RUSSIA'S LAUNDROMAT PART 1 - MINISTRY OF THIEVES

RUSSIA'S LAUNDROMAT PART 1 - MINISTRY OF THIEVES

All around the world, dirty money pollutes public and private life. Those who wield it are a diverse cast of businessmen, politicians, and criminals - and sometimes, they're all three. In this anthology, Vanessa Kirby meets the investigators using open-source intelligence to expose the murky relationship between international institutions and Russian financial crime. In Part 1, former financier and anti-corruption activist Roman Borisovich details an undercover operation in London where an eager real-estate industry is all too willing to get rich off of ill-gotten cash. Could you shine a light in the shadows?
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True Spies, Episode 119, Russia’s Laundromat, Part 1: The Minister of Thievery

NARRATOR: Welcome to True Spies. Week by week, mission by mission, you’ll hear the true stories behind the world’s greatest espionage operations. You’ll meet the people who navigate this secret world. What do they know? What are their skills? And what would you do in their position? I’m Vanessa Kirby, and this is True Spies: Russia’s Laundromat, Part 1: The Minister of Thievery.

ROMAN BORISOVICH: At the end of the day, behind every stolen dollar, there is somebody who knows what happened and how that has been made. And most likely, it's not one person. It's the lawyer. It's the accountant. It's the banker. They're all in the know.

NARRATOR: Let’s game out a hypothetical scenario. One that you’re unlikely to find yourself in, being, I’m sure, a person of robust moral character. But, just for a moment… Suppose you find yourself holding several million dollars worth of stolen money. Or several billion. And you need to find a place to put it. Where do you turn? How do you keep it a secret? And who can you ask for help? After all… who would want to help a criminal? 

ROMAN BORISOVICH: You don't want to be dealing with Al Capones of the world.

NARRATOR: Nobody manages dirty money with spare change. Money laundering is big business, and the more of it you have to hide, the more it takes to cover up. A paper trail - if you leave one - should be convoluted and opaque. Making it impossible for authorities, investigators, and journalists to follow the money. And if you’re in the public eye, or if you have famous friends, you’ll need more layers of protection from scrutiny. 

ROMAN BORISOVICH: But if this is somebody who hasn't been as notorious as Al Capone, if it's some sort of a regional governor out of Russia whom nobody has heard of, then why not? Why not take his money and help him set up an offshore company and buy a chateau in the south of France?

NARRATOR: “Russian corruption” has become as much a cliche as “German efficiency” or “American individualism.” But it’s a cliche that masks a larger problem - one that lets the rest of the world off the hook.

ROMAN BORISOVICH: Behind every kleptocrat, there is a lawyer, a banker, and normally another good little army of people who know exactly where the money is coming from.

NARRATOR: And no one becomes a kleptocrat in a vacuum. In this three-part True Spies series, you’ll meet three intelligence-gatherers who root out financial crime, tax-dodgery, and other kinds of dirty money manipulation. We’ll show you how that money is used to purchase lavish real estate. 

ROMAN BORISOVICH: How easy it is to bring corrupt money into the UK via offshore companies.

NARRATOR: How it’s used to buy secrecy. 

OLESYA SHMAGUN: The Panama Papers showed that Roldugin at the same time had another life that was obscured from the public eye. And in our final episode, how it’s used to finance an autocracy.

OLIVER BULLOUGH: He had made a huge fortune for himself. But he had also partnered with Russia, with Putin - who by this stage, it was clear, was no friend of democracy. Dirty money has been flowing westward from Russia for decades, to places like France, Monaco, Switzerland, the United Kingdom, and the United States. Those of us who live in those places have had every reason to be aware of and fix the problem. So why haven’t more people opened their eyes to it? Seven years ago, an anti-corruption activist asking himself the very same question went undercover, hoping to open people’s eyes. He was working in London. But it could just as well have been Paris, or Washington, or Geneva, or Monaco. Anywhere in one of the wealthy, democratic countries now known to be working as Russia’s laundromat.

ROMAN BORISOVICH: My name is Roman Borisovich and I am a financier by profession and anti-corruption activist.

NARRATOR: Born in Moscow to a Ukrainian family, Roman Borisovich left Russia just after the Soviet Union collapsed and received an education at a prestigious American university, then moved to London in 1997. But as a financier, he worked with clients all over the world. 

ROMAN BORISOVICH: Just before the financial crisis of 2008, I switched from banking to insurance and went to work for my then client, the largest Eastern European insurance company. And that meant that I was spending lots of time in Moscow where the company was headquartered. And the company, Rosgosstrakh, It's a household name because there was no other insurance company. And it still is the third largest retail network in the country.

