The UK is home to a variety of post-Soviet elites. This chapter examines who comes to Britain, and how – until at least 2015 – these individuals were allowed to enter the country with few checks on the sources of their wealth.
Why does so much capital from Eurasia’s kleptocratic states end up in UK assets? Why would the UK government allow thousands of members of the wealthy elites from these countries an easy route to residence – and in some cases to citizenship – at the very same time that it is conspicuously cracking down on what it describes as ‘illegal immigration’? Why would the UK process these ‘golden visas’ – a government scheme where residence rights are provided in exchange for an investment over a certain amount – in weeks with minimal checks, while simultaneously presiding over asylum applications which are stuck for years?
The answer to these questions is not found in the economic benefit to the UK. Luxury property investment has been shown to increase inequalities, while residency-by-investment schemes have ‘negligible’ impact on the national economy.
Rather, it is a matter of supply and demand. A whole host of actors is instrumental in keeping this pattern going, frustrating much of the legislative effort to deal with the problem. Elites from burgeoning economies could not store their dubiously acquired wealth without the help of professional service providers and other prominent intermediaries and influencers in countries like the UK.
This paper’s broad approach to enablers – encompassing both financial and non-financial, regulated and unregulated sectors – is necessary to capture the political and networked nature of the professional services routinely provided to well-connected and wealthy actors from post-Soviet states. Transnational kleptocracy is not confined to particular sectors and neither are its enablers.
The intention is to focus attention on the ‘supply’ side of the problem. It is not simply a matter of demand from Eurasia which will be met elsewhere if not here. UK-based enablers and their overseas partners provide an unrivalled set of hiding and laundering services which generates demand from kleptocrats.
The business of enabling
London has no shortage of lawyers, estate agents and wealth managers offering bespoke instruments for post-Soviet elites to hide their money and gain respectability. Individually, each of these service providers may facilitate a transaction that is legal and within established norms and codes of ethical conduct of these professions. But, although the coordination of enabling activities is usually not done through explicit joint intent, the services provided by the wealth manager, the estate agent and the PR adviser, as well as the welcome from ‘respectable’ UK individuals, complement each other and in many ways could not exist independently.
Guidance from various UK bodies indicates that wealthy individuals from corruption hotspots, especially PEPs, pose a significant money-laundering risk. Yet large parts of the services industry seem to subscribe to the ethos that capital is supreme. In a recent presentation from a representative of a company that offers to help high-net-worth individuals ‘understand and react to media perception’, we learn that non-UK political figures and their families are subject to ‘distinct negative bias’ and that a close connection between business and politics is merely ‘a facet of culture or also somehow aspirational’.
Such companies will help such people who are moving to the UK craft a ‘coherent narrative’ for who they are, and will advise them against ‘out of place’ investments that will draw unwanted attention. They will often work with law firms who will be able to help the client purchase property, prevent critical press coverage via ‘cease and desist letters’ to journalists and NGOs, and suggest ‘family office’ wealth managers who can place the client’s funds in safe, profitable projects.
Reputations are burnished in different ways: through the creation of charitable foundations; philanthropic giving; the support of think-tanks and academic programmes at elite universities; the acquisition of prestigious commodities such as football clubs; or the endorsement of a member of the Western elite. There is often a distinct contrast between an individual’s philanthropic activities – which must be publicized – and his or her private wealth, investments and assets – where the emphasis is on maintaining secrecy at all costs.
‘Our kind of kleptocrat’
London and the UK have acted as a magnet for elites around the world for a range of reasons. From easy access to financial secrecy systems, to the breadth of luxury assets available, to the welcoming admissions and donation policies of elite British universities – it is clear why London has become a global hub for these figures, including those who have earned their money through corrupt or dubious business practices.
Members of Azerbaijan’s Aliyev and Pashayev families directly or through associates spent over £400 million on UK property.
However, not all post-Soviet elites are created equal and not all receive equal treatment on arrival. Assessing the various elites from kleptocracies, three primary types emerge.
