Russian heyday of corruption is over, says MP on release of report into Kremlin money in London
The days when Russian corruption was an acceptable part of business are over, the chair of the Foreign Affairs Select Committee has said.
Speaking to City A.M ahead of the publication of a new report into corrupt Kremlin-connected money in the capital, Tom Tugendhat said the issue needed to be taken “very seriously”.
The report, released today, said the government’s initial robust response to the poisoning of former spy Sergei Skripal and his daughter in March had been undermined by the “business as usual sign hanging on its front door”.
It cited a tweet by the Russian Embassy, in which it appears to boast about a €750m (£655m) bond sale by Gazprom. Some of these were bought by UK investors, just two days after it announced the expulsion of 23 diplomats from the capital.
“The ease with which the Russian government was able to raise funds in London despite the strong measures that the government took in the wake of the Salisbury attack raises serious questions about the government’s commitment to combating Russian state aggression,” it said.
The committee also cited experts as warning there had been a lack of political will on behalf of the UK’s regulators and City institutions, including the Serious Fraud Office (SFO), to tackle corruption, owing partly to a lack of resources and funding.
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Top City magic circle firm Linklaters was singled out for criticism for failing to appear before the committee to give evidence on the flotation of its client, Russian energy company En+, on the London Stock Exchange (LSE).
It queried how the flotation was able to take place given the fact that sanctioned bank VTB held a stake in En+ and that the energy firm used the £1.5bn in proceeds from the IPO to repay a $1bn (£742m) loan to VTB without breaching any sanctions.
The committee’s report called on the government to investigate “the gaps in the sanctions regime that allowed a company such as En+ to float on the London Stock Exchange, and to work with the G7, whose markets dominate the financial world, and other international partners, to close those gaps as soon as possible”.
On Linklaters’ absence, it said: “We regret their unwillingness to engage with our inquiry and must leave others to judge whether their work at “the forefront of financial, corporate and commercial developments in Russia” has left them so entwined in the corruption of the Kremlin and its supporters that they are no longer able to meet the standards expected of a UK-regulated law firm.”
The firm hit back at the accusation, saying it was “very surprised and concerned at the passing criticism of Linklaters in the report”.
“We reject any suggestion based solely on the fact that we – like dozens of other international firms – operate in a particular market that our services may somehow involve the firm in corruption, state-related or otherwise.”
The recommendations the committee unveiled included closing the gaps in the sanctions regime that have seen companies use London markets but be sanctioned in other jurisdictions; closing the loopholes that allow debt issuance be used to go around sanctions and an extension of sanctions to target more individuals who are closely linked to Putin’s regime.
Read more: Prime Minister urged to consider City sanctions for Putin allies