Written evidence submitted by William Browder (IEF0017)
- My name is William Browder. I am the Head of the Global Magnitsky Justice Campaign and the CEO of Hermitage Capital Management.
- Until 2005, my firm advised the Hermitage Fund, which was the largest foreign investor in the Russian stock market. Over time, we identified a number of major corruption schemes in the companies we invested in. To stop them, we researched details of their corruption and shared those details with international and Russian media in order to name and shame those involved. This anti-corruption approach had a positive impact on cleaning the businesses and increased the share price of the companies we invested in.
- This work also angered a number of highly-placed oligarchs and corrupt officials who were close to Russian President Vladimir Putin. In November 2005, I was expelled from the country and declared a threat to national security. Eighteen months later, my offices were raided by twenty-five officers of the Russian Interior Ministry. On the same day, the office of an American-owned law firm in Moscow that held the documents of our Russian investment companies was also raided.
- The Russian police officers were specifically looking for the registration documents of our investment companies, and seized them from the law firm. Shortly thereafter, we asked a Russian lawyer named Sergei Magnitsky to investigate why the raids had taken place. Over the next few months, Sergei Magnitsky collected information and documents from official sources and was able to determine that the documents seized by police during the raids on our offices were used by a group of corrupt police and tax officials and organised criminals to orchestrate the illegal refund of US$230 million of taxes that the Hermitage Fund had paid to the Russian government in 2006.
- Sergei Magnitsky gave sworn testimonies to the Russian authorities in June and October 2007 about the officials involved in the fraud against the Hermitage Fund and in the fraudulent theft of $230 million of taxes it had paid. Five weeks after his testimony, on 24 November 2009, Sergei Magnitsky was arrested by some of the same police officials he had implicated in his testimony. He was held in pre-trial detention for 358 days and killed after eight riot guards beat him with rubber batons. He was 37 years old.
- After his murder, the Russian authorities covered up the cause of death, covered up the torture he had been subjected to in detention, and refused to acknowledge that any crime had been committed against Sergei Magnitsky.
- Given the impunity in Russia, I’ve committed myself since then to go after the people who killed Sergei Magnitsky and make sure that they face justice. That is what I have been doing for the last twelve years.
- One of the key aspects of our justice campaign was to identify who received the $230 million that Sergei Magnitsky was killed over. Through a combination of whistle-blowers, data leaks, and law enforcement investigations, my team was able to put together a number of beneficiaries, as well as to identify channels they used to launder the stolen funds, leading to the discovery of the massive international money laundering network.
- We have learned that the money was comingled and flowed through at least 51 countries, and multiple conduit bank accounts registered to numerous shell companies before reaching different individuals, including those who orchestrated the $230 million fraud as well as a myriad of Russian government officials and associates. The following individuals received funds that were dispersed through this money laundering network:
- Sergei Roldugin, Putin’s best friend from childhood and a cellist from St Petersburg, widely considered to be Mr Putin’s proxy (US$31m in Switzerland);
- Dmitry Klyuev, head of the Klyuev Organised Crime Group and owner of a small Russian bank which accumulated the stolen proceeds (US$45m in Switzerland, Cyprus, and the UK);
- Andrei Pavlov, consigliere to the Klyuev Organised Crime Group which organised the theft of $230 million (US$1.4m in Latvia);
- Olga Stepanova, head of the Moscow district tax office, who approved the fraudulent tax refund, and her husband Vladlen Stepanov (US$12m in Switzerland);
- Elena Anisimova, official in the Moscow district tax office, which approved the fraudulent tax refund (US$0.9m in Switzerland);
- Olga Tsareva, official in the Moscow district tax office, which approved the fraudulent tax refund (US$0.9m in Switzerland);
- Irina Terkina, head of department of the Russian Presidential Administration (US$0.4m in Belgium);
- Vladimir Artyakov, governor of Samara region (US$16.8m in Spain);
- Denis Katsyv, son of Deputy Chair of the Moscow Region Government (US$2.1m in Switzerland);
- Maxim Liksutov, Deputy Mayor of Moscow (US$0.4m in Estonia);
- Nikolai Lyamov, Moscow Transport Minister (US3.3m in Monaco);
- Dmitry Saveliev, member of the Russian parliament (US$1.2m in Switzerland);
- Inna Elvartynova, Moscow City government (US$4.2m in Austria).
- In every instance, when we received this information, we wrote criminal complaints to law enforcement in each respective countries and requested they open investigations.
- Law enforcement investigations have been conducted by the following countries: the United States of America, France, Belgium, Holland, Denmark, Luxemburg, Switzerland, Moldova, Lithuania, Latvia, Estonia, Cyprus, Sweden, Germany and Ukraine.
