It should not have taken the attempted murder of Sergei Skripal and his daughter in Salisbury to have finally brought to the fore the need to scrutinise the nature of the Russian money that has poured into the UK over the past 20 years.

Since the attack in early March, in which Police Detective Sergeant Nick Bailey was also poisoned, allegedly using the nerve agent Novichok, the UK government has been searching for a suitable response to the alleged ‘warlike act’.

One response that has been championed by many is financial, targeting the assets of those associates of Russian President Vladimir Putin who have chosen to invest their money (often of questionable provenance and in plain sight) in the UK.

But how easy would it be to roll up this ‘red money carpet’? How easy is it to reverse the considerable flow of Russian money that has made its way to London over the past two decades since the Russia debt crisis in 1998? And why did Russian money choose London?

The key to the success of London in attracting Russian money was the exploitation of the UK’s investor visa scheme

The capital and its financial services industry offer all the tools any financier or investor seek: the rule of law; a panoply of professional services firms, including lawyers, company-formation agents and accountants; and the efficient flow of capital into a range of investment opportunities from high-end real estate to liquid asset markets. But so, too, do several other financial centres around the world.

The key to the success of London in attracting Russian money was the exploitation of the UK’s investor visa scheme, introduced by the Major government in 1994. Add to this the 1997 Labour government’s promotion of a new light and limited touch approach to regulation, and the long-standing Conservative Party’s belief that burdensome regulation ‘threatens the global competitiveness of the City of London’.

Combine these with the effective promoting of the full-service offering of the City by organisations such as The CityUK and the City of London Corporation and the stage was set for London to dominate, and profit from, the market for capital raising, investment and private banking.

Consider the 2011 establishment of the City of London–Moscow International Financial Centre Liaison Group ‘… heralding a new – and potentially lucrative – relationship between the two cities.’ and the priority was clear.

The result? London attracted investment to its asset markets (bonds, equities and real estate), private banks developed ‘ultra-high net worth’ services, including property and private school finder services to attract the super-rich emerging from Russia and the City attracted the stock market listings of a range of Russian companies, such as Rosneft as the owners – asked in no great detail how they came by ownership – monetised their investments.

All these services, if not carefully regulated and monitored, offered ideal mechanisms by which illicit finance and ill-gotten gains could be laundered and recycled. They were invested in multimillion-pound property portfolios, private school fees and trophy assets. They were also invested in burnishing reputations and developing influence too; PR firms, political parties, universities and museums all benefited.

So, given where we now are, what can the British government do? The simple answer is ‘not much’

And so, in 2018 we face a market in which Russian money – by no means all of it of dubious origin – has spent two decades taking root. This was enabled by the sins of omission of governments, regulators and those professions that encouraged and welcomed money of any colour to London’s investment markets in the competition against New York, Hong Kong, Paris and Frankfurt for fees and status as the world’s leading financial centre.

Protecting this position was paramount; recall the notes which a civil servant inadvertently allowed to be photographed before a Downing Street gathering during discussions in early 2014 about sanctioning Russia for its activities in Ukraine: it indicated that even as a war was erupting in a heart of Europe, the UK did not support sanctions that closed London’s financial centre to Russians.

So, given where we now are, what can the British government do? The simple answer is ‘not much’ – at least not much to reverse the impact of 20 years of neglect; the dirty money has mixed into the economy beyond recognition and separation.

However, greater defences against future inflows of dirty money can be built and new powers provided by the Criminal Finances Act can be deployed to tackle more recent suspected illicit financial arrivals.

But tools such as Unexplained Wealth Orders (UWOs) are not the all-purpose ‘sonic screwdriver’ that many seem to believe they are. UWOs can be applied for in two cases: where there is reasonable suspicion of serious criminality; or where those under suspicion are ‘politically exposed persons’ from outside the European Economic Area, in which case no suspicion of serious criminality is required.

What ministers can do is to influence the National Crime Agency (NCA) and other relevant agencies in providing the resources needed to police the UK’s financial system properly

As both Ben Wallace, Britain’s Security and Economic Crime Minister, and Foreign Secretary Boris Johnson have stressed recently, UWOs cannot be applied as liberally as some would like.

However, these ministers may be wrong, for they appear to abrogate responsibility, hiding, as they did respectively in a recent Urgent Question parliamentary response and Foreign Affairs Committee session, behind the defence that they cannot influence the activities of the UK’s law-enforcement agencies.

This may be technically true, yet what ministers can do is to influence the National Crime Agency (NCA) and other relevant agencies in providing the funding and resources needed to police the UK’s financial system properly.

Money can be found; the Serious Fraud Office has access to blockbuster funding from the Treasury when needs be and a record for doing so: the government moved quickly to provide £10 million to investigate alleged financial wrongdoing revealed by the Panama Papers and form the Joint Financial Analysis Centre at the NCA.

The dispute about Russian financial assets in Britain occurs at an awkward time for London. Last week, the Financial Action Task Force, the global standard setter for anti-money laundering and counterterrorist finance, completed a three-week visit to the UK during which it assessed the nation’s financial crime-fighting capabilities.

The British government can no longer avoid the ugly truth that the reputation of London as the money laundering capital of the world is justifiably earned

The results of this visit won’t be published until towards the end of this year, but as RUSI’s Centre for Financial Crime and Security Studies has long held, the UK’s ability to meets its international financial crime-fighting obligations is considerably restricted by a failure to invest.

So, can the UK roll up the red money carpet? Not to the extent many would like. What the UK can do, however, is use this ‘warlike action’ of an assassination attempt on British soil as a call to financial arms and to acknowledge once and for all that reorganising government departments, creating new acronyms, establishing (overdue) registries of ownership and introducing (welcome) new powers are no substitute for investing in a properly resourced financial crime-fighting capability.

The British government can no longer avoid the ugly truth that the reputation of London, and the UK more broadly (including its Scottish LPs and overseas territories), as the money laundering capital of the world is justifiably earned and has been stoked by the ambitions of the City, aided in no small part by past governments, to dominate global finance.

A failure to act now by investing in law enforcement capabilities, properly empowering supervisors and scrutinising investor visas, a failure to take away the ‘welcome mat’ that greets money whatever its origin, would be a tacit endorsement of 20 years of neglect.

Banner image: Police in protective suits at The Maltings shopping centre, in Salisbury, where former Russian double agent Sergei Skripal and his daughter Yulia were found slumped after a suspected Russian nerve agent attack. Courtesy of PA Images

The views expressed in this Commentary are the author's, and do not necessarily reflect those of RUSI or any other institution.