There is much discussion about what can really be done by the UK that might harm Russian interests. Theresa May has backed herself into a corner where she has to say something. The gesture may be as meaningless as throwing out a diplomat or two. It might be a ban on the England team attending the World Cup. Neither will achieve very much. There is one thing that would.
The fact is that the UK is the hub of the world's largest tax haven network. And in many ways, as far as Russian dirty money is concerned, the UK is also the weakest link in that network.
The further fact is that there is almost nowhere on the planet where it is now easier than the UK to form a company. It can be done online. No signatures are required. No proof of identity need be given. No beneficial ownership need be declared. No proof that those named as directors are really running the show is required. The UK provides the dream location for the money launderer seeking to incorporate.
And it gets worse. Latest data (I will publish it soon) shows that almost 200,000 companies a year are struck off the UK company register each year without ever filing a set of accounts. An great many more are struck off with their accounts overdue for filing and so with only out of date information being available. You can be sure that in the former case HMRC have also never seen a corporation tax return. And, of course, no statement of beneficial ownership will have been filed.
The result is that for all practical purposes the UK provides perfect cover for hiding money laundering.
The process is easy. Form a company. Get a bank account. Do a transaction. Apply to the Regsitrar of Companies to have the company struck off. Say the company has never traded. They agree. HMRC knows nothing at all and so do not object. And the company has gone for good leaving not a trace of what it has ever done.
Then repeat the process as often as is desired.
And that, I am quite sure, is happening day in and day out. Let's also not beat about the bush: the evidence is that some of this is Russian money.
So what to do? Simple. Close the loopholes.
First require that company formation always requires proof of the beneficial ownership of all holdings of more than 10% or it does not happen.
Require that all directors prove their identities with Companies House or they cannot hold office.
Require that every company has a UK resident director.
Make directors fully personally liable for the tax and other liabilities of the company if:
- the company does not file accounts as required by law
- the company does not file tax returns
- the company misstates its accounts or tax returns
- the company commits money laudnering offences.
And make banks provide data to HMRC and Companies House each year on:
- Who the beneficial owners and directors are, as proved by the bank, with annual updates required
- The total payments made through any bank account operated
- Account balances at the company's accounting reference date.
This data is readily available as are the systems to report it: they are just not used.
Then create a legal obligation that:
- Companies House check this data
- No company be allowed to be struck off if any data is either missing or wrong
- Increase peanalties for non-compliance
- Hold directors automatically liable for those penalties
- Make it a legal requirement that HMRC check this data
- Make it a legal obligation that HMRC assess a company to tax on the basis of this data if no other data is supplied to them
- Make directors personally liable for this tax
- Make any accountant or lawyer who assists non-declaration personally liable for lost revenues and penalties
Is that draconian? I suggest not. All it says is that the obligations of directorship must be taken seriously.
And it says that cheating companies undermine the economy as well as assist tax laundering.
But in the process it will also stop those aiding and abetting those using UK companies for nefarious purposes, which I strongly suspect many are.
This is a curse of our economy that needs to end.
And it may hit Russian money laundering hard.
It is a double win. Its time has come. Theresa May should announce it will happen.
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Surely it’s time to end the non-dom status offered by the UK. At present rich personable Russians get an advantage settling in say London compared to say a Northerner oe EU national settling in London. If these people were incentivised to keep Russian residence they would bring pressure on their government to reform incrementally into one which was less autocratic and imperial. After all, we would never have had Magna Carta if rich Brits had an escape from the country – the landowners of the time had to confront the King as no other option was available. You’re welcome to claim and develop this idea if you wish, I’m rather busy with my dogs.
I have worked on trhe issue for years….
For this to happen Richard, requires a government that is prepared to properly fund Companies House and HMRC. Unfortunately, as you’ve pointed out yourself a million times, the present government is more intent on running the machinery of the the state into the ground through it’s deranged obsession with ‘balancing the books’.
And as the IFS has pointed out, the austerity agenda is going to carry on with this lot in charge.
I say this as an HMRC employee currently working in a major HMRC office where, a fair proportion of the time, we can’t get access to a working printer, or you find that the printer you were using is currently out of order, and you have to waste time switching to another.
Of course, there’s also the fact that the Tories have taken £3million in donations from wealthy UK based Russians, most of whom are close to Putin. A fact JC pointed out in Parliament, to heckles from Tory MPs.
So I think we can take it that nothing of real substance will be done to stop the UK being a sink of dirty Russian money, can’t we?
You are right: nothing will happen
Excellent post Richard. Agree with all of that. I also have a sneaking suspicion that Putin would welcome it also, but I may be wrong on that score.
However, I think you have as much chance of getting Mrs May to enact such legislation as you have of getting her to find the real culprit behind the Salisbury attack. When you have a media frenzy 24/7 pointing the finger in one direction only without a single dissenting voice, you know you are being told a lie.
Hear, hear, Richard’s suggestions should be introduced in any event irrespective of this hysteria. When you look at how May has allowed this farce to develop without regard to due process of law you have to wonder what she is so keen to cover up with distraction tactics. We may find out in the next 30 minutes when Hammond stands up but I doubt it. Something much murkier than that.
