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February 28, 2018updated 11 May 2018 4:42pm

Action urged to combat £1.4bn UK sanctions breaches

By Hannah Solel

Imposing financial sanctions on corrupt regimes and individuals is one thing – how the government responds when sanctions are breached is another, writes Hannah Solel

News that an estimated £1.4 billion passed through the UK in breach of sanctions last year is surely an indication that more needs to be done by Britain to crack down on corruption.

That said, the fact of City minister John Glen’s disclosure of this figure and his confirmation that it related to 133 suspected breaches — all reported to the Treasury’s Office of Financial Sanctions Implementation (OFSI) in 2017 — is itself a step in the right direction.

Indeed Glen stated that ‘some of these cases’ are still under investigation and that he was unable to comment further on ongoing assessments, which again raises hope that decisive official action is under way. You can but hope: the 133-odd breaches are against sanctions imposed by bodies including the UN and EU and cover figures such as Robert Mugabe, the former president of Zimbabwe, and Syrian president Bashar al-Assad. A Treasury spokesman confirmed to Spear’s that no breakdown was available for the £1.4 billion figure.

That these latest figures are significantly higher than the £75 million and 95 confirmed breaches reported in 2016 is either a source of worry or a welcome official realisation of the true scale of the problem, depending on your point of view. That they follow the grant of new penalty powers to the OFSI to combat sanctions breaches would seem to support the latter, optimistic view: as of April 2017, breaches can be subject to fines of up to £1 million with maximum prison sentences rising to seven years.

‘The government rightly brought in tough new penalties and powers,’ John Penrose, the government’s anti-corruption tsar and Conservative MP, tells Spear’s. ‘Now these cases have been reported, we’ve got to use the new powers to make it clear the UK is not a light touch when it comes to sanctions busting, money laundering or corruption.’

That the OFSI should listen and take action seems an obvious starting point. But Steve Goodrich, research manager at anti-corruption organisation Transparency International UK, goes further: ‘The government’s own figures serve to confirm that the UK is a global target for high-end money laundering,’ he explains.

‘Although the amount of money in suspected sanction breaches sounds high, this remains a drop in the ocean compared to UK law enforcement’s estimates for the volume of corrupt and illicit funds moving through the British economy every year.’

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Indeed, an estimated £90 billion of laundered money is said to make its way through the country per year. This startling figure only serves to make the likelihood of preventing financial corruption that much harder to imagine.

While the efficacy of sanctions is sometimes questioned in terms of their success in deterring or changing the behaviour of individuals and entities deemed corrupt, they nonetheless play a part in the government’s anti-corruption strategy — as Goodrich acknowledges.

‘When directed against individuals known to have been involved in corruption, targeted economic sanctions can be a useful tool in preventing illicit wealth from being laundered and used with impunity,’ he says — though a much stronger response is needed. ‘Without tougher action and reform of the UK’s money laundering defences, the UK risks gaining the undesirable reputation of a dodgy offshore financial centre floating off the coast of Europe.’

So do the current arrangements satisfy everyone? Not a hope. Will they do the trick and curb sanctions breaches? It remains to be seen how the Treasury’s OFSI reacts to these breaches. It could be the start of a cold new dawn for the likes of Mugabe and Assad.

Hannah Solel is a writer and researcher at Spear’s

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