NARRATOR: As a brand-new board member, Roman was alarmed with what he learned about how that money was being managed. 

ROMAN BORISOVICH: That's my first encounter with corruption - in my first board meeting - when I realized that we're losing 30% of our gross revenue to corruption, something that would make you freak out as a financial director. 

NARRATOR: Nearly a third of the company’s massive revenue was getting pocketed, like bread rolls at a hotel breakfast. 

ROMAN BORISOVICH: But my colleagues were actually quite encouraging. They were saying that our competitors, state-run insurance companies, were losing 70 to 80% and we were quite stable at 30. That was my shocking dive into the realities of Russia, where I realized that the system that Putin has built is entirely based, totally founded, on corruption. Obviously, there is grand corruption in terms of the Kremlin and the cabinet and regional governors and their ministers. But also it goes through everyday life. And it's from street level all the way to the Kremlin.

NARRATOR: But that was the soup Roman was living in. 

ROMAN BORISOVICH: My shock of finding out that the level of corruption in Russia was going on for a while until I came across this brilliant lawyer, and anti-corruption activist called Alexei Navalny. At that time, he was a blogger. He was very rapidly gaining popularity. And he was doing what I would describe as ‘classic capitalist share activism’. He would buy a share of Gazprom and show up at the AGM.

NARRATOR: That’s the Annual General Meeting.

ROMAN BORISOVICH: And say, “Look this pipeline is supposed to reportedly cost you four-and-a-half billion. According to the expert estimates that I got, it should be one-and-a-half billion. Why is it that you are paying so much for it as a shareholder? Can I see your records, please?” And also his anti-corruption activities in exposing the wealth, the hidden offshore unreported wealth of government bureaucrats, were making him really, really popular to the extent that certain hearings and criminal cases were open, and certain people were asked to resign or resign themselves. And I thought that was brilliant.

NARRATOR: Roman was impressed by Navalny. And he wanted to help.

ROMAN BORISOVICH: And we started a conversation on the net, which then translated into a physical relationship, and physical meeting, and contacts. And I became one of his sponsors because I admired the fact that he was standing up to corruption and inventing really modern and powerful, effective techniques of monitoring and fighting it like he was doing with the government tenders and whatnot. So I was very honored when he offered, he asked me to be his advisor and to be one of the founding fathers of his Anti-Corruption Foundation.

NARRATOR: Fighting corruption became a permanent fixture of Roman’s work. In 2015, he co-founded the Campaign for Legislation Against Money Laundering in Property by Kleptocrats or Clamp K. 

ROMAN BORISOVICH: Clamp as in clamping corruption. Putting the clamp on corruption.

NARRATOR: And as a resident of London, Roman saw plenty to clamp down on. Countless wealthy Russians with ties to the Kremlin have tucked away their cash in the United Kingdom. Enough of them that the capital city has earned the nickname ‘Londongrad’. 

ROMAN BORISOVICH: It is definitely a cultural center. It is definitely a historical and cultural hub. It is very, very convenient and fashionable and whatnot. But the primary reason is one and only, because you can bring money into London without questions being asked. Any sort of funds that have been laundered come to London and they can be invested without any further due diligence. 

NARRATOR: Particularly welcoming, Roman says, is the London real estate market.

ROMAN BORISOVICH: Until now it's still possible to buy properties in the name of offshore companies without disclosing who the owner is. So a director from Panama or Cyprus signs the piece of paper in London on behalf of a mysterious anonymous owner, and hundreds of millions of pounds are changing hands in that fashion on a daily basis. And billions of pounds have gone through per year, has gone through London real estate, and a lion's share is going through offshore companies without anyone having even any knowledge of who's behind that.

NARRATOR: Well - it’s not as if no one knew. Certainly, in 2015, there wasn’t the level of interest or scrutiny there is today. But things had begun to shift in the United Kingdom. Attention was beginning to be paid.

ROMAN BORISOVICH: ​I think there was a growing interest, and especially in the UK, the interest was growing primarily - it's very politicized. So initially it was growing from the perspective of whether these corruption cases were linked to any donors of primarily the Conservatives.

NARRATOR: And where there’s political interest, there’s popular interest. Roman met a young journalist who conceived of an idea: something that could be made into a documentary film. One that would expose, to a mass audience, the way dirty money is welcomed with open arms, right in the heart of London.

ROMAN BORISOVICH: Basically, the idea was to trace, to have like a hidden camera, a trace of a money laundering situation, how it has generated - in, like, Russia or Kazakhstan or somewhere in the former Soviet Union - and how it goes through offshore companies comes to London and then is being laundered in the UK property.

