UK sanctions will have little impact on Putin despite Boris Johnson’s claims, say experts

‘Grotesque underfunding’ of UK crime agencies has weakened our ability to fight back against Russian aggression, says financial crime expert

Huge holes in financial sanctions and the “grotesque underfunding” of crime agencies have weakened the UK's ability to fight back against Vladimir Putin, experts have said.

Lawyers told The Independent that a fresh round of sanctions announced on Thursday in response to Moscow’s invasion of Ukraine would be ineffective and largely symbolic, despite Boris Johnson's claims that new measures would "hobble" Russia's economy.

The prime minister unveiled what he called a “massive package of economic sanctions ... to collectively cease dependence on Russian oil and gas,” and “squeeze Russia from the global economy”.

He announced an asset freeze on 100 entities, including Russian bank VTB, a ban on Russian state and private companies from raising funds in the UK, and a new kleptocracy unit at the National Crime Agency to crack down on corrupt assets hidden in the UK.

Critics were sceptical of the latest measures, however. Jonathan Fisher QC, of Bright Line Law, said sanctions would do little to deter Mr Putin, who launched a full-scale invasion of Ukraine on Thursday morning.

“We have to be realistic about what they can deliver,” Mr Fisher said. “They are something more than nuisance value but, whether they are enough to change outcomes, I rather doubt.”

Mr Putin’s circle of ultra-wealthy oligarchs would not be greatly damaged by being personally sanctioned, he added.

“Instead of going for the holidays in Malta, they'll have to stick in the Black Sea for a bit with their boats. It’s just not going to deliver the knockout blow that the west would like it to.”

Experts have pointed to the fact that past rounds of sanctions have only delivered the desired result in a minority of cases, such as in apartheid South Africa. In disputes with other countries, such as Iran, sanctions have been in place for years and had only a relatively minor impact in achieving their aims.

“I don’t think it’s enough to persuade an authoritarian regime to change its course,” said Mr Fisher.

Natali Sevriukova reacts as she stands next to her house following a rocket attack in the city of Kyiv, Ukraine, Friday 25 February 2022 (AP)

Jason Hungerford, a partner at Mayer Brown, agreed. “There are lots of sanctions tools left in the kit, but the problem now is that Russia has committed. No variety of sanctions is going to turn the tanks around in the near future,” he said.

He pointed out that Russia has a relatively large economy which will allow it to withstand sanctions for some time.

A key concern is that sanctions have in the past been undermined by countries which are happy to ignore them. Experts have pointed to Russia's burgeoning friendship with China, and many believe it is not a coincidence that Putin met recently with Chinese premier Xi Jinping, who would likely be a willing buyer of Russian commodities as Europe turns the screw.

Campaigners have also voiced concerns about holes in plans to target Mr Putin’s inner circle of supporters.

Switzerland, whose banking secrecy laws have long made it a preferred destination for Russian oligarchs’ wealth, has yet to sign up to any sanctions package.

The Russian assault mapped (Press Association Images)

London-based law firms and accountants have helped wealthy Russians, some of whom have links to the Kremlin, shield their wealth in anonymous trusts, shell companies and property. Much of that wealth is registered in secrecy jurisdictions such as Jersey and the British Virgin Islands where layers of anonymity and secrecy make it difficult to link assets to their true owners.

Transparency International has identified at least £1.5bn of UK property owned by Russians accused of financial crime or with links to the Kremlin, and the true figure is almost certainly much higher. Most of that property is held by offshore companies.

“The government can only take action against assets that it knows belong to people it now sanctions,” said Duncan Hames, director of policy at Transparency International UK.

As the Ukraine crisis has worsened there has been a significant outflow of Russian funds into the Gulf states and Asian financial hubs such as Shanghai and Hong Kong, where it can remain largely beyond the clutches of Western agencies, according to Oksana Antonenko a director at Control Risks, a political risk consultancy.

“Sanctions will have an impact but won’t mean complete disruption,” she said.

Jonathan Fisher QC said UK bodies including the National Crime Agency and HMRC should immediately begin trawling through documents and suspicious activity reports filed with banks to try to uncover the wealth of individuals tied to the Kremlin.

However, years of “grotesque underfunding” have left enforcement agencies without the resources required to do so, he said.

“If I was director of the NCA, I'd be calling for all the files we had, all the suspicious activity reports on Russian oligarchs that have been filed.

“I would recover the paperwork from banks, accountants and lawyers in relation to those transactions, and I would conduct an inquiry as to where that money came from.”

He added: “Why have we not done more enforcement? Because the government took the view that it wasn’t a priority.”