Report Criticizes U.K.’s Weak Enforcement of Sanctions Against Russia

A recent report by campaign group Spotlight on Corruption has highlighted significant shortcomings in the U.K.’s enforcement of sanctions imposed on Russia following the 2022 invasion of Ukraine. The report, titled *“All bark and no bite?: Taking stock of the U.K.’s enforcement of sanctions,”* criticizes the lack of tangible enforcement actions, pointing out that as of July 24, 2023, there had been no fines for breaches of financial sanctions since they were imposed in 2022. Moreover, the report reveals that there have been no convictions for sanctions evasion since 2012, and no assets have been permanently seized through civil or criminal actions related to sanctions violations, despite the U.K. government possessing the necessary legal powers to do so.

The report specifically targets the HM Treasury’s Office of Financial Sanctions Implementation (OFSI) for its lackluster performance, noting that the agency has only issued a single nonmonetary penalty since the sanctions were put in place. This penalty was a “name and shame” action against Wise Payments in August 2023. Despite OFSI reporting 172 ongoing investigations as of March 2023, it has yet to impose a single fine for violations of Russian financial sanctions.

Interestingly, just two days after the report’s release, the National Crime Agency (NCA) announced a £784,000 forfeiture of sanctioned funds linked to Russian businessman Petr Aven. However, this action has not mitigated the report’s overall criticism of the U.K.’s enforcement efforts.

The report underscores a broader issue of weak coordination and lack of a cohesive strategy among the multiple agencies and government departments responsible for sanctions enforcement. These include HMRC, the Home Office, the NCA, HM Treasury, and the Department of Transport. “Weak enforcement has long been the Achilles’ heel of the U.K.’s fight against economic crime and the early signs suggest that sanctions are no exception,” said Helen Taylor, the report's author and senior legal researcher at Spotlight on Corruption, in an accompanying press release. “After years of complacency in the U.K. about the dangers of kleptocracy and dirty money, it is vital that the new government shifts gear on enforcement as a priority for unlocking the power of sanctions.”

To address these deficiencies, the report outlines four key recommendations for the U.K. government. It suggests the development and publicization of a clear and ambitious cross-system sanctions enforcement strategy, the establishment of a cross-departmental sanctions task force under a government minister’s oversight, the collation and publication of centralized data on sanctions via a “sanctions transparency tracker,” and improved collaboration between chairs of parliamentary committees through a cross-committee inquiry into the U.K.’s sanctions regime, alongside the creation of parliamentary mechanisms for sanctions oversight.

Sophie Davis, an associate at law firm Crowell & Moring, echoed the report's concerns, noting that enforcement of U.K. sanctions against Russia has been minimal. “Compared to the United States, the U.K.’s sanctions regime is still in its relative infancy and the U.K. has not been as aggressive to date in its enforcement. The same can be said about the European Union, although, individual EU member states are responsible for enforcement and there is a wide divergence in approach,” Davis stated. She added that U.K. agencies might have allowed some leeway in ensuring companies followed the rules when sanctions were first imposed. OFSI’s initial focus, she noted, was on collaboration with agencies regarding the sanctions’ nature, publishing guidance, engaging with the industry, and handling the flood of license and clarification requests.

Septimus Knox, director of disputes and investigations at intelligence and cybersecurity consultancy S-RM, pointed out that OFSI’s effectiveness has been hampered by its relatively recent establishment in 2016, a small staff of around 70 employees at the time of the Ukraine invasion, a limited budget, and a workforce made up of civil servants rather than investigators. Another major drawback, according to Knox, is that “OFSI does not possess the statutory powers to investigate and demand the disclosure of information to it. It relies on self-reporting, massively diminishing the chances of successfully enforcing against the most egregious sanctions violations.”

However, James Ramsden, a founding partner of legal and professional services firm Astraea Group, challenged the report’s premise, arguing that the effectiveness of a law should not be judged by the number of convictions but by the level of compliance. “You don’t judge a law’s effectiveness by counting convictions for its breach,” he said. Ramsden further emphasized the high level of caution exercised by U.K. professionals in ensuring sanctions compliance. “It is practically impossible to breach U.K. sanctions without a complicit professional,” he argued. “The caution with which sanctions compliance is approached by the U.K. legal profession leaves me not in the least surprised that there have been no or virtually no enforcement actions.”

By fLEXI tEAM