John Binns discusses the recent headlines that have focused on whether the UK Government's new sanctions regime is doing enough to tackle 'dirty' money from Russia. But is this even the right question to ask?

An agenda against Russian wealth?

The UK's new Global Human Rights Sanctions Regulations 2020 have been heralded as our equivalent of US' and other countries' 'Magnitsky laws' - a way of imposing asset freezes and travel bans on the perpetrators of human rights abuse and corruption, named for the lawyer who died in prison after investigating offences in the Russian public sector. Perhaps not coincidentally, they were announced in the same month that a long-delayed report from Parliament's Intelligence and Security Committee ('ISC') was finally published, calling attention to (among other things) the threat of tainted Russian assets being spent and laundered here.

Predictably, press coverage of the two issues has been focused on the perceived deficiencies of government action. It has also helped to stoke burgeoning anti-Russian sentiment, mixed with long-standing suspicions about interference in elections. But the reality about the use of sanctions to tackle Russian money is more complicated that the coverage implies.

What can proceeds of crime and sanctions laws do?

As a means of freezing the assets of people accused of wrongdoing, the new 'Magnitsky' Regulations are of course not without precedent. The EU sanctions regimes, by which the UK is still bound, impose asset freezes and travel bans on a variety of targets. In the UK, the Anti-Terrorism, Crime and Security Act 2001 ('ATCSA') allows sanctions to be imposed where individuals outside the UK pose a threat to the life of one or more UK residents.

The Proceeds of Crime Act 2002 ('POCA'), meanwhile, allows the restraint of assets belonging to criminal suspects, and the civil freezing and recovery of property that represents the proceeds of unlawful conduct (even without a criminal case). It also provides for various investigative powers, including Unexplained Wealth Orders ('UWOs'). Notably, though, the civil scheme cannot target the proceeds of crimes that took place over 20 years ago.

The use of sanctions against Russian targets

A number of measures have been taken under these various laws that target Russians in particular. Since 2014, EU sanctions have targeted a number of individuals and entities said to be involved in the annexation of Crimea. Since 2016, the UK has used ATCSA to impose unilateral sanctions against the suspected killers of Alexander Litvinenko. Since 2018, an EU sanctions regime targeting the use of chemical weapons has included targets said to be associated with the Salisbury attack on Sergei and Yulia Skripal. And in 2020, Russian targets were among those named in the EU's new sanctions regime aimed at the perpetrators of cyber-attacks.

The new UK Regulations are targeted against a broad range of people that ministers 'reasonably suspect' of being associated with violations of the most fundamental human rights (the rights to life, and to be free of torture or forced labour). Over half of the first set of targets are Russians, said to have been associated with the mistreatment and death of Sergey Magnitsky himself.

Russians and 'unexplained wealth'

Significantly, though, in contrast to other countries' equivalents, the UK's 'Magnitsky' law does not itself target corruption. The ISC Russia report endorsed a criticism of this approach from the National Crime Agency ('NCA'), which also criticised UWOs as a problematic tool to tackle Russian wealth - specifically, because the response from potential Russian targets would often be that their wealth was very fully explained, due to a longstanding audit trail.

On the face of it, of course, this latter criticism is somewhat strange: why should POCA tackle wealth that has been adequately explained? The thinly veiled implication is surely that the explanations are false, and that somewhere under the audit trail is an original offence, perhaps some time ago, for which the evidence is hard to find. A similar scepticism is to be found from critics of political donations from 'Soviet-born' individuals, even those who have fled Russia as refugees, and have since acquired UK citizenship.

An anti-Russian crusade?

There is undoubtedly a risk here of anti-Russian prejudice. Not everyone who was born in or near Russia is an ally of President Putin; nor should an association with Russia trigger negative assumptions that a person's assets are the proceeds of crime. Much of the rhetoric about the new Regulations and the ISC Report has veered towards a crusade against Russian wealth in general, which is neither warranted nor a fair description of what either the Regulations or the Report are trying to do.

The other risk, in calling for ever broader powers and regimes, targeting ever more people, is that laws are strengthened on paper, but hardly ever used or enforced. The NCA's lack of resources to bring cases under POCA was another problem identified by the ISC report. If there are indeed high-end London properties that have been bought with laundered money, from Russia or elsewhere, then it is axiomatic that the NCA should be adequately resourced to investigate them.

An attractive option?

In the absence of adequate resources to investigate under POCA, a strategy of using sanctions regimes and designations to be seen to do something about 'dirty' Russian money may seem attractive to UK ministers. Not only would it attract positive press coverage, but the cost would largely be borne not by law enforcement but, in effect, by the private sector - the vast general population of UK individuals and businesses that are obliged to comply with sanctions laws.

That approach would, however, be short-sighted in the extreme. Unlike the EU sanctions regimes, UK sanctions have an effective system of challenge and court reviews, which will enable anyone who is unfairly targeted to test the evidence that ministers' suspicions about them are 'reasonable'. That, if not a basic commitment to justice and due process, should help make ministers think twice about over-using these new Regulations, whether against Russian targets or more generally.

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