From Freeze To Seize

The imposition of sanctions against the oligarchs which followed Russia’s invasion of Ukraine has triggered an intensive policy conversation about the potential to move from temporary sanctions-based asset freezes to permanent asset confiscation, as policymakers seek to achieve two goals simultaneously:

• ensuring that individuals linked to the Kremlin are held accountable for Russia’s aggression…

• …and for their alleged historical corruption.

While the ultimate origins of oligarchs’ assets may lie in historical bribery, corruption and patronage, linking sanctioned assets to historical acts of corruption presents challenges that the UK’s asset recovery mechanisms have yet to overcome.

Recognising the limited impact of existing powers under the UK Proceeds of Crime Act 2002 (POCA) against more clearly evidenced corruption proceeds, and the complexities of gathering evidence to the necessary standard of proof, in 2022, research was conducted to identify possible alternative asset recovery mechanisms that would achieve permanent confiscation of such assets, without trumping due process and human-rights and rule-of-law protections.

As part of this project, a series of RUSI Commentaries were published in April, June and October 2022, as well as a RUSI Emerging Insights paper.

The research team also held a Virtual Roundtable on International Asset Recovery Mechanisms and the “Freeze to Seize” Dilemma with international asset recovery experts in September 2022. The roundtable aimed at examining additional potential avenues to improve the UK’s ability to move, where a suitable case presents itself, from temporary sanctions-based asset freezes to permanent asset deprivation using human rights-compliant and proportionate tools.

The following is a summary of the views that the different experts shared in this regard, drawing in particular on lessons provided by existing international models.

Summary Viewpoints From the Roundtable Discussion

Question 1: What are the potential routes to amend UK legislation in order to move from “freeze” to “seize”?

Viewpoint 1: Amending existing civil confiscation laws is a meaningful starting point for the UK, but individual cases must be considered on a case-by-case basis given the need for proportionality.

Participants agreed that any future model needs to include appropriate human rights safeguards, particularly surrounding Article 1, Protocol 1 (A1/P1) of the European Convention on Human Rights (ECHR), which protects the right to property and according to which any interference must be justified as a proportionate means of pursuing a legitimate aim in the public interest, and Article 6(1), the right to a fair trial – which clashes with sanctions provisions due to the lack of independent judicial oversight of the designation process.

According to participants, the civil confiscation route provides a sound basis for confiscating proceeds of kleptocracy. Given the expediency with which measures much be taken, it was generally agreed that amending the UK’s existing legislation for civil recovery (Part 5 of POCA 2002), as opposed to establishing an entirely new regime, should be the focus of efforts. This also has the benefit of drawing on the significant extent to which Part 5 of POCA has been tested in the courts from an A1/P1 perspective.

Some participants raised the importance of being clear in legislation about the basis on which individuals are being deprived of their assets. For example, the current legislative provisions relate to assets of unlawful origin, which may not be a viable route in this context given the difficulty in obtaining evidence from overseas.

Participants suggested that amendments to Section 242 of POCA to provide a broader definition of “unlawful conduct” may be a way forward. This could include:

• Assets obtained through political patronage; and/or

• Assets which may be made available to support a hostile regime.

Such an amendment may overcome challenges of lawfulness of the investigation. However, cases will need to demonstrate proportionality, which will need to be judged on a case-by-case basis.

Question 2: Can sanctions evasion be used as the starting point for confiscation?

Viewpoint 2: Sanctions evasion offences have limited reach given they will only capture the specific proceeds of the evasion itself.

Participants indicated that cases have indeed been brought forward in the United States against sanctioned individuals on the basis of sanctions evasion. The European Commission has also looked at ways to criminalise the evasion of EU sanctions.

As proving underlying corruption is too challenging, the strategy should therefore be aimed at finding a criminal offence of sanctions evasion as a starting point for asset confiscation. Sanctions evasion is a relatively easy offence to prove and thus participants agreed that it provides a good practical starting point.

Participants stressed that the UK should be investing in investigating sanctions evasion offences, especially through the newly established Combating Kleptocracy Cell.

However, given the proportionality test, a range of participants agreed that this approach is only likely to address a limited proportion of the sanctioned individual’s assets, namely the direct proceeds of the sanctions evasion, and is thus likely to be a minor solution in the “freeze to seize” debate.

Question 3: Is there a role for administrative, government-ordered asset forfeiture?

Viewpoint 3: Administrative, government-issued forfeiture orders are unlikely to stand up to challenges in the courts and may risk diluting the meaning and impact of the wider sanctions regime.

