The Economist - UK (2022-05-07)

The Economist May 7th 2022 Britain 25

This tilts the system in favour of those with
very deep pockets, who will have no trou­
ble picking up an opponent’s bill. 
It also has the effect of ratcheting up le­
gal  fees.  “Some  lawyers  might  feel  able  to
charge huge sums because they can argue
to the client that if they win the other side
will pay it,” says Frederick Wilmot­Smith, a
barrister  and  author  of  “Equal  Justice”,  a
book about inequities in legal systems. “It
encourages  a  billing  arms  race.”  Top  Lon­
don law firms have been known to charge
£70,000 for a single court application. 
High fees and costs­shifting do not de­
ter plutocrats, who regularly take each oth­
er  on  in  English  courts  and  barely  bat  an
eyelid  at  the  expense.  But  even  in  moder­
ately complex civil cases, says Mr Wilmot­
Smith, “no sensible person worth less than
tens of millions” would expose themselves
to a court trial. He argues that the English
legal  system  should  be  structured  more
like its health­care system, by severing the
connection  between  trial  resources  and
the allocation of lawyers. 
Costs­shifting  stymies  not  just  private
litigants but the authorities, too. The nca,
for  instance,  often  shrinks  from  pursuing
cross­border  corruption  cases  for  fear  of
having to pay out a hefty chunk of its bud­
get should it lose. A former ncainvestiga­
tor  says  he  “almost  gave  my  superiors  a
heart attack” when he wanted to freeze ov­
er  $1bn  in  a  corruption  investigation
linked  to  Nigeria.  They  balked,  he  said,
fearing it could “sink our entire budget”. 
The  case  documents  were  instead
passed  to  a  prosecutor  in  Italy  who  was
keen  to  take  the  case  to  trial  (one  of  the
firms  involved  was  Italian);  the  country’s
well­funded, 60,000­strong Guardia di Fi­
nanza  honed  its  skills  following Mafia
money trails. America, with large kleptoc­
racy­focused budgets and habits of prose­
cutorial aggression (some prosecutors see
taking  on  big  cases  as  a  career  stepping­
stone)  is  also  far  ahead  of  Britain  when  it
comes to chasing down dirty money.
Enforcement is the fourth and most im­
portant part of the puzzle for ministers to
solve.  Britain’s  overall  budget  for  fighting
economic  crime  is  an  underwhelming
£850m,  according  to  Spotlight  on  Corrup­
tion,  an  ngo.  A  mere  £43m goes  on  tack­
ling international corruption, bribery and
the  like,  estimates  Mr  Barrington.  It  is  no
surprise, then, that few big cases are prose­
cuted. Between 2016 and 2021 the ncadid
not secure a single conviction for high­lev­
el international corruption. 
It did win two high­profile asset freezes
using “unexplained wealth orders” (uwos),
but  this  new  tool,  too,  has  been  disap­
pointing. Britain introduced uwos in 2017
as a way to make it easier to get results in
kleptocracy  and  organised­crime  cases,
where  proving  that  money  in  a  bank  ac­
count is corrupt or a mansion was corrupt­

ly obtained can be fiendishly difficult.

Theyrequirethetargettoprovethattheir

assetswereboughtusingcleanmoney,or

faceconfiscation.Butdespitehopesofup

to 20 uwos a year,justfourhavebeenis­

suedsofar.Nonewasagainsta prominent

Russianfigure.

WhenthencahaditsuwoagainstMs

Nazarbayeva and her sonoverturned, it

was landed with a legal bill for £1.5m,

roughlya thirdoftheagency’sannualbud­

getforinternationalcorruptioncases.(To

helptacklethisproblem,theneweconom­

ic­crimeactplacesacaponcostsinthe

eventofauwobeingoverturned.) Accord­

ingtoJonathanBenton,a formerheadof

thenca‘scorruptionunit, theobstacles

thatprosecutorsfaceincaseslikethisalso

include queasiness among judgesabout

thelegalunderpinningsofuwos,which

“makesenseinthecontextofthedifficul­

tiesofbringingsuchcasesbutsituneasily

withtheprinciplethatyouareinnocent

untilprovenguilty”.

Thelackofenforcementresourcesaf­

fectsthequalityofbothpersonnelandthe

technologythat is keyto investigations

thesedays.Middle­levelfinancialsleuths

atthencagetroughlythesamepayascop­

personthebeat,saysMrBenton;whenhe

wasthere,somehadtotakea paycutwhen

transferringfromthepolice.Thestructure

ofenforcementissub­optimal,too.Britain

doesnothaveanyoverarchingauthority

foritsanti­corruptionefforts.Astudyin

2016 found 66 separate“specialistenforce­

ment,prevention,investigativeandover­

sightagencies”involvedinthepolicingof

corruption­relatedoffences,inadditionto

45 regionalpoliceforces.

Penaltiesforbanks,lawyersandother

“enablers”ofdirtymoneyarepaltry. Even

for banks, fines for money­laundering

lapsesrarelyexceeda fewtensofmillions

ofpounds,smallchangeformany.Lawyers

whoturna blindeyecanexpectnomore

thana rapontheknuckles.SeveralBritish

estateagentsfilmedundercoverfora doc­

umentaryseemedunconcernedwhenthe

“buyer”saidtheywereusingfundsstolen

fromtheRussianstatebudget.

AreportpublishedbyChathamHouse,

a think­tank,in2021,wasdamninglytitled

“The uk’s kleptocracy problem”. It de­

scribedhow Britainhasadopteda“risk­

based”approachtoanti­money­launder­

ing,wherebymuchofthefront­linepolic­

ingisdelegatedtobanks,lawyersandoth­

ersintheprivatesector.But,itconcludes,

“failuresofenforcementandimplementa­

tionofthelaw—plustheexploitationof

loopholesbyprofessionalenablers—have

meantthatlittlehasbeendoneinpractice

topreventkleptocraticwealthandpolitical

agendasfromenteringBritain.”

Theupshotofallthiswasencapsulated

in the report’s subtitle: “How servicing

post­Sovietelitesweakenstheruleoflaw.”

The Britishauthoritiesareturning their

backsonMrPutinandhiscronies.Butthe

cracksinthefoundationsofBritain’slegal

systemthatallowedRussianloottoflow

intoLondonwillbehardertoclose.n

Stain removers

A brief tour of selected money-laundering centres

Source:TheEconomist

Britain Popular with plutocrats and kleptocrats from the ex-Soviet Union, Middle East and Asia, despite

the rain. Attractions include laws that make even dodgy assets hard to seize and a world-beating

“reputation management” industry

British Overseas Still in the vanguard of offshore finance owing to Britain’s reluctance to crack down. Shell companies and

Territories opaque investment funds mass-produced in the British Virgin Islands and Cayman Islands, respectively

Dubai Wannabe Switzerland of the Middle East. Foot-dragger on global anti-money-laundering standards.

Favoured haunt of financial fugitives. Sanctions-busting hub

Hong Kong Alluring mix of secrecy, low taxes and light-touch regulation. Hong Kong companies, trusts and funds

feature heavily in creative ownership structures used by rich Chinese to move money under the radar

Switzerland The Rolls-Royce of tax havens. Forced into a partial clean-up after the Gnomes of Zurich were

caught aiding tax evasion on an industrial scale. But 193s financial-secrecy laws remain in place

United States New York skyscrapers and Miami condos are awash in corrupt capital, especially from Latin America.

Delaware and Nevada do a roaring trade in shell companies; South Dakota in trusts