71.The proportion of dirty money in London is estimated to be small, relative to the size of the entire financial sector. The damage that this money can do to UK foreign policy interests, by corrupting our friends, weakening our alliances, and eroding trust in our institutions is, however, potentially enormous. The Government cannot afford to turn a blind eye as kleptocrats and human rights abusers use the City of London to launder their ill-gotten funds and to circumvent sanctions, putting that money directly into the hands of regimes that would harm the UK, its interests and its allies.
72.We asked the Foreign Secretary to outline the Government’s strategic objectives for UK-Russia relations. He told us:
The UK wants Russia to play a role as a responsible international partner in upholding the rules based international system. Regrettably, a pattern of Russian aggression over the past decade, from the murder of Alexander Litvinenko to its actions in Crimea and Ukraine and the recent attack in Salisbury, suggests that this is not Russia’s aim. The Kremlin has consistently flouted the values and norms that make the freedoms we enjoy possible. In December, I held out the hand of engagement, but we have been given every signal to beware.
73.The Government is right to respond robustly to the aggressive actions of President Putin’s regime. But reacting in an ad hoc way to the Kremlin’s behaviour has led to a disjointed approach. Despite the Government’s strong rhetoric, President Putin’s allies have been able to exploit gaps in the sanctions and anti-money laundering regimes that allow them to hide and launder assets in London. This undermines the strength and unity of the global diplomatic response to Russian state actions, threatens UK national security, and helps to enable corrupt kleptocrats to steal from the Russian people.
74.As a nuclear-armed, permanent member of the United Nations Security Council, Russia remains a major player in global affairs with an important voice and a seat at the table. It has the potential to be a force for security and stability. But instead of participating in the international rules-based system, President Putin’s regime uses asymmetric methods to achieve its goals, and others—so-called useful idiots—magnify that effect by supporting its propaganda. Russia’s economy—which, it is worth recalling, is approximately the size of Spain’s—is deeply interconnected to the Western financial system. This gives the US, EU and other G7 countries, acting together, significant leverage in seeking to counter the Kremlin’s aggressive behaviour.
75.The UK must set out a coherent and pro-active strategy on Russia, led by the Foreign and Commonwealth Office and co-ordinated across the whole of Government, that clearly links together the diplomatic, military and financial tools that the UK can use to counter Russian state aggression.
76.There are a number of concerns that we have not addressed in this report, including the role of Tier 1 investor visas and the purchasing of EU and UK citizenship. We may return to these issues in future inquiries, and may also investigate other aspects of the UK sanctions regime, and of UK-Russia relations.
95 Foreign and Commonwealth Office () para 2
Published: 21 May 2018