Phil Espin says:
“…..look at how May has allowed this farce to develop without regard to due process of law you have to wonder what she is so keen to cover up with distraction tactics…”
You think May is in the loop and knows what this is about ?
I don’t. I think she’s being led by the nose.
John Adams says:
“When you have a media frenzy 24/7 pointing the finger in one direction only without a single dissenting voice, you know you are being told a lie.”
And Auntie Beeb dutifully dusting off all their Litvinenko material. Police appeal today on the news asking for the public to report sightings of anyone spotted in Salisbury with snow on their boots….
The faux fur bear paws have ‘Made in the USA’ labels in them I think.
All makes good sense regardless of whether it will reduce the amount of state-sponsored murder taking place on UK soil.
As a specific response to the events in Salisbury, HM government should immediately enact an emergency law freezing the bank accounts and other assets in the UK, CDs and OTs of all persons associated with the Putin regime (I’m sure Cheltenham can provide a list) pending conclusion of enquiries into the matter.
Neither will happen of course. These measures would seriously damage the income of the bankers, lawyers etc. that have made London the money-laundering capital of the world. This would be unthinkable.
George says:
“All makes good sense regardless of whether it will reduce the amount of state-sponsored murder taking place on UK soil.”
Perhaps depends which state is sponsoring and what their objective is (?)
“As a specific response to the events in Salisbury, HM government should immediately enact an emergency law ……”
Possibly exactly the sort of response the attack was intended to provoke (?)
“Neither will happen of course.”….
Oh, I don’t know the media propaganda machine seems to be bringing public opinion nicely into line. I think some manner of further, wholly inappropriate response is almost guaranteed.
Which, I think, was Corbyn’s point yesterday.
On Radio 4 this morning the person being interviewed, about Salisbury poisoning, had been a Labour Foreign Secretary and I couldn’t think who it was, but sounded like Ed Miliband. He was full of praise for Maybot and scathing about Corbyn’s intervention yesterday. So easy to forget – David Miliband.
Making comments on Magnitsky and the Russians (or ex-Russians acc to May) in the middle of his otherwise measured response to May’s statement, was extremely foolish. Corbyn played into the hands of the Tories, and his opponents in the Labour Party and elsewhere. He gave that (expletive deleted) idiot John Woodcock the opportunity to say – it would put our national security at significant risk if we were led by someone who doesn’t understand the grave threat posed by Russia.
Cue right-wing press!
Both parts of Corbyn’s response were sensible, just not in the same speech.
Completely agree. May gave a strong and sensible speech in the national interest. If ever there was a time to demonstrate solidarity and take the statesman’s view, that was it.
The problem will have to be addressed sooner or later: the weaponisation of finance is a global issue that should and could be of concern to both major parties. Corbyn sacrificed the opportunity for the chance to make cheap digs at the opposition at a strategically important moment. May does seem acknowledge the problem and Corbyn would have far more to gain by pushing his point as one of strong governance – as does Richard in his piece above – in a way that neutralises political opposition rather than antagonises it.
David….who ?
Never happen.
Lots of “strong words” little strong action.
Lots of money going into the tory party from Russia….I suspect that will be more important than a few common peasants lives.
While it makes ‘good’ tabloid headlines, invoking emotive popularist reaction, it is a SPY story – hence unlikely that the truth will emerge for some time to come, if ever. Trading secrets is what spies do. hence what you see and hear is definitely not what’s going on. Surely even ‘ordinary’ people aren’t so gullible as to not believe all governments spy on each other all the time, and are capable of carrying out criminal acts in the so-called ‘national interest’. My guess would be the US, UK, France, China, Israel and Russia are probably the main culprits – but what do I know?
Always a good source of inside info on such topics is our fearless ex ambassador to Uzbekistan, Craig Murray. Here’s his take on the story – https://www.craigmurray.org.uk/archives/2018/03/russian-to-judgement.
Politicians will inevitably milk the hoohah for whatever gain they think they can achieve with their respective constituencies. After all, engendering fear is the tactical mainstay for exercising and maintaining control, with Russia, immigrants and Islam the current favourites.
While such deaths are naturally unwelcome, I think Corbyn was right to draw attention to the Tory hypocrisy.
John D says:
“Always a good source of inside info on such topics is our fearless ex ambassador to Uzbekistan, Craig Murray. Here’s his take on the story — https://www.craigmurray.org.uk/archives/2018/03/russian-to-judgement. ”
Makes more sense than the story for public consumption.
Also interesting (from an unlikely source I would not expect to agree with) Peter Hitchens on the Russian predicament and German ambitions. Tallies with many of my own observations.
https://www.youtube.com/watch?v=3CNeDtZmpjU
It’s a whole lecture and Q&A so not to be entered on a whim.
“what can really be done by the UK that might harm Russian interests”
Sack Boris Johnson? Deport Matthew Elliott ? Arrest Arron Banks?
No. The tax haven idea is better
For an idea of what we’re up against when it comes to Putin and the Russian oligarchy, listen to this fascinating podcast of James O’Brien interviewing Bill Browder:
https://soundcloud.com/user-957591628/7-bill-browder
Very scary stuff.
