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Here’s how we can really punish Putin’s friends

Ukraine should be the final push we need to close the legal loopholes that encourage oligarchs and kleptocrats to hide their assets in the UK

Picture: The New European

I have been a lawyer for over 30 years. I specialise in divorce. In recent years, that has meant getting to know a fair few Russians who, in marital matters as in libel and/or the settlement of personal fall-outs, have adopted their beloved Londongrad as the chosen venue of legal battle.

It would not be professional of me to go into the detail of the cases I have handled, and I am sure the wealthy Russians I have read about in reported cases are not representative of Russians as a whole. It has been an interesting experience, though, and one that has taught me a fair few lessons. The first is that the richer people are, the more determined they are to hold on to their money. The second is that although we Brits may see the UK legal system as being among the best in the world, others see it as being riddled with loopholes – which they are very good at exploiting.

So, in the early days of the Ukraine war, as the government came under pressure to bring in sanctions but ministers warned they needed time to get the detail right, I had a fair idea of what the targeted oligarchs would be up to – shifting assets, finding loopholes, using the time between the signalling of sanctions and their actual imposition to ensure as best they could that they would not be hit in the way the UK government intended.

For here is another lesson that I have learned… any asset that flies, floats or has wheels – whether military or civilian – can be moved.

It is somewhat alarming that it has taken the fear of a possible third world war to wake us up to a reality that all too few politicians and journalists have been trying to warn us about for some time; namely that the UK, and British territories, have become the go-to places for the corrupt and the kleptocratic seeking to hide, disguise or launder their assets.

They have considerable experience in moving them around, helped by overseas registration bodies. That experience is doubtless coming in useful as they now seek to protect those assets from those wanting to freeze or seize them.

Much of the work in a divorce case relates to the division of assets when a marriage comes to an end. International family law is a complex enough field, even without the emotions and bitterness that can often accompany a separation and a fight over who gets what. But the work is made even more complicated by the ever-more Kafkaesque layers of corporate and offshore veils behind which money is hidden, assets disguised, and as one veil falls away, another emerges.

Why, I ask rhetorically, do an ever-increasing number of individuals wish to disguise the ownership of assets? The answer, of course, is that they have something to hide, and have found a place where they can do that. But a more troubling question for me, as someone who has always been proud to be able to say in polite company anywhere in the world that I am “an English lawyer”, is why Britain and its laws have become so attractive to those with so much to hide?

Those who have arrived here with their investor visas can scarcely believe their luck when they discover just how much opaqueness is here to be exploited. There are so many places to park their assets, “mitigate” – or better still potentially avoid – tax, and hide all they own, and the manner in which they came to own it, from the countries and peoples from where their sudden rush of wealth emanated. The “system”, a union flag flying above it, assists in providing a secure bolthole for the “klepto-classes” if and when the revolution occurs in their respective countries of plunder. Last but by no means least – and not necessarily part of the original plan at the start of the asset grab – a by-product of such planned secrecy is the thwarting of spousal financial claims on divorce.

The government has talked of closing loopholes for years. They have repeatedly promised to force declarations of beneficial ownership of real estate in the UK; progress has varied between slow and non-existent. Given the horrors of Ukraine and the now unarguable reality both of systemic looting of an entire economy, and the use of oligarchical wealth to support and maintain the Putin war machine, surely the change must now come, and a solution be found to problems we have known about but chosen to ignore.

Finally, the home secretary has abolished the investor visa programme, a welcome step. But further measures must follow to ensure those with the benefit of an investor visa, and the red carpet welcome to non-domiciled tax status and massive fiscal advantage that accompanies it, stop enjoying that advantage at the expense of hard-working, tax-paying UK residents.

The government has a moral obligation to terminate the non-domiciled status that has given so much to so few, at a time when the cost-of-living crisis is becoming all too real for so many.

The opaque non-domiciled investor visa homeowner may think that his “home is his castle”, but with minimum effort, the government can penetrate the rampart for the common good.

The government has the “golden key” to all property in England and Wales; it is all recorded at the Land Registry.

All property owners/sellers/purchasers need to comply with Land Registry rules and give an address. The “klepto-classes” use exotic locations as the registered address of the owner including countries such as Panama, Belize, the British Virgin Islands and others.

The Land Registry, with its sophisticated computer systems, has the ability to churn out a list of all properties registered in the name of an individual and therefore, presumably, can do exactly the same for the country of registration.

In complicated financial claims arising from (usually international) divorce, in the right circumstances I can secure from the court an order requiring the Land Registry to give me a list of properties held by individuals and companies. Should my inquiries prove to be successful, the Land Registry will generate a list of properties; I can then take steps to prevent a transaction taking place by the use of court orders or, at less expense, registrations at the Land Registry. The “owners” (who repeatedly deny ownership) of opaquely registered properties may so easily be precluded from their “tools of evasiveness” by a few simple steps (some of which may need to be retrospective).

First, any property whose ownership is registered in an exotic location that has no obvious connection with the location of the property could be prevented from dealing with it in any way (gift, sale or mortgage) with an immediate Land Registry registration (noted on the official ownership documentation).

Second, if the true owner wishes to challenge the first point then he or she will not only have to declare his or her true identity, but also prove the source of wealth and pay the correct tax on any transaction; all to the required standard of a statutory body or court with a remit to monitor transparency and standards.

And finally, in complex divorce cases where a party has, for many years, tried to hide all his/her assets from others, it is difficult and expensive to prove the true owner of a piece of property, and there are no guarantees of being able to do so. With a few simple strokes and a will, it is possible for the government to easily prove ownership, source of funds and, in appropriate circumstances, prevent transactions in respect of the ever-increasing number of properties said to be “owned” by entities in warm and exotic climates but in reality situated firmly on these cold shores.

David Lister is a Partner in the family law firm Raydens

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