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 effect 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 firms 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
firms involved was Italian); the country’s
wellfunded, 60,000strong Guardia di Fi
nanza honed its skills following Mafia
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 fighting
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 highprofile 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 fiendishly difficult.
Theyrequirethetargettoprovethattheir
assetswereboughtusingcleanmoney,or
faceconfiscation.Butdespitehopesofup
to 20 uwos a year,justfourhavebeenis
suedsofar.Nonewasagainsta prominent
Russianfigure.
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
“makesenseinthecontextofthedifficul
tiesofbringingsuchcasesbutsituneasily
withtheprinciplethatyouareinnocent
untilprovenguilty”.
Thelackofenforcementresourcesaf
fectsthequalityofbothpersonnelandthe
technologythat is keyto investigations
thesedays.Middlelevelfinancialsleuths
atthencagetroughlythesamepayascop
personthebeat,saysMrBenton;whenhe
wasthere,somehadtotakea paycutwhen
transferringfromthepolice.Thestructure
ofenforcementissuboptimal,too.Britain
doesnothaveanyoverarchingauthority
foritsanticorruptionefforts.Astudyin
2016 found 66 separate“specialistenforce
ment,prevention,investigativeandover
sightagencies”involvedinthepolicingof
corruptionrelatedoffences,inadditionto
45 regionalpoliceforces.
Penaltiesforbanks,lawyersandother
“enablers”ofdirtymoneyarepaltry. Even
for banks, fines for moneylaundering
lapsesrarelyexceeda fewtensofmillions
ofpounds,smallchangeformany.Lawyers
whoturna blindeyecanexpectnomore
thana rapontheknuckles.SeveralBritish
estateagentsfilmedundercoverfora 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
systemthatallowedRussianloottoflow
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