James O’brien is good
I’ve copied your post to my MP (Tracey Crouch).
It probably won’t do any good but at least I can feel I’ve done my bit!
Thanks
She could repay bribe money paid to the Tory partei by Russians, shady, various for the use of…. I expect that RT are a bit worried, despite appeasing the Ofcom censor for the last three years.
Keith Crosby says:
“…. I expect that RT are a bit worried, despite appeasing the Ofcom censor for the last three years…”
Getting a dig at RT is about the only titbit of advantage I can see in this for our government.
I note silence issues forth from all the suspects usually to be found howling for press freedoms…
I think your post is excellent! Directors should certainly be held more responsible. In my experience many simply are not aware of their responsibilities.
Totally agree on clamping down on UK’s role in money laundering, but the fact remains that there’s no evidence that this poisoning was carried out by the Russian state: neither was there any concerning Alexander Litvinenko: merely surmise.
On the other hand the UK has slavishly followed the US propaganda onslaught against Russia, with warmongering idiots like Fallon even upping the anti to ludicrous levels and declaring the UK ‘would be ready for war against Russia in two years’. Upping the supposed Russian “threat” level to the UK from Russia serves not the Russians but the interests of the Anti-Russian elite in the US and UK.
The nature of the materials used to poison these individuals do suggests they were carried out with state involvement, but the question remains: which state?
I remain deeply skeptical.
Da tovarishch!
https://www.craigmurray.org.uk/archives/2018/03/the-novichok-story-is-indeed-another-iraqi-wmd-scam/
Hmm, interesting N. Dyson,
Not conclusive but interesting nonetheless.
An uber-state, to which all of a certain political bent belong, one owing allegiance to only itself and nothing so old-fashioned as any nation state. Once you elect politicians, in many ways they have more in common with each other than they do the electorate, just one more reason for not doing it, IMO.
Putin may not be perfect, but am not sure how anyone in the UK government can dare point a finger at him.
At least he believes in the state, the good of the people.
At least he hasn’t turned his country into a tax haven. Unlike Therese May or David Cameron who know nothing except abuse and neo-liberal hate.
I am no Putin fan
Can I make that clear before anyone thinks otherwise?
I have no doubt he heads an extremely corrupt government
C an you name a government that isn’t corrupt?
There is always risk
But to suggest Russia is better than ours is ridiculous
More corrupt or less corrupt than the UK Government?
Isn’t that obvious?
“I have no doubt he heads an extremely corrupt government”
– With most of a million in donations admitted to so far, surely the most corrupt Russians are over here funding our government?
I do not agree
I think the suggestion ridiculous
Richard Murphy says:
“I do not agree “(about the relative corruption of UK Government vs Putin)
“I think the suggestion ridiculous”
I’m inclined to think the difference is one of degree and levels of competence and what each can get away with. A difference of style rather than substance.
And no, I’m not particularly a fan of Putin either but he’s hoeing a very different row than our government. Your offering that begins this discussion lays bare the extent of our own government’s failure to play a straight bat.
Closing Loopholes and stopping money laundering are all great ideas Richard they do not need any bolstering by half-baked warmongering and making serious claims with absolutely no evidence.
Yeltsin was pretty corrupt, it’s not the corruption that our leaders object to about Putin it is that they are not getting their Vig on the spoils.
https://journal-neo.org/2018/03/09/the-skripal-incident-another-anti-russian-provocation/
https://hat4uk.wordpress.com/2018/03/13/the-us-alt-state-cia-triumphant-as-pompeo-becomes-secretary-of-state/
https://off-guardian.org/2018/03/11/the-skripal-case-an-open-thread/
I think the suggestion ridiculous…
Yet the fact remains that many of these Russian oligarchs actually face arrest for corruption if they return to Russia: the same individuals in the UK live under no such fear, and as you yourself point out, launder cash here with impunity.
What I , you or others confess to think of Putin one way or another is surely irrelevant: the Russian people clearly think that he is a vast improvement over the Western Chicago School trauma of what went before.
I would suggest you need to think about the nature of power a little more in this environment
If by ” in this environment” you mean the UK, then power is maintained by winning a gerrymandered FPP election which hasn’t seen a majority since 1932 but where winning a majority of seats is itself still only achievable by means of media coercion.
Of this, the BBC as Reith admitted, would always be on the establishment’s side whist the rest of the media’s ownership naturally support corporate rather than public concerns and have both offshored ownership and profit .
On the “nature” of the powerful, I agree with Bill Kruse above: “An uber-state, to which all of a certain political bent belong…” adding that the UK is perceived by them as little more than a milch cow useful for rentier purposes.
I think this far too cynical a view
Cynicism is wise
But too much is poisonous
So how is this for cynicism: Craig Murray has posted more detail on the exact form of words May is using to formulate her allegations on the Russia did it narrative: https://www.craigmurray.org.uk/archives/2018/03/of-a-type-developed-by-liars/
Truly weasel words from HMG and easy to see why tax avoiders and politicians make such comfortable bed fellows.