Defeating Putin: A Quick Digest of the UK House of Commons’ Treasury Committee report on the impact of economic sanctions on Russia
Clearer communication from the UK government would help the private sector better implement Russia sanctions according to the UK House of Commons’ Treasury Committee report published 21st March 2022. The burden of sanctions compliance implementation largely falls on the private sector, but is not to the level it needs it to be, the Treasury Committee concluded.
To boost Sanctions Enforcement the Committee recommends:
Clearer communication to the private sector when the sanctions are issued.
With greater detail, to allow firms to understand precisely who or what is being sanctioned, for them to be able to process that quickly.
The Treasury Committee found the UK is also lagging on the necessary enforcement of sanctions violations, noting that the Office of Financial Sanctions Implementation (OFSI) has imposed only six fines for sanctions breaches since it was set up in March 2016. OFSI, which is a part of HM Treasury, states that it “ensures financial sanctions are properly understood, enforced and implemented in the UK”..
The Committee contrasted the UK’s low rates of sanctions violations enforcement with the USA, noting that during this same period, the United States Office of Foreign Assets Control (OFAC) imposed 92 civil penalties totalling over US $1,5 billion against companies and individuals violating sanctions. The Committee noted that lack of adequate funding and skilled resources is hindering the UK’s efforts to impose and monitor Russian sanctions. They highlighted that OFAC was reported to have had 204 staff in 2020, OFSI is believed to have only 37.8 full time staff.
Giving evidence to theTreasury Committee, Tom Keatinge, Director at The Centre for Financial Crime and Security Studies (CFCS), Royal United Services Institute (RUSI), noted, “people are deciding not to trade with Russia, not because they are not allowed to, but because they are just not quite sure what on Earth to do right now.'' When that changes, and people know what to do, “we must ensure that people understand what is and is not allowed”.
Despite a lack of clarity from the UK government, Russia sanctions efforts are being implemented by the private sector. Since the Russian invasion of Ukraine, a number of UK-based companies, including energy firms and supermarkets, have announced an intention to divest from Russian investments, close their Russian operations or cease to trade with Russian firms. Anecdotal evidence from sanctions lawyers however suggests that a number of law firms are trying extremely hard to identify loopholes in the legislation for the benefit of their Russian clients.
Illicit finance experts Tom Keatinge and Dr Justine Walker, Head of Global Sanctions and Risk at the Association of Certified Anti-Money Laundering Specialists, both warned that Russia sanctions in their current form are not the answer to stopping the UK from being a illicit finance money laundering capital. To counter the UK’s role as a safe haven for illicit assets a recent RUSI report by Tom Keatinge echoed anti-corruption campaign groups such as Spotlight on Corruption in recommending:
Making tackling illicit finance a top UK Government security and foreign policy priority;
Creating a dedicated economic crime fighting fund to better resource the UK’s agencies;
Increase training and retention of law enforcement staff;
Enhance transparency and accountability in economic crime enforcement and resourcing.
ILP is working with partners in the UK Anti-Corruption Coalition and REDRESS to improve the implementation and effectiveness of the UK’s Global Anti-Corruption Sanctions regime. We specifically work on: capacity building for stakeholders and supporting the compilation and submission of anti-corruption dossiers to government intelligence officials, and guiding partners through the process from evidence-gathering to submission to the government.