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Britain's Prime Minister Boris Johnson, center, Canadian Prime Minster Justin Trudeau, left, and Netherlands Prime Minister Mark Rutte attend a press conference at Downing Street in London, Monday, March 7, 2022.Alberto Pezzali/The Associated Press

The British Parliament passed a bill late Monday designed to toughen sanctions against Russian companies and oligarchs with significant assets in the country.

It made the move amid mounting criticism by anti-corruption activists and opposition party members that Prime Minister Boris Johnson and the Conservatives have not done enough over the past decade to stem the flow of “dirty” money into the London property market, allowing the capital to morph into a money-laundering hub for wealthy foreign elites, particularly from Russia.

But experts in financial crime who have tracked London’s transformation over the past two decades into a preferred destination for Russian and other foreign oligarchs to park their wealth – with easy access to a well-versed web of lawyers, wealth managers, bankers and family offices – are doubtful the new law will actually succeed in rooting out ill-gotten money from the capital.

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“Frankly, [the bill] is up against oligarchs with a lot of money who no doubt have very good lawyers and other professionals that will be able to identify loopholes or structure their property holdings so they are not necessarily captured by the new requirements,” said Kathryn Westmore, senior research fellow at the Royal United Services Institute’s Centre for Financial Crime and Security.

The scattering of property assets by wealthy Russians throughout London with suspected ties to the Kremlin, or who have been sanctioned by other Western governments, is at the centre of political debate in Britain about the effectiveness of the country’s current sanctions against Russia and Russian companies.

A February report by the global anti-corruption advocacy group, Transparency International, estimated more than $11-billion of “questionable funds” from around the world has been invested in British property since 2016. The group also found that, of this total, approximately $2.5-billion worth of property was purchased by Russians who had been accused of corruption or who had ties to the Kremlin.

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Britain's Prime Minister Boris Johnson speaks as he attends a joint press conference with Justin Trudeau and Netherlands Prime Minister Mark Rutte in Downing Street on March 7.Alberto Pezzali/Getty Images

Currently, foreign firms that own property in Britain are not obliged to declare who ultimately owns or controls the company. The new Economic Crime Bill, as it is known, will establish a publicly accessible registry of foreign owners of British property, forcing them to declare and verify their identities as “beneficial owners,” meaning they will not be allowed to hide behind shell companies or trusts.

“For example, a corrupt foreign official might buy a property in the U.K. through a company registered abroad to try and avoid suspicion that the property has been bought by them using laundered money,” the bill reads. “If law enforcement could check the register of beneficial ownership for that country, they would know who owns (or controls) the company, and therefore who owns the property.”

Companies House, Britain’s registrar of companies, will operate the registry.

The bill has been in the works for years, going through various iterations, but it was sped up last week in the wake of Russia’s invasion of Ukraine and subsequent media reports about Russian oligarch money in London’s luxury property market, as well as ties between certain Conservative Party members and Russian billionaires.

The key goal of the bill is transparency, according to Ms. Westmore, who said consecutive Conservative governments have promised better regulations around foreign ownership of property in Britain but have stalled on actually delivering. “It’s been something of a problem for a long time. It might have an important deterrent effect, but that is largely dependent on how the bill will actually be enforced,” she added.

A crucial sticking point between Conservatives and opposition party members is the period in which foreign owners will have to register themselves – an older version of the bill placed this grace period at 18 months, which would potentially allow foreign investors to transfer or sell their assets before they are identified and seized. A government amendment last week reduced that period to six months, but a number of Labour Party members of Parliament are calling for that window to be reduced even further, to 28 days.

Another concern is the bill also provides exemptions on registering assets if it is in the “interest of national security” or in the “economic well-being of the United Kingdom.”

“We need to make sure that this data on foreign ownership is obtained immediately,” said Roman Borisovich, a former Moscow investment banker turned anti-corruption campaigner who runs “kleptocracy” tours in London of Russian oligarch-owned mansions.

“It is truly sad that we have been campaigning for more transparency for years, but we had to do this now because of the bloodshed in Ukraine. Right now, the U.K. government is powerless to do anything even if they suspect a property is owned by a rich Russian government official or someone with ties to the government,” he added.

Nigel Kushner, an international sanctions lawyer and chief executive officer of London-based law firm W Legal, said the bill was a “great help in the battle against corruption,” adding that for years, Britain welcomed investors from all around the world and encouraged them to bring their wealth, so it made sense that there would eventually be scrutiny of ill-gotten gains.

One of the key Russian oligarchs with ties to the London property market is Oleg Deripaska, the billionaire industrialist and founder of Basic Element Ltd., a diversified energy, metals and financial services company based in the British tax haven of Jersey.

According to the Financial Times and Forbes, Mr. Deripaska owns properties in New York, Washington and London worth roughly $100-million, including a seven-bedroom mansion in Belgravia, an affluent district of central London.

Mr. Deripaska has been on the U.S. sanctions list since 2018, and his properties in New York and Washington were raided by the Federal Bureau of Investigation in October, 2021. Last week, Britain’s National Crime Agency obtained freezing orders against bank accounts held by British businessman Graham Bonham-Carter because it believed the accounts contained money linked to Mr. Deripaska.

Roman Abramovich, another Russian oligarch and former politician who is selling his ownership in England’s Chelsea Football Club in the wake of the onslaught of sanctions, owns a 15-bedroom mansion at Kensington Palace Gardens in central London. Labour MP Chris Bryant suggested last week, under parliamentary privilege, which protects him against legal proceedings, that Mr. Abramovich was looking to sell his London property to avoid his assets from being frozen.

But many wealthy Russians who started to fear being sanctioned after Russia occupied Crimea in 2014 had already started unloading or restructuring their British-based assets, according to Chris Weafer, the CEO of Macro-Advisory Ltd., a London- and Moscow-based advisory firm with close connections to the Russian expat community in Britain.

“Their assets are no longer as concentrated in the U.K. and the EU as they previously were. They are now in places like Dubai and Singapore, and many of them have taken great care to leave their assets much less exposed,” he said.

Mr. Weafer said the bill might have some impact on high-profile individuals with properties in London, but otherwise it was not necessarily significant for many other rich foreign investors.

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