What happens when Navalny’s Anti-Corruption Foundation is declared extremist? Plus the UK’s plan for sanctioning the corrupt

Hi, welcome to Oligarchy, where we are tracking how the super rich are changing the world for the rest of us. 

NAVALNY

I’m going to go out on a limb here and predict that next week a Russian court will ban Alexey Navalny’s Anti-Corruption Foundation as an “extremist organization.” I do not of course mean by this prediction to impugn the honor or integrity of Russian judges (far from it), or to suggest that they would dream of taking political factors into account when returning a verdict (as if), but they do side with the state prosecutors more than 99% of the time, so it seems a safe bet.

We have already had a preview of what this will mean, thanks to a prosecutor winning an injunction on Monday against some of the Foundation’s work in anticipation of the court’s decision.

  • ​”The organization’s extremist activities entail violations of the rights and freedoms of the citizen; harm to individuals, to citizens’ health, to the natural environment, to public order, to social security, to society and to the state; and to cause a real danger of such harm being realized,” the prosecutor’s document stated.

Of course, I have no more intention of questioning the integrity of Russian prosecutors than I do of Russian judges (heaven forfend), but it is striking that the man whose signature was at the foot of that document – Denis Popov – was a subject to one of Navalny’s many exposés. In 2019, Navalny accused Popov of having accumulated a property empire in Spain and Montenegro, which certainly appeared to be disproportionate to his income.

When Navalny’s organization is declared to be extremist, members would face prison sentences of up to 12 years, and funders could be jailed for a decade. The Foundation is largely funded by ordinary citizens, and all of them would risk prosecution if they continued to do so. 

  • “Dozens of employees of Navalny’s headquarters working across 34 Russian regions and hundreds of thousands of Internet users who have shared Navalny’s groups’ materials on social networks, are potential targets for severe reprisals. The objective is clear: to raze Alexei Navalny’s movement to the ground while he languishes in prison. It is symbolic and particularly telling of the Russian authorities’ cowardice that the court proceedings have been pronounced ‘secret’,” said Marie Struther, Amnesty International’s director for Eastern Europe and Central Asia.

Russia has always had problems with its court system, and has always had corrupt and venal public officials, but at one time they coexisted with a vibrant news media, energetic civil society organizations, and genuine opposition politicians. Now, the Kremlin is essentially saying that anti-corruption activism is analogous to terrorism. I cannot tell you how depressing I find this.

The problem that Navalny, who currently is serving a two-and-a-half-year prison sentence, poses for the Kremlin is that he is a younger, cleverer, funnier, better-looking, less corrupt version of Vladimir Putin. Unlike previous opposition politicians, he has appeal all across Russia, instead of just in Moscow, and severely threatens the Kremlin elite’s grip on the money geyser which is the Russian state. 

The assault on Navalny’s organization is part of a broader Kremlin assault on any political organization that could rival its grip on power, which has of late spread into a general attempt to restrict access to information. There aren’t many free media outlets left in Russia, but those that do exist are being sucked into the vortex, with journalists from Dozhd, Meduza and Ekho Moskvy being quizzed by police officers after they covered last week’s protests.

If you wish to see what counts as extremism in Russia, then the latest video from Navalny’s allies is here. It reveals the inside of one of Putin’s dachas (including its extremely extravagant spa building). I can understand how the behavior the video exposes could damage society, but I can’t see how this video could. Perhaps the judge’s decision will make that clear.

UK SANCTIONS

Having interfered in the US elections, used a nerve agent on British soil, and dispatched assassins to at least one EU state, the Kremlin is quite clearly no longer very bothered about what Western governments think about it. Nonetheless, the Russian elite is uniquely – for a major power – entangled in the globalized financial system, with at least half of the nation’s wealth stashed offshore, overwhelmingly by the country’s tiny but wealthy billionaire class.

As such, it is good news that the UK – the world’s leader purveyor of wealth management solutions to the discerning kleptocrat, and long the investment destination of choice for Russia’s oligarch class – has brought in a new policy of imposing sanctions on the very corrupt.

