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The recommendations are drawn from research carried out as part of the FCDO-funding Global Integrity Anti-Corruption Evidence programme

Government should enlist expertise of the private sector to fight kleptocracy, experts urge

Experts have urged the Government to enlist the expertise of the private sector to fight kleptocracy because current legislation and investigation practices are “not fit for purpose”.

Better intelligence and enforcement – as opposed to current “weak tools” - is needed to tackle embezzlement by those connected to rogue regimes, they say.

Researchers have urged the Government to publicly state that kleptocracy is a threat to the rule of law and international security. They have called on all public institutions to make transparency a priority, and for more protection for researchers and those who investigate kleptocracy from legal threats made by kleptocrats.

The written evidence was submitted to the Foreign Affairs Committee by Professor John Heathershaw, from the University of Exeter; Thomas Mayne, from the University of Exeter and Chatham House; Dr Tena Prelec, from the University of Oxford and University of Exeter; Professor Ricardo Soares de Oliveira from the University of Oxford; Professor Alex Cooley from Barnard College and Columbia University and Casey Michel, a journalist and author of American Kleptocracy.

The recommendations are drawn from research carried out as part of the FCDO-funding Global Integrity Anti-Corruption Evidence programme.  The researchers have recorded £2bn worth of UK real estate linked to kleptocracies as part of their work so far.

Professor Heathershaw said: “To tackle kleptocracy we need cross-government approach, domestic policy changes for the purpose of more effective foreign and security policy, as well as the defence of the UK’s rule of law.  We need a revolution in thinking by the foreign policy establishment.

“The UK lacks and badly needs a strategy for countering kleptocracy. It is a problem which has festered for at least two decades. By providing a route to the global economy for Russia and Kazakhstan, the UK has helped fuel both the hubris of the Ukraine invasion and the resentment of the Kazakhstan crisis.  The UK’s kleptocracy problem is not just a matter of the rule of law but of international security.”

Researchers say the UK initially lagged behind the US, EU and Switzerland in individual sanctions applied after the invasion of Ukraine because the Foreign Office’s FCDO sanctions unit lacked capacity and the government “simply didn’t know where many of these assets were to be found”. The follow-up amendment to remove the “appropriateness test” from the Economic Crime Bill wouldn’t have been needed if the Government had the capacity to analyse kleptocracy.

The experts say the proposed US-UK joint counter-kleptocracy working group is desperately needed to “stimulate the UK’s own anti-kleptocracy strategy”. They call for the report into the scandal of the Tier 1 investor visas to be published and then for the Conservative Party to commit to give up all donations from persons identified as high-risks of corruption or threats to national security.

Dr Mayne said: “There is the danger that UWOs, even in a revised form, will only have an impact in the most clear-cut anti-corruption cases, where the state official has no possibility of answering the requirements of the order, likely because they are no longer part of the political elite of their home country.  Unless there is further reform or new legal precedent to establish that wealth accrued by such political means is not in fact “lawfully obtained”, then UWOs will remain a weak tool against kleptocracy.”

Researchers have called for membership of a regime, family tie to a kleptocratic regime, or business connections to regime membership to be used as civil standard of proof of unlawful sources of wealth.

The report calls for increased funding and mandate for the UK enforcement agencies so that they can properly investigate and freeze corruptly obtained assets. It also recommends radical reform or replacement of the SAR system to require private sector professionals in regulated sectors fewer but more detailed submissions of cases of suspicion of elites, business and their associates from kleptocracies– not just PEPs – to the NCA’s Financial Intelligence Unit (FIU) and/or other enforcement. Commercial or legal confidentiality requirements must not be allowed to prevent such disclosure in cases of suspected money laundering. 

Date: 18 August 2022

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