Speaker 1: It's Catalina. I'm cleaner. Well, this series is really nice.
Speaker 1: I know the rich because look at the houses. You
Speaker 1: can see the differences, you know. But he'll get here.
Speaker 1: It's a ridge of the Porsche area. Actually Jesus Mother Prize.
Speaker 1: That could be all art. But it's a lovely place.
Speaker 1: Lovely place, expensive but lovely. Yeah. I'm David Merritt here
Speaker 1: in the London studio. This is in the City, Bloomberg's podcast,
Speaker 1: connecting you to the stories at the heart of the
Speaker 1: City of London. With surging inflation and bad economic news
Speaker 1: dominating the news agenda, this week, we decided to take
Speaker 1: a look at the extreme wealth that lives in London.
Speaker 1: There are more billionaires here the New York, Moscow or
Speaker 1: even Hong Kong. Often that money enters without question that
Speaker 1: Britain's National Crime Agency estimates that the UK's dirty money
Speaker 1: problem runs into the hundreds of billions of pounds annually.
Speaker 1: But Russia's invasion of Ukraine is forcing the government to
Speaker 1: rethink its custom of rolling out the red carpet good morning.
Speaker 1: Russia has invaded Ukraine. At President Zelinski has accused Russia
Speaker 1: of nuclear terror. This is a threat to European Security
Speaker 1: and stability. Britain and America have again warned Russia of
Speaker 1: devastating sanctions if it invades Ukraine. Boris Johnson announced asset
Speaker 1: freezes on five Russian banks and three high net worth individuals.
Speaker 1: For our part, today, the UK is announcing the largest
Speaker 1: and most severe package of economic sanctions that Russia has
Speaker 1: ever seen. This is the first trash, the first barrage
Speaker 1: of what we are prepared to do. So just how
Speaker 1: ingrained is dirty money in London and can it be
Speaker 1: weeded out? Francine is away this week, so I asked
Speaker 1: Bloomberg Senior writer Stephanie Baker to join me in the
Speaker 1: studio along with Caroline Knowles, Professor of sociology at Goldsmith's
Speaker 1: University of London and author of Serious Money Walking Plutocratic London.
Speaker 1: In her book, Professor Knowles gives an account of her
Speaker 1: walks through the streets of London's gilded districts, from right
Speaker 1: here in the city to notting Hill, Chelsea and Richmond,
Speaker 1: and she tries to understand the lives of the super
Speaker 1: rich and how they continue to shape our city. And
Speaker 1: to do our own research, we sent one of our
Speaker 1: producers to retrace some of her steps. I love this
Speaker 1: idea of walking around these districts of London as well.
Speaker 1: And you've got a real sense from the pavement of
Speaker 1: the yawning gaps now between the haves and haves not
Speaker 1: in London, a lot of it driven by the wealth
Speaker 1: that's created within a square mild of where we're sitting
Speaker 1: right now, that yawning gap, according to your book, seems
Speaker 1: to be getting worse. Is that right? Yes? I think so.
Speaker 1: If you look at what happened after the banking crisis
Speaker 1: and after COVID, those who already have a great deal
Speaker 1: of money became a lot richer, and those who didn't
Speaker 1: visibly became poorer. And you see an expansion, and you
Speaker 1: see it around here of homeless population sitting around the streets,
Speaker 1: and you know, the number of of unhoused people in
Speaker 1: London just goes on rising. I think it's currently around
Speaker 1: ten or eleven thousand. And that seemed that that London
Speaker 1: was getting both richer and poorer at the same time.
Speaker 1: And I was interested in what were the sort of
Speaker 1: mechanisms of consolidation of the plutocracy in the city, and
Speaker 1: how could one begin to think about that, what were
Speaker 1: the infrastructures that made London a wealthy city that's also poor.
