UK Lawmakers Call for Urgent Fix to ‘Incoherent’ Sanctions Policy
13 Jun 2019

The United Kingdom must amend its disjointed approach to sanctions policymaking and enforcement ahead of the country’s departure from the European Union, a House of Commons committee said in a report Wednesday.

The findings by the Foreign Affairs Committee cite concerns that the Foreign & Commonwealth Office has set aside sanctions policy duties in the lead up to Brexit and that the 2-year-old Office of Financial Sanctions Implementation (OFSI) has not asserted itself as an enforcement body comparable to its US counterpart, the Office of Foreign Assets Control (OFAC).

What’s more, the government has yet to clarify how it intends to match, or diverge from, EU sanctions following its exit from the economic bloc, according to the committee, which urged the National Security Council to prioritize a review of the nation’s current sanctions strategy and report its findings to Parliament by the end of the year.

“The government has spent the last two years running as fast as it can just to stay in the same place,” the MPs said. “The time is right for a major review of the government’s approach to sanctions at every stage.”

The report also took issue with the UK’s “fragmented and incoherent” sanctions system, which divides implementation and enforcement responsibilities between the Home Office and three governmental departments. Such a structure, the committee contends, can lead to “cross-Whitehall confusion” that slows the issuance of industry guidance and humanitarian aid-related licensing.

Consequently, the UK government should consider the appointment of a single official to oversee the use and enforcement of sanctions while acting under the supervision of the National Security Council, the report found.

In addressing OFSI, the lawmakers echoed a recommendation made by the Treasury Select Committee in March to evaluate the performance of the office before the end of the year.

“How are we going to make people be as concerned about OFSI as they are by OFAC?” Tom Keatinge, director of the Centre for Financial Crime and Security Studies at RUSI, asked in testimony cited in the report. “To me, that is a question we have not answered,” he said.

Nor has the government sufficiently recognized the nexus between sanctions, which are primarily imposed for political ends, and money laundering, which can involve blacklisted individuals and entities, according to the committee, which criticized testimony by Minister of State Alan Duncan that dirty money is “not quite” the Foreign Office’s “patch.”

To outline the nexus between suspicious funds and sanctions policy, the committee pointed to parliamentarian findings on the influx of Russian money into the UK, including an initial public offering by En+ Group in 2017 that faced criticism over the role played by blacklisted banks in the listing.

The offering by the aluminum company, which has ties to the Kremlin through its major stakeholder Oleg Deripaska, illustrates the possibility that the UK definition of “control” over a company does not account for “informal and non-transparent relationship networks underpinning the Kremlin’s activities,” the report said.

“Combating the activities of autocratic and hostile regimes such as Russia, without compromising our own adherence to the rule of law, constitutes one of the most complex and daunting challenges that we face in our efforts to preserve the rules-based international system,” lawmakers said.

“This is precisely the type of difficult problem with which the government should be grappling in its efforts to develop a clear and coherent strategy for sanctions policy after the UK leaves the EU, especially given the importance of London to the international financial system.”

Photo: Cristian Lorini [CC BY-SA 3.0], via Wikimedia Commons

Read more:

UK Sanctions Agency Issues First-Ever Fine Against London Bank

In Response to Committee, UK Outlines Pending Steps to Fight Financial Crime

UK Treasury gets new powers for enforcing financial sanctions

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