At first glance, a rich woman going on a spending spree in Harrods, the luxury department store in London, seems an unlikely entry point into the international financial underworld of laundered money and human rights abuses. But, before going into details about Zamira Hajiyeva, let me first mention here the case of a family from Bangladesh, which had smuggled-in millions of pounds into United Kingdom and invested in a number of ventures. The family reportedly lives royal life in Britain and most importantly, they are accused of funding Islamic States (ISIS).
A sacked official of Bangladesh Armed Forces Shahid Uddin Khan smuggled out millions of dollars from Bangladesh to various countries including United Kingdom. In 2009, he invested £ one million in the United Kingdom in exchange of obtaining immigrant status under visa Tier 1, vide VAF No. 511702. The investment was made in the name of Shahid’s wife Farjana Anjum. The family has established a company named Zumana Investment & Holding Limited in the UK.
According to information, Shahid Uddin Khan, his wife Farjana Anjum and their daughters initially invested one million British pounds for obtaining immigrant status under Visa Tier 1, vide VAF No. 511702 in 2009. The entire amount was brought into United Kingdom through illegal channel, which is a serious crime under the existing law of the country. Later the family had brought in millions of punds from unknown sources and already had invested in a number of businesses. The family is living a fabulously posh life in Britain, although the authorities are not at all aware of their source of income.
United Kingdom never enquired about the legality of the money Shahid and his family had invested, although it is learnt from various sources in Bangladesh that the family had never taken any permission from the Bangladesh Bank for repatriating such a huge amount of money. Hundreds of billions of pounds could be being laundered through the UK every year, but the government is unable to give a precise figure of the scale of the problem, MPs have found.
Zamira Hajiyeva, the wife of former Azerbaijan state bank chief Jahangir Hajiyev, splurged an astonishing $21 million over 10 years at the store. But it wasn’t just her insatiable appetite for expensive jewelry and caviar that made headlines around the world.
It was the fact that the cash she used was allegedly embezzled and laundered, and the investigation into her alleged actions and her subsequent indictment was the first high-profile success of Unexplained Wealth Orders, a relatively new provision designed to tackle financial corruption in the United Kingdom.
The story, as ABC News reported in October, exposes a major problem for Britain’s capital city. How does it recalibrate its relationship with the super-rich who have served as the lifeblood of the city’s economy for so long?
Further, how does it do so when, as the Harrods spending spree so vividly demonstrated, so much of the money ringing through its tills is dirty?
Much of that money comes from one country, Russia, which is why London, as the New York Times recently reported, has acquired a sinister new nickname: Londongrad.
The National Crime Agency (NCA) estimates that billions of dollars of dirty money are moved through or into Britain each year, according to the UK’s government’s own national risk assessment of money laundering. The NCA itself said: “The U.K. is an international financial center, processing trillions of pounds of transactions every year.”
“Together with the presence of a highly developed professional services industry,” the agency said, “this increases the attractiveness and vulnerability of the UK’s financial system to exploitation by those engaged in money laundering.”
Anti-corruption campaigners and financial experts argue that London has served as a hub for this illicit activity for too long. They say that money laundering, the method by which the source of illegally obtained money can be disguised within legitimate businesses, is prevalent in the U.K. because of the private sector that is all too ready to assist those looking to invest in the country and easily circumvent its tax laws.
The ease with which suspect foreign money can enter the economy has become an essential aspect of London’s success.
Transparency International, an anti-corruption non-governmental organization, sent ABC News documents that it says identifies an eye-watering £4.4 billion — or $5,654,871,200 — worth of property bought with suspicious money in the U.K.
On top of that, there are a total of 86,000 British properties owned by foreign companies in jurisdictions abroad, meaning it is impossible to trace who owns them. Transparency International also found 766 U.K. companies involved in 52 global money laundering and corruption scandals, the sum total of which amounts to £80 billion, or $102,815,840,000.
“Over the past decade, £68bn has flowed from Russia into Britain’s offshore satellites such as the British Virgin Islands, Cayman, Gibraltar, Jersey and Guernsey,” financial journalist Oliver Bullough wrote in The Guardian in May 2018. “This wealth is not actually in the offshore centers – it is just registered there, which helps to obscure its origins. If you’re a Russian official whose wealth is wildly disproportionate to your salary, this anonymity allows you to spend your money in London without anyone realizing you’re a crook.”
There are a number of ways by which this money “flows” into Britain via these offshore tax havens, tax expert Richard Murphy told ABC News. By far the most attractive way to deposit corrupt capital, he said, is “to hide money in apparent open view” by setting up a U.K. company and then to “let it trade at an apparent profit.”
“The UK’s HM Revenue & Customs audit only a few companies a year,” Murphy said. “Their inclination is to ask very few questions of companies that have paid their tax before an application to be struck from the Register of Companies is made, and to make even fewer once the company has been dissolved upon payment of a £10 fee and a voluntary declaration of solvency. Was the trade real? Who cares?”
Then, if the company has dissolved, HMRC is even less likely to ask questions, Murphy added.
“It’s just too easy to launder this way,” he said. “Bringing money into the U.K. should be hard. As yet it’s not likely to be. And so the laundromat goes round.”
There is another key policy initiative behind the abundance of unvetted foreign wealth in the British Isles. Tier 1 investor visas — a special immigration program that the government recently failed to retract, as the New York Times reported in December — allow wealthy investors to gain residency without screening where their wealth is from.