Speaker 1: That meant these two things could coexist, and the pandemic
Speaker 1: has made things worse, all right, it certainly has. I
Speaker 1: mean it's increased the wealth of the wealthier, but for
Speaker 1: for those who are you know, on moderate incomes, um,
Speaker 1: the median income in London is still only just about
Speaker 1: thirty four thousand pounds a year. For those people, life
Speaker 1: became tougher and tougher, and for those who struggled to
Speaker 1: find housing, which seems to you to be one of
Speaker 1: London's most pressing social problems if you like that. Well,
Speaker 1: while we've build plenty of houses that they're unaffordable to
Speaker 1: most of the population, that what you have was this
Speaker 1: widening gap between halbs and have not really so that London,
Speaker 1: it seems to me, is becoming an experiment in the
Speaker 1: you know, the coexistence of wealth and want. It's definitely
Speaker 1: I can bring you in here as well. You've written
Speaker 1: for many years at Bloomberg about money trails around London.
Speaker 1: What's changed in recent years in terms of how wealth
Speaker 1: is created in the city and how it's spent More broadly, Yeah, well,
Speaker 1: I arrived in London in and it has changed so
Speaker 1: much since then, from rise of Canary Wharf to the
Speaker 1: transformation of Hackney at East London that was once the
Speaker 1: affordable place to live and is now super trendy and
Speaker 1: super expensive. And then you go to places like Belgravia
Speaker 1: or Mayfair which have just gotten richer and richer, and
Speaker 1: in some cases feel a little bit hollowed out, I
Speaker 1: would say, because so many foreigners have bought property in
Speaker 1: those neighborhoods and they don't live there all the time.
Speaker 1: People which are coming it's more looks like businessmans who
Speaker 1: looks at health only for the investment, keeping empty for
Speaker 1: the long time and then selling to the other people.
Speaker 1: So there's no community, right. It's the dark, the dark
Speaker 1: windows at night, doesn't it around Mayfair exactly? So I've
Speaker 1: a londonal life and there's been a massive influx of money,
Speaker 1: foreign money. Most of the people in these houses don't
Speaker 1: actually live here anyway, so you wouldn't ever really see them. Right.
Speaker 1: It sucks the life, doesn't it. The street life is
Speaker 1: sucked out of those very wealthy area is I think
Speaker 1: notting Hill is probably a very good example where go
Speaker 1: back twenty thirty years and you had black activists, you
Speaker 1: had community activists around housing, you had a much more colorful,
Speaker 1: vibrant landscape. And now, if you think about it, those
Speaker 1: streets are fairly sterile and expensive. And every year at Carnival,
Speaker 1: of course, the people who are own those big stucco houses,
Speaker 1: what do they do? They board them up? Don't they
Speaker 1: go somewhere else? Tuscany? Yes, absolutely. As you walked around
Speaker 1: the streets, Caroline, where where else was really striking to you?
Speaker 1: Where this yawning gap between what you called the house
Speaker 1: and have nots has just been has become unsustainable. The
Speaker 1: way I think about streets is that streets tell stories too.
Speaker 1: I mean, people tell stories, but what happens on the
Speaker 1: street is also a series of stories. And the stories
Speaker 1: in places like Belgravia, are you know, enormously wealthy? Are serviced?
Speaker 1: Are you know? Even the facade you've got these uniform
Speaker 1: stucco railing porches with pillars, And if you go around
Speaker 1: Eaton Square, of course there are sort of concierge standing
Speaker 1: in uniforms in bowler hats. Although what's interesting if you
Speaker 1: think about Mayfair is the kind of standoff between hereditary
Speaker 1: wealth like the Grosvenors and Middle Eastern influence. When I
Speaker 1: mean there's a struggle between oil revenues and hereditary wealth
Speaker 1: in in Berkeley Square. Um. You know, the Duke of
Speaker 1: Westminster was the losing bid on buying that, so he's losing.
