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Not a single fine has been levied by the UK against Russia-linked individuals or firms for breaching sanctions, following Russia’s full-scale invasion of Ukraine in 2022, correspondence from the Foreign, Commonwealth and Development Office (FCDO) has revealed.
Minister of State at the FCDO, Anne-Marie Trevelyan, has told MPs she expects the first Government investigations into potential breaches of the UK’s financial sanctions imposed on Russian individuals and organisations since the war to “come to fruition in 2024”, possibly resulting in further monetary penalties. It is nearly 800 days since Russia invaded Ukraine.
The letter published on Friday suggests that none of the ten fines imposed to date by the Office of Financial Sanctions Implementation (OFSI) since 2017 for non-compliance with the UK’s sanctions regime relate to the Russia-Ukraine conflict.
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The fines before 2022, total £22 million, but the vast majority – more than £20 million – appears to relate to a penalty against a single bank in 2020.
Trevelyan told the Commons’ Foreign Affairs committee that since Russia launched its attack on 24 February 2022, OFSI has recorded £22.7 billion in frozen assets – as of October 2023 – relating to that country, and that there have been hundreds of suspected breaches of sanctions.
Appearing to defend the lack of fines or enforcement action, the minister claimed that some breaches are found to be “relatively minor”. “In these cases, OFSI will not necessarily impose a penalty, as it may be more appropriate to deal with the case in a different way such as a warning letter or referring the matter to a regulator,” she said.
But the scale of the suspected violations – 473 suspected breaches of financial sanctions (excluding oil price cap and counter-terrorism breaches) in 2022-2023 is a major increase on the 147 cases recorded in 2021-2022. “This increase was expected given the scale of increased Russia sanctions, and OFSI has increased its enforcement capacity in response,” Trevelyan added.
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Dame Margaret Hodge MP, Chair of the All Party Parliamentary Group on Anti-Corruption & Responsible Tax, told Byline Times: “We already know that our sanctions regime is not as tough as that used by the USA and the EU. Our regime lacks ambition and has too many loopholes.
“So it is all the more shocking that we are not enforcing the sanctions already in place. The Government must properly enforce existing measures, and close any remaining loopholes immediately. Only then can we be confident that we are doing all we can to support Ukraine in its barbaric conflict with Putin’s Russia.”
Tom Keatinge, Director of the Centre for Finance and Security at the Royal United Services Institute think tank, explained that fines and relations actions are “key tools” for Governments to set their expectations and the fact “we’ve yet to see material enforcement action means that the UK is not doing all it could do to ensure sanctions are implemented as effectively as they must be”.
“2024 must be the year of enforcement if the UK is to be taken seriously. Other countries in Europe such as the Netherlands are leading the way. The UK must catch up,” he added to Byline Times.
The minister’s letter also discusses allowances for sanctioned individuals from their frozen funds, saying that OFSI believes the net UK median wage of £28,000 – before tax – should normally fulfil individuals’ “basic needs”.
Licences for sanctioned individuals to receive these allowances don’t usually enable a designated person to continue the lifestyle or business activities they had before they were designated.
It’s unclear from the Government’s letter how many licences OFSI has granted to sanctioned Russian oligarchs that provide them with allowances far exceeding UK average wages.
Chair of the Foreign Affairs Committee, Alicia Kearns MP, said: “For too long the UK has been complacent, allowing wealthy Russians to wash their dirty money in the laundromat of London. Russia’s renewed invasion of Ukraine must be a wake-up call for the West. Clamping down on the illicit funds of high-net-worth Russians is an opportunity to deal a heavy blow to those who support Putin’s war machine.”
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She added that while the number of asset freezes under UK sanctions has grown significantly, “if this is not soon reflected in the number of enforcement actions, we will have to ask difficult questions about the efficacy of OFSI’s enforcement capacity”.
“Investigations into non-compliance are complex but must be prioritised and undertaken at pace; we need to send a clear message that illicit finance has no home in the UK,” the Conservative MP added.
While the sanctions regulator usually says the ‘basic needs’ of sanction-hit individuals in the UK can be met by the median wage of £28,000 per annum, it has been reported that some wealthy Russians under investigation had access to more than double that as recently as 2022.
“It isn’t enough to say that privacy concerns prevent the FCDO and Treasury from providing this information when these figures could be anonymised,” Kearns added.
This correspondence follows an evidence session held on 12 March on the UK’s sanctions regime against Russia and the abduction of Ukrainian children. The Committee published a report in 2022, ‘The Cost of Complacency: illicit finance and the war in Ukraine’, calling on the Government to tackle illicit finance flowing through the UK.
The Treasury did not wish to comment further.
Got a political story or tip? Email josiah@bylinetimes.com
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