NARRATOR: The plan was this: Send an actor to a series of meetings with London’s poshest real estate agencies to view five different multi-million-pound private residences. The actor, posing as a Russian minister, will make it clear to the agents that he intends to purchase his new flat with dodgy money. Then it’ll be up to the agents to decide: Do the right thing and report the kleptocrat? Or make a sale and potentially rake in hundreds of thousands of pounds in commissions? 

ROMAN BORISOVICH: While we were working on this idea we met Dan Reid, who was already at that time the most decorated documentary director in the UK with most BAFTAs to his name.

NARRATOR: The film now had a respected director and it would also need a convincing actor to play the starring role - someone who could not only stay in character but who knew enough about Russian money laundering schemes to be able to roll with the punches.

ROMAN BORISOVICH: We were looking for an actor who could do a Russian accent. And at some point, we both then realized that it's impossible to prepare the person for all of the eventualities that could come up in a conversation. And so basically they point the finger at me. And obviously, I was like, "Me, I've never done this before."

NARRATOR: Despite his nonexistent résumé as a performer, Roman had plenty of material to draw from. He conceived of his character, ‘Boris’, based on real people he knew. Boris was a Russian health minister who claimed to earn a modest salary, buffeted with special deals here and there, little nips into the revenue stream for his own personal gain.

ROMAN BORISOVICH: He was an amalgamation of different people. I had to give him some real-life sort of habits or behavior. Like, I don't know, rudeness, interrupting, treating these estate agents like dirt, and disregard basically that part. I didn't enjoy that part but it was kind of fun to do this.

NARRATOR: Boris would arrive at each property with his considerably younger girlfriend, Nastya. The property, they explained, would be hers to enjoy. Nastya would be played by Natalie Sedletska, an award-winning investigative journalist from Ukraine.

ROMAN BORISOVICH: She had to play a very important role, which probably didn't get into the film because it was only focused on my conversations with the estate agents and on the lavishness of these properties. But in real life, it was she, primarily, who had to go around looking into every wardrobe and find out how things work. To say that, yes, she is happy. She likes this and says, “Boris, can I have it, please?”

NARRATOR: With Dan Reid on board as the director, they pitched their proposal to the British public broadcasting network Channel 4.

ROMAN BORISOVICH: And it was pretty much Mission Impossible because they were convinced that this is going to end up in the courtroom.

NARRATOR: Of course, no one would actually buy any property. Nothing could be signed. No deals could be made. But the oligarchs and kleptocrats investing heavily in the UK have a penchant for taking people to court for libel. To carry this out without incurring massive legal fees, the network’s lawyers would need to ensure that the team proceeded with caution.

ROMAN BORISOVICH: I actually admire their bravery, the way they approach this. And they were ready to go and to defend us in the courtroom. They knew they were going to be sued and they wanted to have a full proof argument that, “Look, there is a clear statement that the money has been stolen.” So there are no other ways of interpreting it.

NARRATOR: Their lawyers agreed that the film could go forward but only on certain conditions…

ROMAN BORISOVICH: The conditions were that it has to be onshore, it has to be in London. And basically, our character would have to tell everyone in no uncertain terms that the money is stolen.

NARRATOR: In other words, it would need to be crystal clear to the real estate agents that the final transaction would involve dirty money. To be sure, no kleptocrat buying property in London would say outright, “I’m buying this flat with money that doesn’t belong to me.” Who would sell to someone who’s just outed himself as a thief? It suddenly seemed unlikely that Roman and his team would be able to pull this off.

ROMAN BORISOVICH: I clearly remember that meeting, Dan was freaking out. He was like, “Ah, you ruined it. This is going to be… No, we're not going to film this. This is ridiculous. Who would ever say that?” And the good thing, being an investment banker, I know how to handle lawyers. Right? So I decided to agree first and then to look for caveats and look for ways of how that could be narrowed down. 

NARRATOR: Creative thinking will get you far in art and thievery.

ROMAN BORISOVICH: And so we narrowed it down to two things like, “Okay, well, that particular phrase had to be said, but the circumstances, how it was handled would have been completely on our own.” So Dan suggested that, for example, I would go into some sort of a Dostoyevsky revelation of the Russian soul or something like that. And I said, “By the way, why don't we make it turn differently, saying, I have the money and I would like to use it really. But the only small problem is I cannot be seen doing this. It cannot be me because that's the problem. The money has been stolen.”

