An oligarch’s arrest exposes how criminals can hide on a slither of silicon

Oliver Bullough

 

OLIGARCH ARRESTED

Exciting news from the U.K.’s National Crime Agency, which last week arrested “a wealthy Russian businessman on suspicion of offenses including money laundering, conspiracy to defraud the Home Office and conspiracy to commit perjury.” It didn’t actually say who the gentleman in question was, but it provided a photograph of officers walking through the hall of his tremendously bland mansion (or, possibly, through the foyer of a tremendously bland hotel), which was clue enough for the internet’s sleuths.

Maria Pevchikh, head of investigations for Alexey Navalny’s FBK, concluded within hours that the photo was taken in Athlone House, a grand Victorian building which Mikhail Fridman got planning permission to “transform to its former glory” six years ago.

  • “It intrigued me that the building had originally been designed as a family home about 130 years ago for a wealthy industrialist working in London,” Fridman said at the time. “It felt like fate that I, as a businessman, would be similarly drawn years later to the same property and grounds.”

Fate, eh? It’s a funny old thing. I haven’t yet seen a daguerreotype of bobbies removing ledgers from Athlone House when it was owned by a Victorian paterfamilias whose assets were frozen in a geopolitical crisis, but that’s not to say they don’t exist. For that matter, I also haven’t seen any official confirmation that Fridman was indeed the man arrested, or any information on the identity of a 39-year-old (“the former boyfriend of the businessman’s current partner,” which sounds a bit icky, to be honest) arrested on suspicion of money laundering and conspiracy to defraud, or of a 35-year-old who was arrested after being seen leaving the premises with a big bag full of thousands of pounds in cash. So, it may not be Fridman at all (and here’s an interview from March in which he says he has no influence over Putin and did nothing wrong) but it does show that the National Crime Agency’s new anti-oligarch unit is out there sniffing around, which is good.

  • “The NCA’s Combatting Kleptocracy Cell, only established this year, is having significant success investigating potential criminal activity by oligarchs, the professional service providers that support and enable them and those linked to the Russian regime,” said NCA head Graeme Biggar.

I remain frustrated that the Combating Kleptocracy Cell, a unit of the National Crime Agency, is tasked not with investigating how large fortunes were accumulated, but instead with investigating efforts to evade the sanctions on those fortunes imposed since February, but that isn’t the NCA’s fault. Sanctions, as has become depressingly clear, are — in the U.K., as in most other countries — a foreign policy tool, not a law enforcement one. So, well done to the Combating Kleptocracy Cell’s officers for doing this, but once again for anyone who’s not read my newsletters before: they need more resources and more people if we are to expect them to tackle oligarchs more broadly, not least because oligarchs remain extremely litigious.

  • “The NCA’s lawyers have a look at a case and say to the director general, ‘Worst case scenario, this could cost a billion pounds.’ If you’re the DG and your budget is 800 million that will give you pause for thought,” a source with knowledge of this kind of nonsense told me last week.

One snippet did jump out at me from the press release, which was that the officers confiscated “a number of digital devices,” which they are now analyzing. I often wondered how investigators are able to find digital information when criminals can hide it on a slither of silicon and stick it in a book, behind a picture, etc., etc., where no one can spot it. Once upon a time, bobbies busting Athlone House would have had no trouble finding a Victorian industrialist’s ledgers, but nowadays, a far larger volume of information takes up almost no room at all. So how do you find it?

The answer to this question, as I discovered last week while talking to a police officer who works in intellectual property investigations (which often involve slithers of silicon holding pirated content), is to use a “digital dog.” It appears to have been Jack Hubball of Connecticut’s Forensic Science Laboratory who realized there were trace chemicals found on a circuit board that dogs could find with their unbelievably sensitive noses. This article suggests Selma of the Connecticut State Police, who died in 2013, was the first canine semiconductor superdetector; and here’s a dog called Bear who helped find child pornography a couple of years later. You can listen to a podcast with audio of the FBI’s black Labrador Iris. Meanwhile, British cops prefer to use spaniels, like Milly and Mila.

  • “Their superior noses will also be able to sniff out concealed SIM cards or devices linked to drug dealing and organized crime — their potential is limitless and I really can’t enthuse enough about just how valuable they will be to our Force.”

If you want a bit of video, here’s Flurry and Henry, springer spaniels at Lincolnshire police, training for digital duty by chasing a tennis ball about.

My own dog, as far as I have been able to discover in five years of cohabitation, is basically incapable of doing anything except snoring, being on the wrong side of doors, lying in the middle of the kitchen when I’m trying to cook and spreading hair all over the house, so I’m finding the discovery of this kind of canine capability absolutely extraordinary.