Speaker 1: Is that the aristocrats are losing? How are they can't
Speaker 1: compete with the petro dollars. No, they can't. And if
Speaker 1: you look at the the latest rich list, the people
Speaker 1: at the top of that, with one or two exceptions,
Speaker 1: are international. So one of the most concerning things about
Speaker 1: the reach of Bill and Am into London and British
Speaker 1: society is the possible impact on government and influence. And
Speaker 1: we know that the Conservative Party auction off things like
Speaker 1: dinners and access at their parties. Definitely, is the influence
Speaker 1: of Russian money, particularly something that potentially sways policy that
Speaker 1: has an outsized influence on the government's thinking. It's a
Speaker 1: really good question. I think it's hard to tell because
Speaker 1: of the lack of transparency. What we can see is
Speaker 1: Russian money flowing into political parties, in particular the Tory Party.
Speaker 1: There's a woman named Lubov Chernukin as she was born
Speaker 1: in Russia, but she is now a British citizen. Lubov
Speaker 1: Chanukin has donated large sums to the Conservatives to play
Speaker 1: tennis with David Cameron and Boris Johnson and one thirty
Speaker 1: five thousand pounds for a night out with Teresa May
Speaker 1: and members of the Cabinet, and she has donated more
Speaker 1: than two million pounds to the Conservative Party on the
Speaker 1: other side's reason. May is a loup of Junikin, who
Speaker 1: is the wife of former Russian minister. Her wealth comes
Speaker 1: from her husband, Vladimir, who has strong links to the Kremlin.
Speaker 1: She's the top female donor to the Conservative Party and
Speaker 1: it's unclear why she's done that and what she's gotten
Speaker 1: in return. Um. You know, there have been various reports
Speaker 1: looking at the source of her wealth, and you know,
Speaker 1: some leaked files showing that her husband had done business
Speaker 1: with a sanctioned Russian oligarch named Suliman Karimov. Um. So,
Speaker 1: I think there's real questions about the flow of money
Speaker 1: into politics, whether or not there are enough checks on
Speaker 1: what is the origin of that money, uh, and what
Speaker 1: is the agenda really behind it? Uh. You know, there
Speaker 1: are plenty of other examples of that. Uh. You know,
Speaker 1: for instance, you have guinea. He is the rich Russian
Speaker 1: born son of an ex KGB agent, and he of
Speaker 1: course owns the Evening Standard and has hosted various charity
Speaker 1: parties and events where Boris Johnson has attended. And he
Speaker 1: two years ago became a member of the House of Lords.
Speaker 1: And what we've learned recently is that that was against
Speaker 1: the recommendation of the security services, who had raised questions
Speaker 1: about him and becoming a member of the House of
Speaker 1: Lords because of his father's KGB past. Did Boris Johnson
Speaker 1: intervene to elevate Ev Gainey Ledvedev to Lord Leddev of
Speaker 1: Hampton and Siberia, and money, of course trump those security
Speaker 1: concerns exactly. There's also what we don't see, you know,
Speaker 1: what they do in the clubs, the kind of cognitive
Speaker 1: capture of government by wealthy foreigners and wealthy people in general,
Speaker 1: where you know that there's nothing is said, but there
Speaker 1: is a sense of being in a certain location social
Speaker 1: location to other which kind of fuels some of these things.
