Yesterday, UK Prime Minister David Cameron made an important statement. He said there is an urgent need to put an end to the laundering of corrupt money through the purchase of London real estate. This is a long-awaited issue, and to the great surprise of many, it was not included in the anti-corruption plan announced last year.
Justice has been restored, I think in part thanks to the documentary From Russia With Cash and the campaign that was launched, which I wrote about. Just two weeks ago, not a single Conservative MP had signed the recommendations on disclosing the true owners of offshore-held property, and today those recommendations are already being discussed at the prime ministerial level.
Cameron says openly (the full version can be watched here) that dirty money has no place in the UK—and really, no place anywhere. He talks about specific crooks from Nigeria and Kazakhstan who bought up large amounts of luxury property in London.
Among the concrete promises, Cameron said that this autumn a register of all offshore owners in England and Wales will be published, covering about 100,000 homes in total. We are eagerly awaiting it and will definitely examine it.
The ACF (Anti-Corruption Foundation) will also prepare and translate an archive of our London findings—and not just ours. We will tell the story of Shuvalov’s apartment, Yakunin’s house, hidden behind a Panamanian offshore company, the Rotenbergs in Chelsea, Witanhurst, and the three-story penthouse of former Senator Guryev.
Plans to de-offshore London real estate are excellent promises; all that remains is to hope they will be carried out. Judging by yesterday’s comments, there is still considerable skepticism (Ashurkov’s comment for The Question can be read here), mainly tied to the fact that the British treasury makes good money from such offshore crooks.
I would like to believe that our recently published investigation into Shuvalov’s apartment, timed to coincide with this campaign, also made its tiny contribution to the fight against offshore money launderers.
This investigation unquestionably has special potential for the campaign—not only is it a textbook case (hidden behind offshore structures for 11 years, registered to a foreign company, the owner has now been definitively identified, and he is a Russian official), it should also make a strong impression on the local establishment.
Here’s why. Look at where the 500-square-meter (about 5,380-square-foot) apartment of Russian Deputy Prime Minister Shuvalov is located.
A huge number of British ministers, officials, and MPs walk past Shuvalov’s palatial residence every day, see the building from their windows, and, just as we once did, have no idea that anyone could actually live there. Officials at the UK Ministry of Defence could, in theory, watch from their windows as the Russian deputy prime minister plays the grand piano or hosts a lunch for 12 in the fireplace room.
Since Shuvalov has come up, I would also like to comment on his press office’s reaction to our investigation.
“Shuvalov’s press office” (an interesting institution, whatever exactly that means) responded to an inquiry from TV Rain (an independent Russian media outlet) as follows:
In other words, they said: “So what if it’s his apartment?”
The press office is badly mistaken in claiming that “there is nothing new in this information.” But if the entire press office of an entire deputy prime minister does not understand what is “new” here, perhaps it is worth explaining once again, in more detail. Point by point:
Very little of what is “contained in the investigation” appears in the official declaration. Let me illustrate:
The declaration says not a word about Shuvalov having owned the apartment since 2003, not a word about what happened before 2008, and of course it is simply untrue in the part describing it as a “rental.”
“Everything contained in the investigation is in the New Times interview.” In fact, nothing that is in the investigation appears in the New Times interview. The London apartment is simply not mentioned there. Let’s look:
Of the specific properties, the only one discussed was the castle in Austria, regarding which Shuvalov finally admitted that it belongs to his wife’s company (a major achievement by NT magazine). No other real estate was discussed in the interview.
“We do not consider it necessary to comment on games and interpretations involving figures and facts,” Shuvalov’s press office said.
“Games and interpretations” are precisely what allow Deputy Prime Minister Shuvalov to conceal the fact that he owns foreign real estate.
The question of the taxes Shuvalov paid into the British treasury drew particular interest. First of all, I have to correct myself: we calculated the purchase tax using the 2015 rates, whereas the rates were lower in 2014.
On August 1, 2014, Shuvalov paid £800,800, or 48,133,900 rubles. That exceeds his annual income by a factor of 5, not 8 as we wrote earlier.
But there are other clarifications as well. It appears that Shuvalov paid this tax two or even three times: first at a 4% rate in 2003, then again in 2014, and it is quite possible that there was another offshore owner between 2003 and 2014, which would mean the purchase tax was paid then as well.
There is one more remarkable clarification. In the UK there is a special annual tax on especially expensive property—the Annual Tax on Enveloped Dwellings (ATED). In 2014, Shuvalov’s annual tax simply for owning the London apartment amounted to £71,850, or 6,630,000 rubles.
For 2015, he will have to pay more: £109,050, or 9,699,480 rubles. In other words, the annual “luxury tax” Shuvalov pays in the UK exceeds his annual official salary by several hundred thousand rubles. He would not have to pay this annual tax if he had simply registered the apartment in his own name.
Shuvalov is paying a fairly serious price to preserve his anonymity and under no circumstances admit that the apartment belongs to his family.
It is hard for us to say exactly what motivates Shuvalov’s lawyers in setting up this kind of property scheme. Perhaps the deputy prime minister simply wants a “more modest declaration,” or perhaps it is about some clever tax maneuvering. Most likely it is all of the above, but one important fact remains: he simply does not want to attract the attention of the local authorities. Given his position, and the apartment’s value and location, the family of a Russian deputy prime minister, as Politically Exposed Persons (PEPs), would almost certainly have faced a barrage of checks, tax scrutiny, banking inquiries, and other compliance demands. And they would have had to explain to British police what this mysterious Sibneft option was, what the loan was, where a housewife wife got tens of millions of pounds in income, and what Abramovich and Usmanov have to do with it.
Fortunately, the jurisdiction is ideal for checking: all the pillars of Putin’s state system—Shuvalov, Abramovich, and Usmanov—are in London.