NARRATOR: Roman Borisovich is about to go undercover to demonstrate how easy it is for a kleptocrat to launder stolen money in the United Kingdom. He has a celebrated director and a solid legal team on his side. But there are a few problems he’ll have to contend with. The first? He has to state, in no uncertain terms, that he’ll be purchasing a multi-million-pound London flat with dirty money. That’s a tough way to begin a business transaction. The second? He’s never even acted before, much less gone undercover. How would he fool the sorts of estate agencies that see the real deal, day in and day out? And the third: What if something goes horribly wrong?

ROMAN BORISOVICH: We were concerned that somebody would be causing problems like reporting us to the authorities, to the police.

NARRATOR: But let’s back up a moment. Boris, Roman’s character, would be making relatively small investments for a Russian oligarch in London, to the tune of £5m to £15m - roughly £19m maximum. Some of the properties linked to Russians who have been sanctioned since the Russian war in Ukraine began are valued at over fifteen times that amount. Still, ‘Boris’ couldn’t just write a cheque for £15m pilfered pounds. He’d need to find a way to cover it up. And the estate agents he’d be working with would likely be familiar with the process. 

ROMAN BORISOVICH: My idea was to put it like that, put it as a small problem saying, “Look, everything's done. We love it. She loves it. Done. Except how can I do this?”

NARRATOR: In other words, he’d ask them, “How can I make sure my purchase will remain a well-guarded secret?” If these agencies had worked with other suspicious clients in the past, they’d know just how to reply. The most tried-and-true formula? Outfit yourself with lawyers, bankers, and accountants who can be trusted to keep things hush-hush. Then, move your money outside of Russia - maybe somewhere with strict privacy laws, like the British Virgin Islands, or low tax rates, like Cyprus. Hide it in a shell company, and make sure you’ve created enough official-seeming documentation that you won’t raise any eyebrows. Then again, maybe these agencies would want nothing to do with this crooked health minister. One of them even branded itself with the slogan “The only way is ethics.”

ROMAN BORISOVICH: Some people are obviously going to say, “No, no, no, we're not going to deal with that. That doesn't sound right. Thank you very much. But don't call us again.”

NARRATOR: Roman and his production team set up five different viewings for their documentary. At each viewing, Boris’s girlfriend Nastya would fall in love with the place. They’d make it look, to the estate agent, like a done deal. Then Boris would ask for a word in private. That’s when he’d deliver the line Roman had agreed upon with their lawyers.

ROMAN BORISOVICH: “Needless to say, the money for this property has been stolen out of the ministry budget.” That phrase had to be repeated in these certain words in its entirety.

NARRATOR: Of course, it was unlikely that many of the real estate agents would want to proceed further. But if any of them did, it would help Roman expose the ubiquity of UK money laundering. And it would make for pretty good television. Roman was hopeful.

ROMAN BORISOVICH: We thought that at least one story would be able to follow all the way to not to completion, to exchange for some sort of tangible result.

NARRATOR: Roman and Natalie, as Boris and Nastya, were outfitted with buttonhole cameras and microphones. Dan, playing Boris’s bodyguard, also wore a camera.

ROMAN BORISOVICH: Six months before the actual filming, we set up a concierge studio that was supposedly acting for wealthy Russian customers, that established relationships with certain estate agents that we suspected at the time were handling dirty money, basically giving legitimacy to that business, awaiting that final phone call when one day, the day that we were filming, finally, the real client is flying in. You know, he's a very important government minister. He has to be met only by the senior person, one-on-one and your best property, that type of thing.

NARRATOR: Finally, that day arrived. Boris and Nastya saw their first flat. Nastya, as planned, was instantly smitten.

ROMAN BORISOVICH: Nastya had to get them to that orgasm basically in front of the camera. And at which point I would intervene saying, “Hey, hang on a second. There's one small problem.” And then depending on the circumstance, “Can we have a cigarette outside? Can we go to the balcony? Can you please guys step out of the room?”

NARRATOR: Imagine being in Roman’s shoes. You’re a financier and an activist, not an undercover reporter or even an actor. Under UK law, even failing to report money laundering is a criminal offense - so if the stunt goes to plan, it could have a seriously negative impact on these estate agents’ lives. And it’s easy to imagine how things could go poorly. Who would sell a home to someone who admits to being a criminal? As soon as Boris fesses up to having stolen his millions, doesn’t this house of cards come crashing down? Who would go into business with an avowed kleptocrat?

ROMAN BORISOVICH: All of them must have been in a position or had dealt with something like that because all of them immediately said that I need to put together some sort of an offshore company and come back through that company. 

NARRATOR: You heard that right. Not only did they not refuse to do business with Boris, they walked him through how to do it.