Speaker 1: I think, what should the government be doing. They've claim
Speaker 1: that they're going to clean up the flows of money
Speaker 1: coming into London, that London is not going to be
Speaker 1: the world's laundromat that it's sometimes has claimed to be,
Speaker 1: and the government have tried to put legislation through. But
Speaker 1: is it enough, Stephanie, I mean, are they are they
Speaker 1: actually taking this seriousty or is it very difficult for
Speaker 1: the British government to disentangle itself from the from all
Speaker 1: of this wealth. I think the Russian money is so
Speaker 1: deeply embedded in London and the UK it's going to
Speaker 1: be very, very difficult to unravel. Using London to laund
Speaker 1: a dirty Russian money has its origins in the politics
Speaker 1: of the nineties and two thousands, an era of political
Speaker 1: engagement with Vladimir Putin. You know, it all started as
Speaker 1: a result of the Golden visas offered to the world's
Speaker 1: global elite and exchange for at least two million pounds
Speaker 1: in investment into the country. Those schemes started in the
Speaker 1: mid nineties and you know they've changed over the years,
Speaker 1: but that that really ushered in. You know, hundreds of
Speaker 1: wealthy Russians who made their home here felt comfortable because
Speaker 1: they felt like their property and their wealth was protected
Speaker 1: here in a way that it wasn't in Russia, and
Speaker 1: the rules were very lax. Many Russians were allowed to
Speaker 1: come in with as little as one million, then it
Speaker 1: was up to two million. All you had to do
Speaker 1: was prove that the money was in your name for
Speaker 1: a few months, and then you could invest it in
Speaker 1: government bonds. It was such a safe bet. It was
Speaker 1: almost very safe compared to other capitles around the world,
Speaker 1: of other major cities. I mean, it was much easier
Speaker 1: to come here, was it, then say go to New York.
Speaker 1: All we really rolled out the red carpet for wealthy individuals,
Speaker 1: you know, in particular Russians. It's such a it's a
Speaker 1: short flight from London to Moscow. You know, Russians were
Speaker 1: attracted by elite British private schools, by the high quality
Speaker 1: of private healthcare. I think, you know, London has a
Speaker 1: unique ecosystem as well, built on what you say for
Speaker 1: dealing with wealth. I think in the United Kingdom a
Speaker 1: lack of political will to actually do very much about this.
Speaker 1: We already have unexplained wealth orders which we haven't really used.
Speaker 1: I mean, there is a growing apparatus that could be
Speaker 1: used to end the opacities of wealth and the offshoring
Speaker 1: and hiding of money and laundering of money. But we
Speaker 1: seem very reluctant to because of the economic impact. They're
Speaker 1: worried about frightening people off, or taking the capital and
Speaker 1: lodging it in Dubai or I mean what I guess.
Speaker 1: I mean the thing about capital it is always very
Speaker 1: mobile anyway, isn't it. So if it's going to go,
Speaker 1: it's already gone if it doesn't like what's here. So
Speaker 1: it's a very odd thing. But it seems to be
Speaker 1: that that's the kind of all is to attract foreign
Speaker 1: direct investment and other kinds of international investments that whatever
Speaker 1: social cost to the city as a whole. I wanted
Speaker 1: to talk about property because no discussion of wealth in
Speaker 1: London is completely that talking about about property, and it
Speaker 1: is it's often described as a great way to launder
Speaker 1: money as well, potentially. In June we had reports about
Speaker 1: sanctioned Russians buying property at One Hyde Park that was
Speaker 1: that building has been such a symbol, hasn't it of
Speaker 1: the um sometimes rather crazy prices of London property. I mean, Stephanie,
Speaker 1: can you tell us more about this and what it
Speaker 1: tells us about UK transparency laws? Right? So for those
Speaker 1: who don't know what One Hyde Park is, it's this
Speaker 1: luxury apartment building across from Herod's that launched about a
Speaker 1: decade ago, ten twelve years ago, and um, you the
Speaker 1: prices range from anywhere from three to I think the
Speaker 1: top penthouse sold for an excess of a hundred and
Speaker 1: thirty million pounds and I was looking at the ownership
Speaker 1: of it. Yes, there were reports and I've looked at
Speaker 1: some of the data behind this that there are about
Speaker 1: three flats there that are owned by companies or individuals
Speaker 1: linked to sanctioned Russians. They did not buy them after
Speaker 1: the sanctions came through. Those were existing owners. But I
Speaker 1: think the real story of one Hyde Park is there
Speaker 1: are about thirty flats that are owned by offshore companies
Speaker 1: where we have no idea who the ultimate beneficial owner
Speaker 1: is and who knows some of those could be Russian, uh,
Speaker 1: you know. And I think that's the real problem facing London.