And the wonders don’t stop there. The holidays are nearly upon us, so why not buy that special person in your life a digital dog of their own? A plush toy version of the City of London police’s very own Fred is available from the Scotland Yard merch store, for a very reasonable £24.99, complete with a collar advertising the world’s favorite money laundering center. Don’t tell me this newsletter doesn’t provide you with the best seasonal recommendations, and I’m not even getting a commission.

MAKING RUSSIA PAY TO REBUILD UKRAINE

Don’t worry, I’m not going to bang on for a third week about the idiocy of the European Court of Justice’s decision to close corporate registries (though I was glad to finally see a firm editorial in the Financial Times about it, plus a piece in the Economist with the sub-heading “Sanctions-busters rejoice”). Instead, this week I’m going to praise Ursula van der Leyen, who is the president of the European Commission, for strong words on making Russia pay to rebuild Ukraine.

Russia has not just killed more than a hundred thousand Ukrainians but also, completely without justification beyond the fact that Vladimir Putin has spent too long without anyone telling him ‘no,’ destroyed hundreds of billions of dollars’ worth of Ukrainian infrastructure. Meanwhile, we’ve got hundreds of billions of dollars of Russian money in frozen accounts in Western banks.

So let’s just cut out the middle kleptocrat and spend Russia’s money on repairing the damage Russia has done.

  • “In the short term, we could create, with our partners, a structure to manage these funds and invest them. We would then use the proceeds for Ukraine. And once the sanctions are lifted, these funds should be used so that Russia pays full compensation for the damages caused to Ukraine,” van der Leyen said. “We will work on an international agreement with our partners to make this possible. And together, we can find legal ways to get to it.”

Fabulous. I sincerely hope the EU’s partners respond well to her suggestions. And, while they’re doing that, perhaps they could also suggest that the EU going backwards on transparency is a really bad idea from the perspective of tackling oligarchs.

WHAT IS BLOCKCHAIN FOR?

So many cryptocurrency companies have gone bust this year that Reuters has had to publish a list of them all, so we can keep track. The European Central Bank has meanwhile called a recent Bitcoin price stabilization “an artificially induced last gasp before the road to irrelevance,” with all the relish of an old stag watching a young buck fall flat on his face.

  • “The belief that space must be given to innovation at all costs stubbornly persists. Since Bitcoin is based on a new technology – DLT/Blockchain – it would have a high transformation potential. Firstly, these technologies have so far created limited value for society – no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it,” the European Central Bank said. In central banking circles, that counts as a sick burn.

So, for crypto enthusiasts, a lot is riding on the fact that distributed ledger technology (DLT) has a purpose beyond wild Ponzi schemes. If you try to find examples of what that purpose is (except speculation and money laundering), you tend to hear a lot about supply chains. For example, Glenfiddich, the whisky company, has sold super-expensive 46-year-old bottles of Scotch alongside non-fungible tokens so you can prove their authenticity.

  • “Using blockchain in the supply chain can help participants record price, date, location, quality, certification, and other relevant information to more effectively manage the supply chain,” said Deloitte, in a paper that sets new records for how many times the words “chain” can appear in a single sentence.

That may well be the case, but it looks to me like this argument has taken a significant blow from Maersk — the shipping giant which was relying on new technology to help it manage its operations — giving up on its blockchain venture. If the world’s biggest supply chain specialists can’t find a use for distributed ledger technology, is there really an actual use?

I admit I’m not neutral here. I’m prejudiced against cryptocurrencies — and, by possibly unfair extension, blockchain as well — because I’m a big fan of the regulatory oversight of currencies that results from them being issued by democratically-accountable governments rather than by offshore billionaires; nor do I believe that finance in Web 3.0 will result in real decentralization, just a different kind of centralization, but with even less democratic control and even fewer taxes being paid. But, if anyone knows of any good reasons for blockchain to exist, please let me know, and I’ll give them a shout out.

WHAT I’M READING

It was back to the 1970s for me this week, since I’ve been reading “Dirty Money: Swiss banks, the mafia, money laundering and White Collar Crime” by Thurston Clarke and John J. Tigue Jr., two former U.S. attorneys, which was a fascinating insight into how dodgy cash got moved around before I was born. I particularly liked the disclaimer at the beginning.

  • “There will probably be a few amateurs – professional criminals are already well-versed in these techniques – who may consider this a “how to” book. Before you do anything, we suggest you consider the fact that most of the dirty-money techniques explained here are illustrated by examples of criminal acts in which the participants were caught.”

It’s an important point. We overstate how much we know about money laundering, based on the kind of cases that have gone to court, without realizing that there is an entire universe of “unknown unknown” schemes out there, merrily laundering money without us being any the wiser. We are just picking up smoother pebbles or prettier shells on the seashore, while a great ocean of filthy cash splashes around all undisturbed (or whatever it was Isaac Newton said; I’m on a train and the WiFi isn’t working very well). Again, if you hear about new money laundering techniques, or see a new scam, drop me a line. I always want to know more.

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