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The government must expedite the Economic Crime Bill to irreparably cripple Russia's economy

3 min read

The UK sanctions announced on Tuesday have been ironically compared to “turning up to a gunfight with a peashooter". The reality is much worse.

This lame first round of sanctions makes the UK the weakest link in the chain of international measures to prevent Russian aggression. The US blocked Russia from placing foreign debt, sanctioned Kremlin’s VEB bank and its 21 investees, military bank Promsvyazbank, and extended direct sanctions to Russian government officials’ families. The EU stopped the Nord Stream 2 gas pipeline and sanctioned 378 members of the Russian parliament.

In comparison, the UK sanctioned Promsvyazbank, plus four other banks no one has heard of and three individuals with no immediate connection to the UK, who had already been on the US sanctions list since 2018.  

From the world’s perspective, it looks like the UK is letting its Nato allies down. This is precisely what Putin wants to achieve: to break the unity of the western alliance, strengthening the myth that Russian money has bought the UK government.

Waiting for Putin to invade before applying full economic sanctions allowed innocent people to be killed today

So, what is wrong with the UK sanctions? First and foremost, the legislation itself contains several omissions that make the scope of the sanctions ineffective. The legislation does not apply to members of Russia’s legislative and judicial bodies, or affect holders of minority stakes without board seats in strategically important entities, thus allowing many of Russia’s wealthiest and most powerful people off the hook. The legislation also does not apply to family members and affiliated persons.

The timing of the first round of sanctions was ill-considered. Waiting for Putin to invade before applying full economic sanctions allowed innocent people to be killed today. 

Paraphrasing Russia’s own Dostoyevsky, “Not all the fees from Russian companies trading on London stock exchange, not all the Russian oligarchs’ assets and properties in the UK neither their political donations are worth a single drop of innocent Ukrainian blood”.  Time will judge this government for not doing enough, sooner, to prevent war from breaking out.

Now the immediate action is explicit: apply all possible sanctions to the aggressor. One cannot imagine a situation in 1940 where Germany’s largest state-owned companies would have been trading on the London Stock Exchange, permitting the Nazi government access to the UK’s capital markets, and allowing German industrialists, bankers and their families to enjoy their lavish lifestyles in London. 

All this must stop today. Russian companies’ shares must be de-listed, those with headquarters or branches in the UK must have their assets frozen. The Russian government and companies must not have access to the UK markets and the financial system, SWIFT must cut off Russian financial institutions from its payments system. Russian oligarchs, their families and entourage should be sent home, their visas and passports revoked and their assets frozen. Then the invader’s economy should be irreparably crippled.

The enforcement of sanctions is immensely difficult without foreign asset ownership transparency.  Possibly the lack of action from the government can be explained by the fact that they do not know which assets to freeze.

Most Russian oligarchs own their properties and other assets in the UK via anonymous offshore companies. Ironically, a large part of them registered in British Overseas Territories. I have been campaigning for the Overseas Entities Registration Bill for the last seven years. If it had been passed, beneficial foreign ownership would be transparent.

The UK government must expedite the passing of its new iteration - the Economic Crime Bill - to make sanctions, the Unexplained Wealth Orders and the Magnitsky laws work against Russia today and other kleptocracies in the future.

 

Roman Borisovich is a former investment banker and now anti-corruption activist. He is the founder of anti-corruption NGO ClampK.

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