The roundtable considered confiscation proceedings stemming from a sanctions designation, an example of which is provided by recent amendments to Canadian legislation. These allow for the Canadian government to directly issue an order seeking permanent asset forfeiture if it assesses that an individual presents a “grave breach of international security”.

The legislation has not been tested in court and the bar to be reached for making an order is not clear. Canadian legal professionals participating in the roundtable have argued that this approach is likely to face substantial challenge in the courts and may be unconstitutional.

A number of participants also agreed that this was not an appropriate approach for the UK. There was general consensus among participants at the roundtable that sanctions are a political tool that seeks behaviour change. Using them as the basis for eventual asset deprivation risks diluting their purpose and meaning.

Question 4: Is there a role for reverse burden of proof or rebuttable presumptions?

Viewpoint 4: Full reverse burden offences in a range of jurisdictions have been proved human-rights compliant and may be a useful component of future UK amendments seeking to deal with the freeze to seize challenge.

Participants at the roundtable referred to a range of reverse burden/rebuttable presumption-based models, including the following:

• New Zealand is discussing adopting full reverse burden at the point of asset freeze, which places the burden on the respondent to explain the lawful basis of any frozen property to the satisfaction of the court, otherwise there is a presumption of recoverability.

• In 2013, a law in France created a presumption of money laundering according to which “the property or income is presumed to be the direct or indirect proceeds of a crime or offence if the material, legal or financial conditions of the investment, concealment or conversion operation have no other justification than to conceal the origin or beneficial owner of such property or income” (French Criminal Code Article 324-1-1). Following this rebuttable presumption, the burden of proof no longer rests on the prosecution but on the defendant, who must demonstrate that the operation fulfils a licit purpose. As reported by the French Court of Cassation, applying the presumption of money laundering does not require the characterisation of the predicate offence.

• Illicit enrichment offences such as the ones in Western Australia and other mechanisms targeting unexplained wealth (e.g., in Switzerland) generally rely on reverse burden mechanisms and have been adopted in a range of jurisdictions to good effect.

Question 5: What about organised crime-based asset confiscation models?

Viewpoint 5: Categorising kleptocracy as an organised crime may provide another avenue to overcome some of the challenges inherent in asset confiscation linked to the proceeds of kleptocracy and political patronage, by negating the need to make an express link between individual assets and specific criminality.

Examples discussed at the roundtable include the US Racketeer-Influenced and Corrupt Organizations Act (RICO) model and the Italian Anti-Mafia Code, which use the organised criminality and/or societal impacts of specific groups and individuals as the starting point for confiscation proceedings.

The benefit of such approaches is that they negate the need to link individual assets to specific criminality; rather, they create a presumption that wealth obtained by the individual is the proceeds of crime.

The challenge in the courts may be around the proportionality of individual cases. In Italian legislation, participants made an express link to societal harms to overcome such challenges and may offer a useful blueprint.

Question 6: Could confiscation be linked to national security?

Viewpoint 6: Using national security/societal danger as the basis for confiscation in isolation risks conflicts between national security and foreign policy goals.

Participants referred to the option of models which use the status of the individual, rather than the status or provenance of the assets, as the basis for confiscation.

An example discussed in this regard is the Swiss Foreign Illicit Assets Act (FIIA), which may order an asset freeze in anticipation of initiating proceedings for the confiscation of assets if these “have been made subject to a provisional seizure order within the framework of international legal assistance proceedings in criminal matters instigated at the request of the country of origin … the country of origin is unable to satisfy the requirements for mutual legal assistance owing to the total or substantial collapse, or the impairment, of its judicial system (failure of state structures) [and] the safeguarding of Switzerland’s interests requires the freezing of the assets.”

However, using diffuse concepts such as national security as a basis for confiscation could lead to highly politicised outcomes, unintended consequences, conflicts between prosecutors and government, and significant tensions between criminal justice and foreign policy goals.

Question 7: Is there a role for fugitive disentitlement provisions?

Viewpoint 7: Fugitive disentitlement provisions may have a particular use in cases where a viable criminal case has been identified, but the offender remains overseas and/or extradition is not possible.

The roundtable raised the potential of mirroring US-style “fugitive disentitlement provisions” to prevent defendants who have absconded from the jurisdiction from using the resources of the court to defend a civil case.

While likely only to cover a limited number of cases, participants agreed that such provisions would provide a potentially useful additional tool within the asset confiscation arsenal.

What Next?