Speaker 1: And of course the Economic Crime Bill that the government
Speaker 1: rushed through in the wake of the war in Ukraine
Speaker 1: is attempting to deal with that. The UK government says
Speaker 1: they are stepping up their game. They're putting forward an
Speaker 1: Economic Crime Bill two members of Parliament today that would
Speaker 1: put in place a register that would enforce the owners
Speaker 1: of these assets, largely property across the UK, to have
Speaker 1: their real identities rather than climbing behind shell companies. And
Speaker 1: it's going to go back. The legislation was fast tracked
Speaker 1: in a bid to target Russian oligarchs over the Ukraine invasion.
Speaker 1: But is it going to Is it going to work?
Speaker 1: Tom Keating is the director of the Financial Crime Security
Speaker 1: Studies at our US. I called that bill a botched job.
Speaker 1: It's not actually going to shine a light is it
Speaker 1: on who owns these places? Yeah? I mean the Economic
Speaker 1: Crime Bill is something that's been languishing for years and
Speaker 1: it was only the carnage in Ukraine that forced the
Speaker 1: government to finally act. And it does a few things. One,
Speaker 1: it toughens up the sanctions regime. It makes it easier
Speaker 1: to impose penalties for sanctions violations. It makes it easier
Speaker 1: to go after unexplained wealth orders. This is, you know,
Speaker 1: court efforts to target individuals, make them prove the source
Speaker 1: of their wealth, that they actually have clean money to
Speaker 1: buy and hold the assets that they have here. But
Speaker 1: the real thing that it does is create this register
Speaker 1: of overseas companies that own property in the UK. But
Speaker 1: it's full of loopholes. You know, you can create a
Speaker 1: company still based in someplace like the British Virgin Islands
Speaker 1: and find a few relatives or friends to hold less
Speaker 1: than twenty which is the threshold at which beneficial ownership
Speaker 1: must be disclosed, and you still can shield who the
Speaker 1: ultimate identity, who the ultimate owner is. And I'm just
Speaker 1: I mean, this comes to the point I really want
Speaker 1: to go into next, which is this question of secrecy.
Speaker 1: There is this absolute paranoia of of transparency and it's remarkable.
Speaker 1: And you have to give everyone names, sort of stage
Speaker 1: names in your book because they won't be referred to
Speaker 1: by their means. Why do wealth and secrecy go together
Speaker 1: like this? It's curious, isn't it. I mean, they wouldn't
Speaker 1: have spoken to me if they've been on the record,
Speaker 1: if I was using their real names. I mean, that
Speaker 1: just wasn't going to happen. They're extremely coy about how
Speaker 1: much money they've got, how they've got it, often obscuring
Speaker 1: the origins of their wealth with philanthropy and art collections
Speaker 1: and other things. You know, I coined this term that
Speaker 1: I borrowed, which is that the wealth is in a
Speaker 1: way of nervous condition. They I think the wealthy know
Speaker 1: that what they do the sources of their wealth, that
Speaker 1: they live in such a different way from the rest
Speaker 1: of Londoners that actually that's indefensible, and I think that's
Speaker 1: what they're covering up. It's not they do anything so
Speaker 1: very there's a sense of conscience there. Do you think
Speaker 1: that actually really there is a whole mix. But I
Speaker 1: think generally they don't want to step over the homeless
Speaker 1: on the way to the opera. They probably wouldn't mind
Speaker 1: investing and paying a little more tax to to even
Speaker 1: up the playing field a little bit. I mean, Stephaniely,
Speaker 1: so we've got this transparency bill, you can circumvent it,
Speaker 1: as you've described, But how is London stocking up on
Speaker 1: this with other big financial centers around the world. You know,
Speaker 1: in America, is it easier to consider your wealth or
Speaker 1: the motive is still the same, or what's the difference
Speaker 1: in London. It's a real mixed picture. I mean the
Speaker 1: US has taken similar steps to try to um, you know,
Speaker 1: crackdown on money laundering through real estate, but ultimately there
Speaker 1: are certain states in the United in the United States
Speaker 1: that are bigger tax havens than the likes of Cayman
Speaker 1: or b v I. And so there are real problems there,
Speaker 1: I mean, the lack of transparency and states like Montana, Nevada.