The first type centres on those figures who, while in the UK, support, or are, the ruling powers overseeing their home nation – for example, Vladimir Putin’s regime in Russia and that of Ilham Aliyev in Azerbaijan. Many of these people appear to ensconce themselves within the broader Western body politic, layering their assets via British shell companies and British property and luxury goods, sometimes reinventing themselves as ‘philanthropists’ interested in funding the educations and opportunities of rising generations of UK citizens. Some become naturalized UK citizens themselves – providing them with both greater security and new opportunities such as political donations (see Chapter 5).
In so doing, these figures successfully become effective ‘bridges’ between the West and their countries of origin – all while enjoying the financial benefits associated with kleptocracy. Quintessential examples of this type are members of the Aliyev and Pashayev families of Azerbaijan who, having made fortunes from state control of the economy, directly or through associates spent over £400 million on UK property between 2006 and 2017 (Annex, numbers 3–26). Meanwhile, Nargiz Pashayeva, a sister-in-law of President Aliyev, sits on the board of a centre for the study of Azerbaijan and Central Asia at the University of Oxford established in 2018 after a £10 million endowment was gifted by an undisclosed donor.
The second type of elite centres on those who maintain a low profile, including those who are or were previously an opponent of the government overseeing their country of origin.
An example of this second type would be Maxim Bakiyev, the son of former Kyrgyz president Kurmanbek Bakiyev. Maxim Bakiyev successfully claimed asylum in the UK, despite strong evidence – later confirmed by an asset recovery programme – that he had stolen Kyrgyz state funds. While they enjoy the largesse of their business success in kleptocratic states – Maxim Bakiyev purchased a £3.5 million mansion in Surrey (Annex, number 62) – these figures style themselves as ‘non-political’. In framing themselves in this way and adapting their behaviour accordingly, these figures enjoy their newly acquired British assets in relative peace.
The third type of elite is the previously kleptocratic figure who elects to use their wealth and stature to agitate against the regime from abroad. In doing so, they find themselves targeted by Western investigators, pressured by the regime from which they emerged.
Such phenomena are seen most clearly in the case of Mukhtar Ablyazov (Annex, numbers 57–61), a former government minister and bank chairman in Kazakhstan and the alleged perpetrator of one of the largest frauds to appear before a court in the UK. Ablyazov has become an exemplary case study in how such figures can find themselves hemmed in by governments both near and far. Ablyazov was initially given asylum in the UK, but was stripped of it after he was found in contempt of the UK High Court for failing to reveal his assets and fleeing to France.
These three types of Eurasian elite highlight not just how both the insiders and exiles of brutal regimes in the post-Soviet region have turned to the UK, but their differing treatment since leaving their host countries. It is in that discrepancy that we can discern how, and why, these elites have been able to remain in the UK – or not. While some details of each case differ, one thing seems clear: so long as elites keep a low profile and pose no threat to the regimes overseeing their countries of origin, they rarely need to be concerned with their futures in Britain – even if they are laundering money and reputations.
‘Golden visas’: a national embarrassment
The most effective means for Eurasian and other elites to achieve their aims is to secure residency and eventually become naturalized UK citizens.
First, we examine the ‘golden visa’ Tier 1 (Investor) scheme which has provided the means of residency in the UK, and ultimately British citizenship, for over a thousand members of elites from post-Soviet kleptocracies.
Many European nations maintain schemes providing a ‘fast track’ to residency for wealthy individuals investing a defined amount of money in the country. However, some of these schemes have been flagged for posing money-laundering risks, and in 2020 the European Commission opened infringement procedures against Cyprus and Malta for ‘selling’ EU citizenship. The UK has operated such a ‘golden’ investor visa scheme since 1994. However, its rebranding as the Tier 1 (Investor) Visa in 2008 in response to the financial crisis has proven to be an embarrassment for the UK government in its failure to realize the money-laundering and security risks that such a scheme presents. According to the NGO Spotlight on Corruption, 6,312 ‘golden visas’ – one-half of all such visas ever issued – are being reviewed for possible national security risks by the Home Office.
