Polina Kovaleva’s London flat and the task of tracing Russia’s dirty money

A ground-floor flat in Kensington has grow to be emblematic of the issues dealing with Britain because it confronts its function as a hub for soiled cash after the flat’s 26-year-old proprietor was sanctioned by the UK due to her shut relationship with Sergei Lavrov, the Russian overseas minister.

Within the sanctions itemizing, Polina Kovaleva was described as Lavrov’s “stepdaughter” by the UK authorities. Her mom, Svetlana Polyakova, just isn’t married to Lavrov, however has been named by Russian unbiased media as his romantic associate.

Kovaleva purchased the London flat with out a mortgage in 2016 for £4.4mn At the moment, she was a scholar at Loughborough College in England’s East Midlands. She has since labored as an intern and in junior roles on the Russian state-owned financial institution VTB Capital, the commodities dealer Glencore and the Saudi state oil firm Saudi Aramco.

Saying its measures towards Kovaleva and others, the UK authorities mentioned in an announcement: “This sends a powerful sign that these benefiting from affiliation of [sic] these answerable for Russian aggression are in scope of our sanctions.”

Within the wake of Russia’s invasion of Ukraine, there was far larger scrutiny of individuals related to Vladimir Putin’s internal circle within the British capital — nicknamed “Londongrad” due to the variety of rich Russians residing there.

However whereas the UK has sanctioned greater than 1,000 people and companies for the reason that warfare started, Kovaleva stands out. She is notable for her youth — she has been residing within the UK since she was 16 and studied at Clifton School, a personal faculty in Bristol — and since she is allegedly a member of the family of a high Russian official.

The UK has additionally introduced sanctions towards Kirill Shamalov, Vladimir Putin’s former son-in-law, however aged 40 he’s older than Kovaleva, has a excessive public profile, and had held senior positions in massive Russian firms. Till Kovaleva’s hyperlink to Lavrov was first reported final 12 months, she was a junior finance employee residing anonymously in London.

However her case highlights a number of the issues that made the UK such a centre for Russian cash, and the difficulties the authorities now face in tracing its origins. It additionally exhibits how confirming the id of the associates of even excessive profile Russian figures is extraordinarily troublesome.

The character of Kovaleva’s relationship with Lavrov had been saved secret; her hyperlink to the overseas minister was first publicly revealed by dissident Russian media organisations solely in late 2021.

The FT has since independently confirmed that Kovaleva has attended household occasions the place Lavrov was current. The FT additionally tried to contact Kovaleva for remark within the weeks working as much as her being sanctioned however she didn’t reply.

Kovaleva’s connection to Lavrov signifies that she ought to have been thought-about a excessive danger for cash laundering, and required to endure stringent checks: as an affiliate of a so-called “politically uncovered individual”, establishments ought to have undertaken further checks on her sources of funds.

Nonetheless, if she didn’t declare the connection, establishments are unlikely to have identified.

Second, the present guidelines on money-laundering have been solely tightened up in 2017. Earlier than that change, skilled advisers have been solely required to conduct checks on their very own purchasers. Savills, the property brokers who dealt with the sale of the flat in 2016, had an anti-money laundering obligation in relation to the property firm promoting the flat — however not in regard to Kovaleva.

 It’s not identified which advisers had that duty, nor how she defined the sources of her wealth if and when she was requested.

Kovaleva’s flat possession, moreover, was solely detected as a result of she didn’t try to cover. She used her Kensington handle in a public submitting, that attracted consideration. She additionally purchased the flat immediately, not by means of a shell firm owned in a secrecy jurisdiction. Had she achieved so, it may have been far tougher to show her possession.

The submitting was in relation to a property firm she shaped in 2019. In 2021, she additionally arrange an organization, with one different shareholder, whose supposed objective was given as “licensed eating places”. The corporate was renamed in late February, simply after the invasion started, to “Hotbox Holdings”. 

Following the publication by Russian journalists of a Twitter thread about Kovaleva this month, protesters gathered exterior her residence. After the UK authorities introduced the sanctions towards her on Thursday an activist affiliation referred to as Kensington Towards Soiled Cash launched an announcement calling for the property to “be seized instantly and bought off, with the proceeds invested in social housing regionally”.