleasure it is to speak in this debate? I commend the hon. Member for Cheadle (Mary Robinson); I am pleased to follow her. I agree wholeheartedly with her comments about whistleblowing and the importance of having that Bill in place. I hope that the Government will look sympathetically on that, because it is a positive step in the right direction. There are many things in this House we would like to do—we have ideas, we bring forward Bills, and they are not always accepted—but that Bill is certainly one that would be worthy of acceptance.

I commend the hon. Member for Isle of Wight (Bob Seely) for setting the scene so well. He has a vast knowledge, and I mean that genuinely. I very much look forward to his contributions in the Chamber. They are always detailed, informational and evidential, which I think helps us all—it helps me, anyway—to better understand things, and I appreciate that. It is always a pleasure to hear the hon. Member for Bermondsey and Old Southwark (Neil Coyle) speaking as well. He also has a depth of knowledge on this subject. We have had exceptional contributions today and others will follow, whenever the shadow Ministers speak as well.

I thank the members of the Foreign Affairs Committee for their findings in the second report into illicit finance and the war in Ukraine. Monday’s debate was the first on Ukraine that I could not attend, primarily because I was stuck at Belfast City airport and could not get away because of the fog and all the other things that were happening that day. However, I have spoken in nearly every debate involving Ukraine. I had a deep passion and interest in Ukraine long before the Russians invaded, because churches in my constituency have done missionary work and provided humanitarian aid in Ukraine for many years, way back into the 1990s. Indeed, I sponsored a Christian family in Ukraine back then.

It is clear, given the levels of illicit money laundering by the Russian kleptocracy, that the UK’s response was somewhat underprepared. This debate has followed a theme: what have we done to respond? In all honesty, the answer is probably, “Not as much as we should have.” Ultimately, to combat illicit crime from Russia, we must commit to a transatlantic partnership, so I welcome the findings of the report and the Government’s reply. At least they have understood the issue, but I do not think they went far enough. The hon. Member for Isle of Wight referred to that, and I am certainly going to say the same thing.

At the very start of the invasion, Transparency International identified more than £1.5 billion of UK property owned by Russians accused of financial crime or with links to the Kremlin, and that will have increased since then. The hon. Member for Huntingdon (Mr Djanogly) referred to how Government need to be able to take all the assets they seize and turn them into financial assistance to help the Ukrainians to rebuild their land, their country, their buildings and their infrastructure. In all honesty, I believe that that £1.5 billion—probably more now—would go a long way to helping rebuild Ukraine. It would be poetic justice if those moneys were used for that purpose.

We want calls for action. In 2019, the “Moscow’s Gold: Russian Corruption in the UK” report found the laundering of dirty money from Russia to be an instrumental problem. Until the invasion of Ukraine, there was unfortunately little commitment to tackling the problem. Through many sanctions and Bills brought forward to Parliament, we have learned our lesson about taking lax approaches to corrupt and autocratic regimes. It seems there have never been so many autocratic regimes in the world as today. The report being discussed today also stated:

“By the Government’s own measure, ‘there is a realistic possibility that the scale of money laundering impacting the UK annually is hundreds of billions of pounds’.”

The £1.5 billion I referred to earlier on is almost just picking the scab of the real corruption.

Unexplained wealth orders were used in 2021 to recover the proceeds of illicit crime. In Northern Ireland, England and Wales, £219 million was recovered. In a debate in the Chamber on that very issue, I referred to a case of money that came from Latvia and right through Germany, France and Belgium into England and it ended up in Northern Ireland. It was a massive amount of money—more than £200 million—and an example of corruption on a very high scale.

While unexplained wealth orders are a welcome move in recovering the proceeds of illicit crime, London has unfortunately become a hub for illicit money. Where does that leave the smaller regions, such as Northern Ireland, Scotland and Wales, where it will become increasingly attractive for launderers to invest money? The hon. Member for Isle of Wight referred to some of the ways in which that money can be invested in an attempt to legitimise it through a legitimate company, yet that money is still economically and criminally wrong.

The Economic Crime and Corporate Transparency Bill has been introduced to fight the flows of dirty money. I previously raised with the Secretary of State the fact that Companies House was identified as taking part in 89 economic crime incidents, which came to a total sum of £137 billion of potential economic damage. The Bill must introduce regulatory objectives to tackle illicit finance across this United Kingdom. I welcome the fact that it introduces new powers for robust verification requirements to ensure that business ownership across the UK is as transparent as possible. That has to be good news. When the Government do something well, I like to give them credit for that.

We must not let it slip our minds that Kremlin-backed oligarchs rely on the western transatlantic system. As I mentioned earlier, we need to protect our good relationships with other western allies to ensure that proactive steps are taken to reprimand the enablers and their proxies to whom illegal wealth is transferred. The hon. Member for Isle of Wight outlined how that is done, the procedures that take place and the ways that people cover their tracks.

The integrated review named Russia as

“the most acute threat to our security”,

and I believe that to be the case. China is undoubtably trying to catch Russia and is biting at its heels. Russia has proceeded to diminish every aspect of Ukraine’s domestic security. I am proud of our Government and Ministers’—even in the Chancellor’s statement earlier—continued commitment to Ukraine. This great United Kingdom of Great Britain and Northern Ireland is leading the way and all the other countries—I say it with great respect to them—have almost been shamed into matching what the United Kingdom is doing. The Foreign Affairs Committee report concluded:

“The Government cannot afford to rely on rhetoric if it is to deliver on its commitment to tackle illicit finance”

so let’s get it done. We have been seen to be under-resourced in the past and that has led to our own constituents, including many of mine, losing their hard-earned money.

Our United Kingdom of Great Britain and Northern Ireland prides itself on the rule of law and the protection of our economy and citizens. If we do not put in the necessary means and resources, we allow Putin and his illegal regime to take advantage of the freedoms of the western world. That must stop. Like the hon. Gentleman and others, I call on the FCDO and the Minister to ensure the immediate enactment of this Economic Crime and Corporate Transparency Bill for the betterment of our economy and the protection of our assets from Russian interference. The quicker that happens, the quicker the world will be a better place.