Tackling sanctions evasion in the UK:�Recent policy developments and emerging enforcement challenges

Symposium on Systems of Financial Secrecy

21 February 2024

Dr Helen Taylor

Senior Legal Researcher, Spotlight on Corruption

helen@spotlightcorruption.org

Introduction

• UK acted swiftly to ramp up sanctions on Russia:
• More than 1600 individuals and 200 entities designated
• £23 billion frozen; estimated £33 billion in Russian central bank assets immobilised
• Beefed up sanctions powers
• Focus shifting to effectiveness of enforcement and tackling evasion
• Outline of presentation:
• Recent legslative, policy and operational developments
• Remaining gaps and weaknesses
• Early enforcement efforts
• Priorities for strengthening our response to sanctions evasion

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How has the UK responded to sanctions evasion?

Legislative reforms:

• “Ownership and control” test
• Strict liability for sanctions breaches
• Disclosure powers to “name and shame”
• New duty to disclose assets, with concealed assets susceptible to confiscation

Operational response:

• 200% staff increase at Office for Financial Sanctions Implementation
• New Office of Trade Sanctions Implementation
• New Combatting Kleptocracy Cell in NCA

Policy ambitions:

• Economic Crime Plan (2023-2026) commits to “combatting kleptocracy and driving down sanctions evasion”, including cross-government strategy on professional enablers.

What key gaps and weaknesses remain?

Limitations on private-private information sharing

• Economic Crime and Corporate Transparency Act’s information-sharing powers apply to AML
• Limited ability for private firms to build comprehensive client profile of sanctions risk

Barriers to proactive information and intelligence-sharing with public actors

• General licence for legal fees cuts off source of proactive intelligence
• Weaker regulators not included in information-sharing protocols

Third-party jurisdictions

• Bridging countries; UK firms offshoring risk
• Potential chasm in global enforcement strategy between US and UK, EU

Taking stock of early enforcement efforts

• Zero fines for sanctions breaches after full-scale invasion
• Only one case of “naming and shaming”
• No convictions for sanctions evasion in UK since 2012
• Early evasion cases:
• Mikhail Fridman – investigation dropped after botched dawn raid
• Petr Aven – AFOs and cash seizure investigation hit early snags
• Dmitry Ovsyannikov – first prosecution for sanctions evasion

Priorities for strengthening enforcement

1. Clearer enforcement strategy and guidance
1. Fines vs disclosure powers
2. Civil penalties vs criminal enforcement
3. Enforcement strategy of the Combatting Kleptocracy Cell
2. Better coordination on domestic enforcement
1. Fragmented sanctions landscape with many domestic actors
2. Cross-departmental taskforce
3. Greater transparency and stronger parliamentary scrutiny
1. Transparency of data and policy guidance from OFSI
2. “Disruptions” as a measure of NCA success
3. Parliamentary committee with dedicated oversight mandate