  • “Corruption has a corrosive effect as it slows development, drains the wealth of poorer nations and keeps their people trapped in poverty. It poisons the well of democracy,” said Foreign Secretary Dominic Raab. “Global Britain is standing up for democracy, good governance and the rule of law. We are saying to those involved in serious corruption: we will not tolerate you or your dirty money in our country.”

The policy was widely welcomed, including by U.S. Treasury Secretary Janet Yellen, who envisioned it as potentially opening the possibility of the world’s two biggest financial centers coordinating their assaults on crook-owned wealth. British anti-corruption activists were also pleased to see it.

  • “Today’s announcement is an important achievement in the fight against corruption globally. The UK anti-corruption coalition welcomes the new sanctions regime and hopes to see the UK announce bold and ambitious designations against corrupt actors to become a leading voice in the fight against kleptocracy,” said the Anti-Corruption Coalition in a statement.

Much of the credit for the policy belongs to Bill Browder, the determined ex-fund manager who has sought justice for Sergei Magnitsky, a Russian lawyer who exposed a gigantic tax fraud against one of Browder’s companies, then died in detention after being denied treatment for a pancreas condition. Several Western countries have named anti-corruption laws in Magnitsky’s honor, and the UK’s first list of sanctioned individuals included the names of 25 people who mistreated him.

I am fully in favor of blocking the assets of crooks and thieves, of stopping them from enjoying their stolen wealth, and of limiting their access to the global financial system, but (and this is one of those examples of sentences when you can ignore everything before the word ‘but’) I am very worried by this UK policy, and the applause it has been greeted with.

Britain remains the world’s biggest money laundering center. Hundreds of billions of dollars of stolen wealth flows through the UK and its offshore territories every year. By the UK government’s own admission, ownership is hidden behind the complex shell structures created by Britain’s world-leading financial professionals. British efforts to combat this surge of illicit wealth are risible – the National Crime Agency’s International Corruption Unit has a budget of less than $6 million a year, and its record against oligarchs is, by its own admission, limited as a result. On the same day that Raab was speaking, yet another Serious Fraud Office case collapsed, owing to mistakes by investigators.

Companies House – the UK’s companies registry, which is wide open to fraud, and thus widely used by fraudsters – remains unreformed; and government promises to reveal who really owns the tens of thousands of offshore-owned properties in the country remain unfulfilled. 

You cannot sanction crooks’ wealth, if you cannot see that they own it. You cannot confiscate that wealth if your investigators are outgunned by the crooks’ lawyers. The most important weapons against the corrupt are twofold: transparency, and the robust prosecution of the crimes that transparency reveals. Sanctions are only a final piece of that jigsaw, to be used when those measures fail to bring results, but Britain is using them like they’re the whole puzzle. 

In short, this new sanctions policy is a beautiful, shiny cherry on top of a non-existent cake; and my concern is that the welcome it has received in Washington DC will encourage British politicians to believe they can give up on fighting corruption now, when their work hasn’t even begun.

If you wonder why I think the current UK government’s heart isn’t really in fighting financial skullduggery, read this excellent piece by Peter Geoghegan, and you’ll see. You know standards are bad when the Russian Embassy tweets some trolling about them, and you find yourself thinking it has a point.

WHAT I’M READING

I have just raced through Spooked by Barry Meier, which is a truly alarming glimpse into how the information market has become turbo-charged by dark money, loose morals and oligarchic feuds. I would highly recommend reading it, just in case you get an email from a friend who now works for a corporate investigations company and who’s “found out” something he thinks you’d like to know.

Warning: you’ll end up trusting no one!

If you like these newsletters, you should sign up for Crazy Rich Russians, a live oligarchy event on May 5, with online video tours of oligarchs’ sumptuous properties, and their children’s terrible taste.

See you next Wednesday,
Oliver

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Oliver Bullough

Oliver Bullough is an author and journalist from Wales, who specializes in writing about financial crime, often when it has links to the former Soviet Union. His most recent book is Moneyland, why thieves and crooks now rule the world and how to take it back, and he is currently trying to write another one despite lockdown.

@OliverBullough