Developing legislative mechanisms to facilitate the permanent confiscation of kleptocratic proceeds is a challenge that goes well beyond the UK. However, other jurisdictions’ existing asset recovery mechanisms provide some useful lessons at the legislative level that, coupled with appropriate resourcing and expertise, could lead to a refined whole-of-a-system approach to the recovery of proceeds of kleptocracy in the UK.

Dealing with Oligarchs’ Assets in the UK

Maria Nizzero, 13 April 2022

Having frozen the assets of Russia’s wealthy elite, seizing those assets will be far more difficult.

The war in Ukraine has seen an unprecedented response in terms of the economic retaliation rolled out against Russia. Alongside a basket of sanctions aimed at debilitating the Russian economy, Western governments have heavily targeted oligarchs’ assets, leaving no villa or superyacht untouched. However, sanctions-based asset freezes are a tool of foreign policy, and the assets cannot stay frozen in limbo forever: they must eventually be confiscated, or unfrozen. There is a risk, if Russian President Vladimir Putin demands that sanctions measures are dropped as a condition for ending hostilities, or if the oligarchs win their appeals against sanctions, that the assets will simply be unfrozen.

It appears from UK government rhetoric that the policy intention is to find a fast solution to move from “freeze” to “seize”. However, the tools currently available under the Proceeds of Crime Act 2002 (POCA) make gathering the necessary evidence on oligarchs’ assets, and having it stand up in court, hard to achieve. Given this challenge, it is tempting to seek a “shortcut” fix, but in its haste, the government must be cautious not to create precedent for more draconian measures in the future. Any action the government decides to take needs to balance the policy intention that “crime shouldn’t pay” with respect for fundamental human rights and the rule of law, and be capable of standing the test of time.

Desperate Measures for Desperate Times?

Uncertainty regarding the outcome of the war and the drive to make an example of oligarchs, while showing that something is being done to put pressure on Russia, have led to some extreme proposals by the government, such as seizing oligarchs’ properties and using them to temporarily house Ukrainian refugees. While attractive in political terms, this approach falls short when assessed against the rule of law. Property rights and legal due process should be respected regardless of whether these individuals are oligarchs. Ignoring these principles would invite comparison with the autocracies we are supposedly standing against.

Many of these proposals are more political theatre than reality. However, they reveal a general lack of understanding of what sanctions can and cannot do. In the current crisis, sanctions have been used against those that benefit from or support the Russian government. If ministers want to deprive oligarchs of their assets, they will need to use different mechanisms to seize and confiscate them to achieve their desired outcome – mechanisms that require separate, lengthier legal proceedings, and which need to meet specific requirements regarding the nature of the assets and the way in which they were generated.

Thus, recovery of oligarchs’ assets will prove to be a much harder task than simply sanctioning them, and will require appropriate tools to be available. To many, the most obvious solution is deploying the much-vaunted Unexplained Wealth Order (UWO). However, UWOs have previously fallen short and, although the Economic Crime Act has addressed some of their limitations – namely by expanding the definition of a UWO subject and placing a cap on the costs to which law enforcement could be subject should they be unsuccessful in their bid – they are still not straightforward to operationalise.

On top of the complexities presented by the use of UWOs, oligarch assets give rise to additional problems. Notably, the criminality and corruption at the root of this wealth are historical, meaning it was amassed decades ago and has been laundered into legitimate businesses so many times that, by the time the money is used to buy a house in Kensington, it is difficult to prove it was tainted in the first place. Additionally, these assets are often well-hidden behind complex structures, complicating the task of identifying the real owner for law enforcement, as recent attempted detentions of superyachts have shown. These issues, coupled with the investigative nature of UWOs – which requires a separate civil proceeding to be commenced for a recovery order and adds another step to an already lengthy process – still represent unresolved obstacles that render UWOs unlikely to meet the requirements needed for effectively dealing with kleptocratic assets.

Alternative Means for Asset Recovery

Given the challenge ahead, what alternatives exist?

As a first option, a full reverse burden of proof as to the origin of the assets could be introduced, modelled on examples such as the Swiss Law on Asset Recovery. Should an oligarch fail to demonstrate the lawfulness of their wealth, this tool would allow for the confiscation of frozen assets without the need to commence a separate civil proceeding – a step that has contributed to the disappointing use of UWOs so far. However, it would likely still be relatively easy for foreign kleptocrats to “prove” the legitimacy of their wealth, given the time that has elapsed since it was first “earned”.