Introduced in 2008, “golden visas,” as they are known, means that a foreign investor can receive a visa in return for £2 million — or $2,570,396 — worth of investment. After five years, those individuals will receive permanent residency in the U.K.
According to Transparency International, of the 3,048 visas of this kind that were awarded between 2008 and 2015, 60 percent went to Russian and Chinese nationals. These twin policies — a lax approach to money entering from secrecy jurisdictions and the “golden visas” — mean that the source of foreign investment, even from potential human rights abusers, is extremely difficult to trace.
“It’s not just Russian money,” Misha Glenny, the author of McMafia, a non-fiction book adapted into a hit TV series about money laundering, told ABC News. “With the anonymous companies, then anyone can invest in this country — Mexican cartels or Chinese gambling consortia or American corporate tax evaders.”
While the NCA has said that the first UWO issued was the first implementation of a wider strategy, significant concerns remain about how much, and more importantly who, gets to invest in the U.K.
Earlier this month, the Daily Telegraph dropped a bombshell disclosure. In 2012, with the Syrian Civil War in full swing, the rich aunt of Syrian dictator Bashar al-Assad was granted indefinite leave to stay in the U.K. after arriving in 2006 on a visa based on a promise to “invest in bonds, hedge funds etc.,” the paper reported.
Her husband, Rifaat, known as the “Butcher of Hama” for his role in alleged human rights abuses in the 1980s, reportedly owns a £10 million mansion off London’s historic Park Lane, according to the report.
While the full extent of this kind of activity is not yet known, there are plenty of examples of foreign nationals exploiting this system.
Take Colonel Qadaffi henchman General Ahmed Mahmoud Azwai, who was tracked down by Buzz Feed to the south west of England, where he was found to be living a “comfortable lifestyle.” This, despite being “suspected of laundering millions through properties in the Home Counties via a network of offshore companies,” BuzzFeed reported.
Or Brigadier Guima Elmaarfi, another Qadaffi associate, who is also living in southwest London. He is also suspected of money laundering and allegedly escaped Libya with a fortune of £14 million, or $17,992,772, following the dictator’s fall.
And then there’s Igor Shuvalov, the former Russian deputy prime minister, who bought two London apartments for £11.4 million, or more than $14.6 million, according to the Organized Crime and Corruption Reporting Project. Alexey Nalvany, an anti-corruption campaigner, alleges Shuvalov owns the company through which the properties were bought.
Shuvalov denies this claim. His official salary? £112,000 per year. Transparency International say it would take Shuvalov 76 years to pay for these Westminster properties.
A number of banks have been hit with headline-grabbing fines in the European Union over recent years. In November, Reuters reported that the head of Danske Bank resigned after it was revealed that nearly $226 billion of cash entering its Estonian branch was laundered money from Russia.
Domestically, the U.K. government has made efforts to curb the influx of dirty money.
The government passed Magnitsky-style legislation last year. The law, established in the United States, allows the U.S. government to sanction corrupt government officials implicated in alleged abuses anywhere in the world.
However, after Prime Minister Theresa May directly pointed to the Russian government as the perpetrators of the poisoning of dissident former spy Sergei Skripal, the government announced the policy would not be used for two years, according to the Daily Telegraph. Meanwhile, Estonia, Canada, Lithuania and Latvia have all used versions of the Magnitsky Act to sanction individuals.
Bill Browder, a hedge fund manager and activist who pioneered the Magnitsky Act in the United States, told ABC News that this climbdown, similar to that on “golden visas,” “gives the Russians a huge green light to go and do more terrible things because there is no consequence.”
“The only thing we can do now is go after Putin politically, and the only way we can do that is by targeted sanctions against people close to him in his regime,” he said. “And particularly the oligarchs who are holding his money.”
However, even this response would likely have unintended consequences, experts say.
“Fundamentally, sanctioning oligarchs and cracking down on embezzled money is well worth doing on its own terms, but it does not in any way punish Putin or the Russian state,” Mark Galeotti, a security expert on Russian affairs, told ABC News. “If anything, it helps him, as it forces oligarchs to move their money back to Russia, where it can be taxed and controlled, and makes them more dependent on the state.”
The U.K. Parliament passed legislation in 2018 to abolish the anonymous companies in offshore tax havens by imposing a public register by 2020. On Monday, the government announced a new “task force” to tackle economic crime: the new economic crime strategic board, which will meet twice a year.
In response to questions by ABC News about money laundering, the minister of state for security and economic crime, Ben Wallace, said the government was taking “tough action, which is having an impact.”
“Laundering dirty money corrupts our society and allows crooks to enjoy their dubious wealth,” he told ABC News. “Our focus on detecting and combating dirty money is being delivered through a new national coordination centre, new laws and expanding partnership with the private sector. Last month, the UK was rated world-leading in the fight against illicit finance by the Financial Action Taskforce.”
However, with Brexit on the horizon and the previous shelving of transparency policies, there is no guarantee that will be the case. Consulting firm EY recently found that the financial services sector has shifted almost £800 billion worth of staff, operations and customer funds to Europe.
Politicians, businesses and citizens continue to sweat over their economic future.
“At the moment we’re headed for a no-deal Brexit,” said Misha Glenny. “And you can’t afford to alienate wealthy communities that have come in if you’re going for a no-deal Brexit.”
Beneath London’s flashy exterior, it seems, lies a murky financial underworld of lax regulations, loopholes and shady foreign investors. But while the country may be squarely focused on Brexit, the forgotten reality of how London caters to its super rich could once again slip through the cracks.