- My team has identified $43m flowing to the UK through the money laundering network used to launder proceeds of the $230m fraud. We have also discovered the involvement of numerous UK entities and persons in this money laundering network, including:
- multiple British citizens (including Stephen John Kelly, Andrew Moray Stuart, John Wortley Hunt, Damian Calderbank, Matthew Charles Stokes) served as nominee directors for the shell companies used as conduits in the money laundering network scheme;
- more than 80 shell British companies appear to have been involved in the network used to launder proceeds of the $230m fraud (see the list below). To provide them an appearance of legitimacy, these companies were registered with the UK Company House, whilst bank accounts were opened for these companies in other jurisdictions;
- at least eight UK banks received funds from conduit accounts in the network used to launder proceeds of the $230m fraud (see the list below);
- payments to UK accounts were identified as payment for various goods and services, including real estate (Harrods Estate; Strutt & Parker; Lane Fox), design (David Collins Studio; HB Interior), tuition (Queen Ethelburga’s Collegiate), legal services (Withers LLP), concierge services (Quintessentially), IT goods and services (HP Europe BV), fashion (Phillipa Lepley; La Petite S; Vera Basharatyan), yacht services (Peters and May Ltd) among others.
- Despite these prevalent and overwhelming UK connections, the British authorities have steadfastly refused to open any investigation into money laundering connected to the fraud against Hermitage and the $230m money laundering scheme.
- In 2010, the Metropolitan Police stated that it did not have ‘jurisdictional responsibility to investigate the fraud and money laundering’.
- In 2012, the Serious Crime Agency replied that it was not ‘the appropriate body’ to investigate, and put our complaint into an archive of ‘suspicious activity reports’.
- In 2012, the Serious Fraud Office (SFO) replied that the reported money laundering did not ‘fall within the offences that the SFO is permitted to investigate’.
- In 2013, HMRC replied that it would not provide any information on any action taken or not taken in response to our complaint.
- In 2015, the National Crime Agency (NCA) replied that ‘at this stage a domestic criminal investigation relating to money laundering in the UK is not the most effective way forward’. A further reply to our subsequent complaint stated that the NCA was not able to consider it due to priority being given to an investigation into Panama Papers.
- Notably, an officer in charge of investigating our complaint at the NCA, [name], assessed that there were grounds to investigate. However, when he began his investigation, he was instructed by superiors on two separate occasions not to investigate. We learned about this only after Mr [name] left the NCA.
- Why has Britain been so lax in this case? I believe there was a political direction not to investigate.
- Furthermore, the leadership of the NCA had not been up to the task. For nearly six years, between 2016 and 2021, the NCA had been run by Lynne Owens, who in her prior position as chief constable of Surrey police had been responsible for the botched investigation into the sudden death in Surrey of a key Russian whistle-blower and a witness in the Swiss money laundering case relating to the Russian officials involved in the $230m crime scheme.
- In addition, UK lawyers and even a member of the House of Lords were engaged by Russian interests to advance their agenda in the UK and influence the public policies and their implementation. Specifically, Andrei Pavlov, consigliere to the Klyuev Organised Crime Group, personally engaged the former Attorney General of the UK, Lord Goldsmith, in an attempt to avoid being included on the European Parliament’s Magnitsky Sanctions Recommendations List in 2014. Mr Goldsmith’s fee was £960 per hour. Mr Pavlov’s retainer with Mr Goldsmith’s firm, Debevoise and Plimpton, was £75,000.
- My first recommendation is that officials in the NCA and related government bodies who were involved in decisions not to investigate be brought before this committee to testify as to their reasoning for why such decisions were made. With current events such as they are, it is not an understatement to say that this is one of the most important money laundering investigations in modern history. Certainly, these testimonies will be crucial to combating illicit finance in the United Kingdom.
- My second recommendation is that the UK’s law enforcement capabilities fighting illicit finance need to be reformed root and branch. These reforms must allow for robust and effective delivery of justice to combat international money laundering. Specifically:
- The budget and investigative resources should be increased;
- Recruitment should aim to hire the top trained experts, and their compensation should be competitive with the private sector;
- Money should be allocated to bring in private sector investigators, solicitors, and QCs with experience to match the calibre of lawyers that the targets of investigations are able to hire to fight their prosecution;
- The money collected from successful prosecutions should in part be used to fund further investigations;
- Programs to support and protect whistle-blowers on international money laundering should be developed;
- And, most important, the requirement for law enforcement agencies to pay the legal fees of the targets of prosecution if they lose prosecution should be abolished entirely. This is perhaps one of the biggest weaknesses of the current British law enforcement system as it utterly paralyses law enforcement’s willingness to pursue serious money laundering cases.
