Boris Johnson’s decision yesterday to impose sanctions on three Russian individuals and five banks after Vladimir Putin ordered his troops to push into Ukraine obscures an embarrassing truth: the UK may be enthusiastic about introducing sanctions, but it is terrible at enforcing them.
As of December last year, the UK had sanctions against 180 Russian individuals and 48 companies, as well 108 Belarusian individuals and ten companies. Put together, that’s more than the sanctions targeting Isis and Al-Qaeda. But when it comes to enforcement, it appears to lack motivation: a report released this month (February) by one of the agencies charged with civil enforcement of sanctions, the Office of Financial Sanctions Implementation (OFSI), showed it had levied just £20.7m in fines since 2016. That is despite another report showing that in 2019-2020 alone the total value of breaches reported to it was just under £1bn.
The agency in charge of criminal enforcement is just as ineffectual: the campaign group Spotlight on Corruption has calculated that the National Crime Agency (NCA) has obtained fewer than five convictions a year for economic crimes over the past five years.
This is surely one of the reasons Russian oligarchs love London. So easy is it to launder money in the capital, it’s become known as the “London laundromat”, the Intelligence and Security Committee has said. In fact, this month the anti-corruption organisation Transparency International found that £1.5bn worth of property had been bought by Russians accused of corruption or links to the Kremlin. More than a quarter of that was in the same borough as parliament — Westminster — and just under a fifth was in Kensington and Chelsea. About half of it was held by companies registered in Britain’s overseas territories and crown dependencies: anonymous shell companies, designed to hide the identity of the owner.
The trouble is that “there is no enforcement regime” in the UK, said Bill Browder, a former investor in Russia who has been campaigning for sanctions on Russians since his lawyer, Sergei Magnitsky, died in a Russian jail in 2009. “The laws are all written very well and there’s all sorts of political will, in parliament and even [with] the government to do something. But… there’s no culture of law enforcement here.”
Why is the UK so terrible at enforcing these rules? Lynne Owens, who was director-general of the NCA until last year, has suggested it comes down to budget. In a report published by the Intelligence and Security Committee in 2020, she explained the difficulty of attempting to police “wealthy people with access to the best lawyers”. One case Owens highlighted had “been through every bit of court in the land”. The defendant’s lawyers knew that eventually the NCA would run out of resources to pursue them further.
The UK’s total budget for fighting economic crime is £852m a year, according to Spotlight on Corruption. This is equivalent to 0.09 per cent of total government spending, and 0.042 per cent of the UK’s total GDP. This is about a third of what the government spent on management consultants last year.
Browder says the problem goes deeper than budgets, however. “I think that there’s a lot of either corruption or careerism in [UK] law enforcement agencies,” he told me.
“I spent the last decade going after the money that Sergei Magnitsky exposed and was killed over,” he says. “What I discovered is the money went everywhere. Every time I would find where it went, I would contact the law enforcement agencies of that country with the evidence and ask them to open a criminal investigation. I’ve seen how good law enforcement agencies work and how bad ones work. And I can say that the British law enforcement is in the bottom one or two of the 16 countries [I worked with].
“We discovered that the UK was actually the largest recipient of the money. We went to the National Crime Agency, we went to the Serious Fraud Office, we went to HMRC, we went to the Financial Conduct Authority, and every single one of them refused to open a case.”
Susan Hawley, executive director of Spotlight on Corruption, said that an “alarming lack of transparency” around the “headcount and budget” of the OFSI suggested a lack of accountability. “I think it’s pretty clear that OFSI do not appear to be the kind of aggressive and proactive regulator that would make the UK’s financial sector really sit up and take sanctions breaches seriously. Fines are very infrequent and fine levels are on average very low.”
Browder added that even if they were enforced correctly the sanctions announced yesterday were, in their way, fairly pointless. The individuals and organisations involved have already been sanctioned, he said. “The US sanctioned them four years ago, so I don’t see how it’s a big black eye for Vladimir Putin.”