17 March 2022

Are you an oligarch?

By Miranda Marshall, Director, Hayes + Storr.

Events are moving so quickly in Ukraine and with them the legal and political changes that accompany those cruel and egregious developments. It is difficult to write an article that will still be current when it goes to press.

Yet how can I write something that ignores Ukraine and return to my traditional narrative of law relating to the domestic family?

We have all seen news of London international mega-firms cutting their links with Russia, stories of London practices threatening to sue the Government because it is sanctioning their oligarch clients, and there have been questions raised in the House of Commons about ‘amoral lawyers’, with parliamentary privilege being used to name them.

On 10th March the PM said that ‘the legal profession and everybody assisting those who wish to hide money in London and assisting corrupt oligarchs have been set on notice that their actions are under scrutiny. If they break the law, and if they undermine the interests of this country and advance the interests of Putin’s war machine, they will pay a price.’ Yet, even if this is true, to what extent has his own party received funding over the years from the same people?

There have been some fascinating academic musings on obscure points of International Law, encompassing the subjects of the prosecution of Putin for war crimes and of an illegal war. “Even war has rules”, as the International Committee of the Red Cross puts it. The rules of war are contained in treaties called the Geneva Conventions and a string of other international laws and agreements.

These topics have all brought the law into the headlines and have produced some very fine writing, but these are all very far removed from my own area of practice. Closer to home and more prosaic is the question of solicitors whose role in English transactions, often commercial or residential property transactions, is seen to have played a role in facilitating the transfer of wealth out of the former Soviet Union, and elsewhere.

As a solicitor, you need to understand the source of wealth and source of funds for a transaction, and to know your client (KYC, in the jargon. If you rely only on a passport and a utility bill as proof of ID, the person before you could be a crony of Putin, but one who pays their gas bill. Identity information will help establish whether someone is a Politically Exposed Person (PEP). We must look further into their wealth and where it came from.

Olga (19) comes to see you. She is buying a flat in Mayfair (or a marsh side house in Brancaster, perhaps!). She tells you that she will pay for it with a loan from the bank. The bank’s involvement is, surely, reassuring as they must have checked things out? But the bank loan itself is no proof that the money is clean. Perhaps there is an imminent money laundering report to be filed, which the bank cannot tell you, or Olga, about because that would be ‘tipping off‘? Even if the loan is approved, you still need to be curious. Why is this private bank lending Olga so much money? Is there family wealth swaying the banker’s decision? Does it ‘smell’ right? If not, ask more questions….or decline to act….

There is to be an overhaul of the system of checks for Britain’s register of companies at Companies’ House. It has been increasingly criticized that the database is too easily abused by money launderers and fraudsters. Companies House was set up in 1844 and ever since its creation it has operated by accepting information that is submitted to it as being in good faith, based on an assumption. This is to change and CoHo will have more power to scrutinise and reject information.

The Law Society has acted quickly in supporting lawyers who work in affected areas of the law, putting in place policies and practices, including regarding the sanctions legislation. The ripples spread ever outwards.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

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