A similar option would be adopting an Irish model, through which property is frozen based on “belief evidence” and is subsequently forfeited if it appears to the court that a person is in possession or control of property that constitutes – directly or indirectly – proceeds of crime. Part of the success of the Irish system stems from the resourcing provided to its Criminal Assets Bureau, something the UK has not traditionally been willing to consider. This mechanism has also not traditionally dealt with cases involving politically exposed persons, bringing into question its effectiveness when applied against oligarchs.

A third option to consider is the concept of “criminality by association”, found in racketeering legislation in Italy and the US. In the US case, the general test is whether the defendant knew about the criminal nature of a conspiracy of which they were part, not that they agreed to a specific predicate offence. If applied to oligarchs, the key point would be proving they knew and understood the corrupt nature of the Russian regime with which they are associated, in the same way a mafia member would. For this to work, a close connection between the oligarchs and the regime needs to be established, as well as the kleptocratic nature of the Russian government. However, the latter would require the UK government to list Russia as a kleptocracy – something that is likely to be undesirable from a diplomatic standpoint.

No Easy Answer

Although current tools may prove ineffective in these unique circumstances, it may be possible for the government to develop new legislation to move from “freeze” to “seize” while respecting due process, providing the precise circumstances justifying confiscation are carefully set out.

Along with ensuring proportionality and respect for human rights and the rule of law, policymakers should also carefully consider the primary purpose of this asset confiscation. Is it a step that is felt necessary to persuade Putin to stop waging war against Ukraine, and to disincentivise other countries (like China) from carrying out similar acts of aggression, or is it because the oligarchs’ wealth was illicitly acquired in the first place?

If the latter, the line between the role of sanctions and the role of asset confiscation must not be blurred in the way it has been thus far. More importantly, any measure taken today should be designed to stand the test of time, so that it can be used in the future against criminally acquired assets from other unpalatable regimes and in support of other sanctions, such as those targeting corruption or human rights abuses. The government should aim to develop asset recovery mechanisms that are capable of targeting dirty money, whatever its origin may be. After all, the “London laundromat” was a national security issue long before the war in Ukraine, and will continue to be a threat long after.

Creativity and Nuance is Needed

Tom Keatinge and Maria Nizzero, 7 June 2022

Political rhetoric on sanctioned Russian asset seizure is being replaced by concrete proposals. A long legal road lies ahead.

As Vladimir Putin’s full-scale invasion of Ukraine passes 100 days, and as the imposition of Western sanctions on Russia-related assets continues, the debate surrounding what to do with these frozen assets is still high on the political agenda.

In recent weeks, the political rhetoric has become more moderated, and the process has entered a new stage, with the US, Canada and the EU all bringing forward proposals that are semantically different, but share the same goal: seizing Russia-related assets within the rule of law.

What’s on the Table, and What’s Not

There is currently a lively debate on the different mechanisms that might be employed to achieve the intended policy goal of seizing sanctioned assets – assets that, despite being frozen, remain the property of their original owner, be that an oligarch or the Russian Central Bank, and where a connection with criminality remains, thus far, undetermined.

In late April, the US opened the way, by proposing a comprehensive legislative package “to hold the Russian government and Russian oligarchs accountable for President Putin’s war against Ukraine”. The proposal considers establishing new authorities for the forfeiture of property linked to Russian kleptocracy, while setting up mechanisms that would allow the government to use the proceeds to support Ukraine. Among the most relevant elements of this package is the forfeiture of property used to facilitate the evasion of sanctions, and the inclusion of this offence in the definition of “racketeering activity” in the Racketeer Influenced and Corrupt Organizations (RICO) Act. The legislative package also creates a new criminal offence making it unlawful for any person to “knowingly or intentionally possess proceeds directly obtained from corrupt dealings with the Russian government”.

Around the same time, Canada dusted off a previous proposal aimed at allowing Canadian courts “to take the frozen assets of foreign officials whose mis-rule creates forced displacement and other humanitarian needs”. The Frozen Assets Repurposing Act, originally drafted with the primary purpose of assisting the humanitarian needs of those forcibly displaced, essentially foresees new powers to seize and sell assets of sanctioned Russian oligarchs while repurposing the proceeds to rebuild Ukraine.

