海角大神

For years, Londoners have largely ignored the wealthy Russian oligarchs living among them.

Locals in affluent Highgate in North London certainly knew they were there. Every weekend, tours of billionaires鈥� homes walk past Russian-owned Witanhurst, the United Kingdom鈥檚 second-largest house after Buckingham Palace.

So, too, were they aware聽a couple of miles away in Belgravia, where Londoners have renamed Eaton Square 鈥淩ed Square,鈥� due to its high concentration of Russian tycoon homeowners聽鈥� among them Roman Abramovich and Oleg Deripaska, two billionaires closely allied with Russian President Vladimir Putin.

But the lack of public scrutiny聽鈥� and the active welcome the oligarchs have received from multiple British governments over the years聽鈥� looks set to come to an end.

As Mr. Putin pushes onward with war in Ukraine and renewed questions are being raised about the origins of oligarchs鈥� fortunes, the United Kingdom is moving to 鈥渃lamp down on Russian money in the U.K.,鈥� announced Prime Minister Boris Johnson on March 1. That signals a long-awaited U-turn in the historically laissez-faire attitudes adopted towards oligarchs and their 鈥淟ondongrad鈥� playground.

The London laundromat

In three decades, London has established itself as the global hub of choice for Russian 鈥渄irty鈥� money. Russian oligarchs are believed to have siphoned money from Russian state assets, often with Mr. Putin鈥檚 assistance or approval. They eventually transferred that wealth to the U.K. for safekeeping and investment 鈥� which the country welcomed with few questions, according to a 2020 intelligence and security parliamentary committee report.

According to the report, that welcome 鈥渙ffered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London 鈥榣aundromat鈥�. The money was also invested in extending patronage and building influence across a wide sphere of the British establishment 鈥� PR firms, charities, political interests, academia and cultural institutions were all willing beneficiaries of Russian money, contributing to a 鈥榬eputation laundering鈥� process.鈥�

Transparency International identified over two thousand U.K.-registered companies used in Russian money laundering and corruption cases, involved in more than 拢82 billion ($109 billion) of funds diverted by, for example, embezzlement and unlawful acquisition of state assets. The advocacy group has also identified some 拢1.5 billion worth of London property owned by Russians accused of corruption with links to the Kremlin.

The mood in Britain began to turn against Russian oligarchs even before the invasion. On Feb. 17, the government axed the so-called 鈥済olden visa鈥� program introduced in 2000, which granted residency to wealthy foreigners in exchange for large-scale investments聽鈥� the larger, the more quickly the visa would be granted. Many Russian millionaires were among the recipients.

But the escalating violence in Ukraine has 鈥渃ompletely changed鈥� Britain鈥檚 casual approach toward Russian money, says Kathryn Westmore, senior research fellow at the Royal United Services Institute, a British military and security think tank.

Key among those changes is Mr. Johnson鈥檚 resurrection of legislation first proposed by former Prime Minister David Cameron but ignored for almost a decade. The bill would require anonymous owners of property to identify themselves,聽 or else the property cannot be sold. Violators of the law would face five-year prison sentences.

鈥淚t鈥檚 disgraceful that the situation in Ukraine has had to happen in order for that to happen,鈥� says Ms. Westmore. She, like many Britons worried about the obscure nature of Russian influence in Britain, welcomes the expediency shown by Boris Johnson.

鈥淚t鈥檚 hard to celebrate the fact that new legislation tackling transparency is coming in,鈥� she says. 鈥淏ut it is much needed.鈥�

The U.K. has other tools available to it as well. In 2018, it introduced unexplained wealth orders (UWOs), a means by which it could demand that a rich person suspected of corruption or criminal connections explain the origins of their wealth. UWOs have only been used a handful of times, but the new bill is expected to boost their utility.

Also, cabinet minister Michael Gove is working on a proposal that would enable the government to more easily seize the assets of oligarchs closely associated with Mr. Putin.

Russian money, British institutions

When Labour Party Member of Parliament Chris Bryant last week read a leaked government document in Parliament identifying Mr. Abramovich, the聽Chelsea Football Club owner, as having links to the Russian state and of engaging in 鈥渃orrupt activity and practices,鈥� he had set in motion a chain of events that has shed light on the influence that Russian wealth has exerted on British cultural institutions.

Mr. Abramovich acquired his riches from Russian oil after the fall of the Soviet Union and bought Premier League soccer club Chelsea in 2003. His wealth turned them into an all-conquering team, but few questioned his intentions, or indeed, the true source of his fortune. Soccer, like much of Britain, has 鈥渟imply bent the knee to foreign capital,鈥� says Jonathan Liew, sportswriter at the Guardian.

But after years of being seen as a benevolent figure, he is now under serious scrutiny, even from a once laudatory government, says Mr. Liew. The 鈥渇urious backpedaling of the Johnson government鈥� and the 鈥減erformative outrage of the footballing authorities suggests that the real red line was not morality, but PR.鈥�

Still, whatever its motivation, the U.K.鈥檚 role as the global hub for Russian money 鈥減uts its government in a uniquely strong position to hurt Putin鈥檚 kleptocracy ... by attacking financial secrecy,鈥� says Tom Burgis, author of 鈥淜leptopia: How Dirty Money Is Conquering the World.鈥�

Russian firms have sought London as the place to raise foreign capital and global clout; in total, they have a market value of more than 拢400 billion listed on the London Stock Exchange. And some 拢68 billion of Russian money has flowed into offshore British tax havens, such as the Cayman Islands and the British Virgin Islands, via London, raising further questions as to how and where that wealth was generated.

Dismantling the City of London鈥檚 financial secrecy, with its links to tax havens and law firms adept at reputation management will come at a cost, Mr. Burgis says. 鈥淏ut the U.K. now faces a choice: whose side is it on?鈥�

Russian influence in office

Amid a clampdown on Russian money in Britain, Mr. Johnson may have to look closer to home. The ruling Conservative Party has received some 拢2 million in donations from Russian-tied sources since Mr. Johnson took office in 2019, according to Electoral Commission data. Intelligence authorities warn such gifts may not be for altruistic reasons, as Russians seek to establish broad influence in the U.K.

World-renowned universities and cultural institutions also 鈥渆ncouraged鈥� Russians to set up camp, says Ms. Westmore of RUSI. 鈥淭he U.K. offers a sort of stamp of legitimacy,鈥� she says, 鈥渘ot just from a financial perspective, but also from a social and cultural perspective.鈥�

An open property market for foreign investors, the rule of law, and a functioning legal system has, ironically, encouraged the systemic flow of Russian wealth into Britain, she adds.

For financial crime analysts like Ms. Westmore, a new register of overseas ownership represents a step in the right direction and will act as a 鈥渄eterrent,鈥� but will need 鈥渢ime and tough enforcement.鈥�

It鈥檚 not just about the money, she says, but about the British role in not facilitating wider corruption. 鈥淲e must make sure we get it right.鈥