The writer is head of the centre for financial crime and security studies at the Royal United Services Institute think-tank

As the Russian war in Ukraine grinds through its second month, Britain’s foreign secretary faces a looming challenge in applying financial pressure on Moscow. Since the UK has already used its most powerful sanctions tools, Liz Truss is now scraping the barrel for new targets. A more imaginative approach to economic statecraft is needed.

So far, issuing sanctions has been the primary means of response for western allies. Over the past eight weeks, they have been applied in three main categories: those against Russian economic infrastructure, including asset freezes on banks and the freezing of foreign currency reserves; those against individuals who benefit from or support the Russian government; and on activities that fuel the country’s economy, notably the purchase of energy, whose profits are funding the Kremlin’s war in Ukraine.

The UK has been an active contributor to the first two of these. But as Ukraine’s President Volodymyr Zelensky has repeatedly observed, it is the latter that western allies must address if they are to answer the charge that they are dealing in blood money. For the UK, which has already committed to end all imports of Russian coal and oil by the end of 2022, this third category offers limited opportunity. So, how could it ratchet up the financial pressure?

The central priority must be a broadening and deepening of Britain’s finance-focused diplomatic dialogue and influence at posts around the world, via operational and policy relationships led by the National Crime Agency and policy experts at SOCNet. Initiatives such as the UK-UAE illicit finance partnership — which collaborates on mutual economic crime threats — should be leveraged and replicated with other key financial markets to build a networked response to dirty Russian money.

Existing capabilities such as the International Corruption Unit and the International Anti-Corruption Coordination Centre should be harnessed to boost the UK’s role as a convener of international responses to illicit finance.

Britain should also be doing far more to exploit its invaluable access to information provided by company registries in crown dependencies and overseas territories. Examples of this potential can be seen in the role played by the British Virgin Islands in identifying yacht ownership and the headline-grabbing action in Jersey to freeze $7bn of assets linked to Russian oligarch Roman Abramovich. UK officials, who have access to this information, have a unique vantage point.

Last, we need to focus on enforcing sanctions. As Britain and its allied governments are discovering, economic curbs are far easier to announce than to implement. Success depends on private sector co-operation. Names of targeted individuals or entities must be linked to companies and ownership structures — as the authorities in Jersey have successfully done — so banks have information to act on. Governments must monitor evasion by those it has sanctioned to ensure the restrictions are maintained. Where the private sector fails to meet its obligations, guidance and enforcement is required.

Part of the problem is expertise and manpower. Compared with the US Office of Foreign Assets Control, which specialises in making sanctions effective, European allies have little in the way of necessary capabilities. The UK’s Office of Financial Sanctions Implementation, which is short-staffed when its role is most essential, has only just started a recruitment drive. And the Foreign, Commonwealth and Development Office needs access to detailed political analysis and intelligence to understand whether its sanctions are having the desired impact, if the right individuals are being sanctioned and if the economic pressure is actually being felt by the Kremlin.

After a bumpy start — and through its central role in global finance, plus some legal sleight of hand in “copy and pasting” allies’ sanctions designations — the UK has made a significant contribution to the response against Russia. But with partner countries such as Germany still effectively financing Moscow’s military operations via their energy purchases, Britain and its European allies are certainly not “decimating Putin’s war machine”, as Truss claims. At best, the western response can be graded at four or five out of 10.

While it waits for Germany, Hungary and other EU nations to move forward with overdue energy sanctions, the UK should make better use of its illicit finance expertise. In doing so, the foreign secretary might finally start refilling a barrel that has become perilously empty.

Articles You May Like

Powell commits to finish Fed chair term, stays mum on future plans
States are on a budget cutting trend, Pew Trusts report
Trump calls for unity as new details emerge of assassination attempt
‘Rentvesting’ can be ‘a good way to get into the property market,’ economist says. Here’s how it works
IMF sees ‘bumps’ in path to lower inflation