Thank you for the opportunity to contribute to this important inquiry.
List of bank branches in the UK which received funds from accounts identified in the money laundering network, used to launder US$230m fraud proceeds
- Lloyds bank (113-117 Oxford St and 399 Oxford street branches, London; Bristol City branch)
- Barclays bank (Mansfield, Cheshunt, and 1 Churchill Place branches)
- NatWest (Chiswick branch)
- RBS (Devonshire Square, London EC2M 4XJ and St. Albans AL1 3LR branches)
- Bank of Scotland (London EC2M 3YB and Edinburgh EH12 9DR branches)
- HSBC Bank (60 Fenchurch Street, EC3M 4BA, and 76-78 King's Road SW3 4TZ branches)
- Citi bank (Canary Wharf, London branch)
- JP Morgan (Canary Wharf, London branch)
List of UK-registered companies identified in the money laundering network used to launder US$230m fraud proceeds
NN Company Name
1 ALMERDALE ASSETS LTD
2 ALTMAN PROJECT LLP
3 ALVEX INTRO LIMITED
4 AMT GROUP LIMITED
5 ARMAC CONSULTANCY LIMITED
6 ARMUT SERVICES LLP
7 ARRELL TRADING LIMITED
8 BARONSON LTD
9 BAYFIELD UNION LLP
10 BECATONE IMPORT LP
11 BHW PROJECTS LLP
12 BRANTING ALLIANCE LLP
13 BRYNER LLP
14 C. GROUP INTERNATIONAL L.P
15 CARLTOWN BUSINESS LLP
16 CARTHILL SOLUTIONS LLP
17 CARTMILL ALLIANCE LIMITED
18 CASTLEFRONT LLP
19 CHERANO LIMITED
20 CHESTER UNITED LTD
21 CLARK INDUSTRIES LLP
22 CNR SYSTEM LIMITED
23 CONTLUX PROJECTS LLP
24 CORPMARK IMPEX LLP
25 CRAMBERG VENTURES LLP
26 CROFTLINK EXPORT LLP
27 CROMEX TRADE LLP
28 CROSS TRADE INVESTMENTS LLP
29 CROSS TRADE SERVICES LIMITED
30 CRUISE NAVIGATOR LLP
31 DANFORD SHIPPING LLP
32 DEXTERSON LLP
33 DIRON TRADE LLP
34 EDMONTEX LLP
35 EPSILON COMMERCIAL LTD
36 EVEREN UNIVERSAL LLP
37 EVERFRONT SALES LLP
38 EXTRAVOX SALES LLP
39 FINBURG SALES LLP
40 FIRST LEADER TRADING LIMITED
41 FORRES LIMITED
42 FRANTINI ALLIANCE LLP
43 FRIMAS SOLUTIONS LLP
44 GOODBECK CONSTRUCTION LIMITED
45 GOODWIN MANAGEMENT CORPORATION LTD
46 HADDINGTON ASSOCIATES LTD
47 HANSA PROJECTS LLP
48 HOLDNET TRANSIT LLP
49 HOUSEHOLD PRODUCTION LLP
50 HOWARD RESOURCES (LONDON) LLP
51 INDUSTRY ALLIANCE LTD
52 INTERSERVICE ALLIANCE LTD
53 JACKWELL LLP
54 JEDSERT CONSULT LLP
55 JOINTMAX SALES LLP
56 KARERAS LIMITED
57 LERONA CORPORATION LIMITED
58 LORDUM LLP
59 LOTA SALES LLP
60 MERCHANT LINE LLP
61 MUROVA SYSTEMS LLP
62 NASWERT TRADE LIMITED
63 NATBORG VENTURES LLP
64 NETMARK IMPEX LTD
65 NILSON MANAGEMENT LTD
66 NOBEL SERVICES LIMITED
67 NOMIREX TRADING LIMITED
68 NORLOG INDUSTRIES LLP
69 OLDSTAR SYSTEMS LLP
70 OSTEND PARTNERS LLP
71 OVERCORD LLP
72 PROGRESS ALLIANCE LIMITED
73 ROBERTA TRANSIT LLP
74 ROSINA LIMITED
75 SENECA ENTERPRISES LIMITED
76 TECHNOMARK BUSINESS LTD
77 TEXTILE EUROPE LLP
78 TONFIELD COMMERCE LLP
79 UNICONT INDUSTRIAL LLP
80 UNITRONIC LLP
81 WELMAX ASSOCIATES LTD
82 WENTROAD LLP
83 WINCHESTER TRADE AND DEVELOPMENT LTD
15 March 2022