ROMAN BORISOVICH: Two went as far as recommending their contacts who would do this for me.

NARRATOR: The agents offered to put him in touch with lawyers who might be able to help him out. One of them even mentioned that he’d had another client in a similar boat.

ROMAN BORISOVICH: When somebody like that tells you, “Oh yeah, I know, I put another Soviet minister [in touch] and got the property for him,” well, then, then you understand that. You're preaching to the converted.

NARRATOR: Flat after flat, the stunt worked. 

ROMAN BORISOVICH: All I remember is that after, like, three of them agreed, you then don't think that the odds of the next one is 50/50? Obviously, you think, “Oh, no, no. But the next one, it has to… then… ” But just by the law of probability, you think that it cannot be four, four in a row. So every time it was, the pressure was higher and higher.

NARRATOR: And then, on the fifth and final viewing…

ROMAN BORISOVICH: Bullseye.

NARRATOR: Five out of five.

ROMAN BORISOVICH: Everyone agreed to cooperate with a thief and with perfect knowledge that the money has been stolen from another country.

NARRATOR: The project had gone off better than he or anyone else could have expected. And as a first-time actor, Roman had received a big win. But as an anti-corruption activist, Roman was able to see the dark truth of what they had uncovered.

ROMAN BORISOVICH: Then it was really shocking, like in a bad way, in a discouraging way. Like, is it that bad? I mean, yes, we did suspect that these agencies were catering to that sort of personnel. Yes. But we were very, very obnoxious in a way that it was so apparent, so in-your-face. How can they not react?

NARRATOR: Still, when it was released in 2015 the film provoked a significant public response. And that was bang on the money.

ROMAN BORISOVICH: The response was exactly what we were aiming for. It wasn't just the film. At the same time, there was this brilliant research by Transparency International that put numbers on everything that was happening in that film, saying exactly that hundreds of thousands of properties are owned by anonymous companies, that nobody knows how the money was created, and that there is a good reason to suspect that a lot of the of this financial flows are dirty. At the same time, Global Witness came out with their report, Mystery on Baker Street, whereby they showed that a whole block of buildings was owned by an ex-KGB chief of Kazakhstan, including the beloved Sherlock Holmes flat. And that was, again, as real as it gets that these were real buildings, and really, really bad guys. So together with that the film just showed how easy it is.

NARRATOR: Those revelations gave way to new promises, from the highest echelons of British power.

ROMAN BORISOVICH: A few days after the film aired, the commander in charge of the Economic Department of National Crime Agency, Donald Toon, gave a very big interview to The Times where he basically [said] better than anyone he coined it. His phrase was that ‘London property prices are skewed by criminal money’. That just became headlines for all the tabloids. I mean, the government could not have ignored this any longer. And so, within days, there was a response from Mr. Cameron.

NARRATOR: That is, Prime Minister David Cameron. In a speech in Singapore, Cameron responded to the cascade of negative press surrounding property purchases. “There is no place for dirty money in Britain,” he said. “Indeed, there should be no place for dirty money anywhere.” But in practice, things have been slow to change in the UK. Yes, Parliament has introduced a new Economic Crime Bill. But it's been seven years since Cameron’s speech and, according to Roman, only now are those promises beginning to take shape. Things are changing in the west. But how many years of warning went ignored? And how many voices from within Russia itself went unheard, before the unthinkable happened? 

ROMAN BORISOVICH: I mean, it's really unfortunate that we had to have a situation where innocent Ukrainian blood has been shed for us to finally receive that bill.

NARRATOR: Next week: the canary in the coal mine. A ‘foreign agent’ willing to pay a high cost for transparency in today’s Russia.

OLESYA SHMAGUN: Even at a local scale, local journalists in many cases are beaten and killed and everything. So it's something you always have in your mind.

NARRATOR: You can learn more about Roman’s work at ClampK.org. And you can learn more about Boris in the documentary film To Russia with Cash. I’m Vanessa Kirby. Join us next time to meet a young woman going head-to-head with Russia’s most corrupt officials. Or, if you’re a subscriber to *Spyscape Plus* on Apple Podcasts, there’s no need to wait. You can listen to it right now.

Guest Bio

Roman Borisovich (pictured) is a financier and anti-corruption activist who was born in Moscow to a Ukrainian family. He left just after the Soviet Union collapsed and received an education in American university before moving to London in 1997.

Olesya Shmagun is a Russian investigative journalist. She worked for the Russian newspaper Novaya Gazeta and the Organized Crime and Corruption Reporting Project.

Oliver Bullough is a regular contributor to London's The Guardian newspaper, and the author of Moneyland.

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