UK foreign secretary Liz Truss on Monday faced calls to do more to tackle “dirty money” flooding into the UK as she announced plans to toughen the sanctions regime against Russian oligarchs with links to the Kremlin.
The legislation, which will come into force next week, would “significantly strengthen” the UK’s ability to deal with Russia’s “aggressive action towards Ukraine”, Truss said. The move was part of “an unprecedented package of co-ordinated sanctions” that the UK was preparing with its allies, she added.
Officials said the new powers would allow Britain to act in “lockstep with the US and other allies to freeze assets and ban travel” in the event Russia’s forces invaded Ukraine.
Truss said the expansion of the sanctions regime would allow the UK to target “any individual and business of economic or strategic significance to the Kremlin”.
Tom Tugendhat, the Conservative MP and chair of the foreign affairs select committee, welcomed the announcement but pointed out his committee had first called for a tightening of the sanctions regime against Russia four years ago. “The strongest thing we can do to defend Ukraine is to defend ourselves against filth and corruption in our city.”
In 2018, the government estimated £100bn of “dirty money” had flooded into the UK, from countries including Russia. Two years later the parliamentary intelligence and security committee said the City of London provided “ideal mechanisms” for the recycling of illicit finance, adding it had become a “laundromat” for offshore wealth.
David Lammy, Labour’s shadow foreign secretary, supported the move to tighten sanctions but accused successive Conservative-led governments of not acting sooner. “For too long our defences have been let down at home while the government looks abroad . . . London is the destination of choice for the world’s kleptocrats.”
Dmitry Peskov, spokesperson for Vladimir Putin, Russia’s president, said the UK’s move amounted to a “blatant attack on business”.
Truss also said the government would revive a long-delayed economic crime bill — designed to crack down on the flow of dirty money to the UK — by the end of the year. Tory MPs, including the government’s anti-corruption champion John Penrose, had criticised Boris Johnson, the UK prime minister, last week for delays in bringing forward the legislation.
The bill is expected to include crucial reform of Companies House to crack down on the abuse of shell companies as well as powers to unmask the real owners of offshore companies who own UK property and tougher powers to challenge unexplained wealth.
Truss said the government would publish a long-delayed review by April 5 into how more than 700 wealthy Russians, who secured so-called Tier 1 visas allowing them to live in the UK, had acquired their wealth. The probe was ordered in 2018 in the wake of the Salisbury nerve agent attack that targeted a former Russian intelligence officer, which the UK has blamed on Moscow.
British officials said the new sanction powers were needed as under previous legislation ministers had only been able to target those linked to the destabilisation of Ukraine.
But analysts and lawyers rejected that claim. Tom Keatinge, an expert in finance and security at the Royal United Services Institute think-tank, pointed to the global anti-corruption sanctions regulations adopted last year.
“It has taken the brink of war in Europe for the government to think about sweeping out the Augean stable of dirty Russian money in London, when it could have done this previously via sanctions, unexplained wealth orders [UWO] or other measures,” he said.
Under a UWO, National Crime Agency investigators can freeze assets and seize property in the UK unless subjects can explain how they can legitimately have afforded the purchases.
Neill Blundell, the head of the corporate crime and investigations team at Macfarlanes, said the UK’s pre-existing sanctions legislation relating to Russia was not as “narrow as it is being depicted”.
Additional reporting by Polina Ivanova in Moscow