Speaker 1: I mean, the list goes on is enormous, and you know,
Speaker 1: it has led to, you know, accusations of hypocrisy that
Speaker 1: the US preaches, you know what it doesn't practice. Um So,
Speaker 1: I you know, I think that the UK is taking
Speaker 1: the step the right direction, but ultimately, for instance, with
Speaker 1: the Overseas Register, it doesn't matter if you do you're
Speaker 1: required to disclose, if there's no if there are no
Speaker 1: checks on the information that you provide, and there's no
Speaker 1: budget for company's house to actually monitor and audit the
Speaker 1: information that is submitted there. And I think the real
Speaker 1: change won't happen until company's house is empowered and financed properly.
Speaker 1: I think it is a resource issue, isn't it very much?
Speaker 1: Because the British state in many ways is so much
Speaker 1: poorer than the well see who can afford the best
Speaker 1: lawyers and so on to avoid tax So I think,
Speaker 1: you know, I think it's a question of not just
Speaker 1: passing legislation, but as you say, is resourcing it properly
Speaker 1: and making it enforcible and giving it some teeth. What
Speaker 1: sort of change can we realistically expect to try to
Speaker 1: make this a more equal city. You could do something
Speaker 1: about shifting resources from the very rich into home building
Speaker 1: for people on moderate and pour incomes in London of
Speaker 1: solving the housing crisis, it should not be beyond a
Speaker 1: wealthy city or a city with this much money going
Speaker 1: through it to actually solve the problem of homelessness. It
Speaker 1: wouldn't be that expensive, and actually it would be possible,
Speaker 1: but it you know, you need to empower local authorities
Speaker 1: to have and spend money. They don't often don't have
Speaker 1: the right resources, and so I think some small redistributions
Speaker 1: would be in order to make a start on that
Speaker 1: kind of gap which exists, you know, kind of city
Speaker 1: where so much the GDP comes from finance and comes
Speaker 1: from the square mile in Canary Orphans and the hedge
Speaker 1: funds in Mayfair. Is there a model in which that
Speaker 1: can coexist with a more equal society as well? It's difficult,
Speaker 1: isn't it. And you know, the whole question of counting
Speaker 1: prosperity through GDP is ablematic, isn't it. So I'm not
Speaker 1: quite sure how one would deal with that, but I
Speaker 1: mean certainly making a start on tax taxation and taxing
Speaker 1: wealth and raising council taxes so that people who live
Speaker 1: in these luxury properties pay multiples of what the rest
Speaker 1: us pay would be a would be a start. I
Speaker 1: think you could begin with that. I'm not saying that
Speaker 1: you can change the entire system, but if you move
Speaker 1: a few of the pieces on the board, the mosaic
Speaker 1: would look a little bit different, and it might just
Speaker 1: move slightly in the right direction. Karen Nols, thank you
Speaker 1: so much for talking to in the City, and Stephanie Baker,
Speaker 1: thank you so much to thank you. Thank you. I'm
Speaker 1: David Merritt, and that's it for this week's episode in
Speaker 1: the City. We will be back next week and in
Speaker 1: the meantime. If you like the show, please rate it
Speaker 1: and check out the Bloomberg UK website for more news
Speaker 1: and views. Special thanks our guests Stephanie Baker and Caroline Knowls.
Speaker 1: This episode was produced by Summersadi and Elina Ganatra. The
Speaker 1: head of Limbo Podcasts is Francesco Levi.