The system in place from 2008 to early 2015 was particularly egregious as the checks that were carried out on the applicants were the sole responsibility of the law firms and wealth managers representing them. The state had thus no oversight on the more than 3,000 individuals who were granted visas during this time, leading it to be dubbed ‘the blind faith’ period by Transparency International UK.
Applications from Chinese nationals accounted for the greatest number of visas granted between 2008 and 2015. The second largest group by nationality were Russian citizens, totalling 705 people or 23 per cent of the total visas granted. Kazakh citizens were the fifth-largest group, totalling 206 applicants. As Kazakhstan is a country where just 162 people own 55 per cent of the wealth, this suggests that the UK may have granted residency to a significant proportion of that country’s kleptocratic elite.
In October 2015, Transparency International UK released a report commenting that it was ‘highly likely that substantial amounts of corrupt wealth from China and Russia have been laundered into the UK’ through the Tier 1 scheme. These concerns were confirmed by the UK parliament’s Intelligence and Security Committee’s investigation on Russia, published in July 2020, which highlighted that: ‘It is widely recognised that the key to London’s appeal [for Russian oligarchs and their money] was the exploitation of the UK’s investor visa scheme.’
Among those individuals known to have acquired a Tier 1 visa are: Zamira Hajiyeva, the wife of a former chair of Azerbaijan’s state bank and the recipient of the UK’s first ever UWO; Izzat Javadova, a cousin of the Azerbaijani president, who was forced in 2021 to hand £4 million of unlawfully acquired money to the NCA; and, from Kazakhstan, Madiyar Ablyazov, son of Mukhtar Ablyazov.
One-half of all ‘golden visas’ ever issued are being reviewed for possible national security risks by the Home Office.
UK government revisions to the ‘golden visa’ regime that came into force in November 2014 increased the investment threshold from £1 million to £2 million, and gave immigration officers the power to refuse visa applicants if they had reasonable grounds to believe that the funds had been obtained unlawfully. A requirement to hold a UK bank account (thus passing the burden of due diligence to bank managers and compliance officers) was also added in April 2015.
Applications for the scheme surged before the 2014/15 revisions and declined dramatically thereafter. For example, 126 applications were made from Russia in 2013, 241 in 2014, but just 30 in the first nine months of 2015. This indicates the role of supply – and of legal enabling – in generating demand from states with high levels of corruption.
Despite the tightening of access, Tier 1 applications have a high success rate, perhaps due to the effectiveness of legal assistance offered to applicants. From 2008 to 2019, only 9 per cent of ‘golden visa’ applications were rejected, compared to 42 per cent of asylum applications.
The UK government temporarily suspended the scheme in 2018, due to concerns over money laundering, but its latest iteration still has serious flaws and loopholes. In April 2021, the UK Court of Appeal ruled that circular investments from companies registered in Britain but re-invested into Russian companies by Russian citizens were legal, in effect undermining the main motivation for the introduction of the visa scheme in the first place – i.e. generating capital for the UK. Even if this practice was outlawed, academic research has shown that ‘golden visa’ programmes may plug short-term economic gaps, but have negligible national-level economic impact, with recent research showing that it is not clear whether it has a positive net effect on the real economy.
Kleptocrats in residence
There is no question that ‘golden visa’ recipients are major customers in the luxury property market which has continued to boom in London and southeast England.
Between 2010 and 2012, Gulnara Karimova, the daughter of the then president of Uzbekistan, bought property in the UK worth over £35.2 million. This formed part of a worldwide property portfolio valued at around £200 million. The vast majority of Karimova’s fortune had been obtained by bribery – according to the US Department of Justice, she received more than $865 million in bribes from international telecoms companies looking to access Uzbek markets, which she then laundered through the US financial system. In October 2018, the SFO announced it had launched a claim under Part 5 of the Proceeds of Crime Act 2002 for civil recovery of three UK properties owned by Karimova that were obtained using the proceeds of these corrupt deals.