The European Commission has also followed suit, presenting in late May a new Directive on Asset Recovery and Confiscation. The proposal seeks to modernise EU rules on asset recovery through a series of measures, including an Asset Recovery and Management Office with the powers to trace and identify criminal assets, ensure that frozen property does not lose value, and enable its sale. The proposal also allows the confiscation of assets obtained from a wider set of crimes, all linked to some form of organised criminality. Like the US proposal, the directive would make sanctions evasion a crime across the EU, triggering the potential to enforce seizure procedures. This is a significant step, considering that only 12 EU member states currently treat evasion as a crime, while in 13 more it is either an administrative or a criminal offence, and two other member states only treat it as an administrative offence.

In contrast, thus far, the UK has yet to make the transition from political theatre over the topic to a more informed debate.

Creativity (and Nuance) Needed

These proposals include a few common themes. First, the current stance is to approach recovering the assets of oligarchs from an organised crime/racketeering standpoint, with little consideration given to securing reparations from the largest source of assets, the Central Bank of Russia. Both the US and EU packages include proposals aimed at expanding their current initiatives against organised crime.

In particular, even though the EU proposal has been advertised as providing new rules aimed at confiscating sanctioned Russian assets, the full text of the proposed directive reveals that its primary target is organised crime in general, and that the Russian oligarchs are just affected by proxy. Thus, operationalising the Directive would require establishing a link between oligarch assets and organised crime. The proposed Directive has an Italian flavour. This is unsurprising as the Italian Anti-Mafia Code’s asset recovery mechanisms, albeit not perfect, have been put forward as a palatable option upon which to build tools that could help solve the puzzle of how to seize oligarchs’ assets.

Second, sanctions evasion is receiving more attention from policymakers as a possible route to seizure. In the US, existing laws related to sanctions evasion and money laundering have already been creatively deployed to seize the Tango, a yacht belonging to sanctioned oligarch Viktor Vekselberg, via civil forfeiture.

A final theme concerns asset return and repurposing. While still uncertain on how to effectively seize sanctioned Russian assets, the US and Canadian proposals already discuss their use once forfeited, and propose repurposing them for the reconstruction of Ukraine. This gives rise to a discussion over whom the recovered money should be returned to. The purpose of asset recovery is to return funds to victims and the country from which they were originally stolen. However, in the case of the oligarchs’ wealth, which was originally accumulated decades ago following the collapse of the Soviet Union, the “rightful” owners are, indeed, the Russian people (who might not agree with the Kremlin’s actions). While attractive and warranted, using the oligarchs’ money to help reconstruct Ukraine – rather than returning it to the original Russian victims – may not be in line with current asset recovery norms, requiring further legal exploration. A different matter would be compensating Ukraine with the money derived from penalties linked to sanctions evasion – a totally acceptable option that would achieve two goals simultaneously (ensuring that crime doesn’t pay, and that Ukraine’s reconstruction is supported).

Sanctions are Easier Said Than Done

The current proposals highlight the complications of using administrative tools (sanctions) to achieve criminal justice outcomes (asset recovery). While progress is being made, and experts are becoming more optimistic about the possibility of holding Russian kleptocrats accountable, there is a long road ahead which will require careful drafting of legal frameworks that can be used should another “kleptocracy crisis” hit.

Compounding the objective complexity of designing appropriate legal mechanisms, at a time when Western allies are seeking to build support for Ukraine around the world, whatever solution is brought forward is likely to invite comparison with the autocracies the West supposedly stands against. There is also a considerable risk that a court might invalidate these mechanisms under challenge, thus handing Russia a propaganda win.

Furthermore, the current focus on seizing assets which are potentially the proceeds of historical crime from oligarchs ignores the greatest source of reparations for Ukraine, the assets of the Russian government, held primarily in the Central Bank of Russia’s frozen accounts in the West. Focusing on this dimension might yield a more profitable return.

While the emphasis on seizing oligarch assets is politically appealing, there is a long legal road ahead as considerable creativity will be needed to ensure that whatever results is sufficiently robust to withstand scrutiny from a range of legal, moral and human rights perspectives.

How the UK Can Break the Deadlock on Asset Recovery

Maria Nizzero, 10 October 2022

While the UK continues to impose sanctions, it is lagging behind allies in developing its approach to the recovery of ill-gotten assets.

At the end of September, members of the Russian Elites, Proxies and Oligarchs (REPO) Taskforce convened to discuss initiatives to tailor “already robust asset forfeiture tools and maximize the impact of … joint work on Russian elites”. Participants from G7 countries, plus Australia, debated legislative efforts and several proposals – including some already discussed in a previous commentary by this author – with a key focus on expanding definitions of racketeering to include sanctions evasion as well as a trigger for property forfeiture.

In the UK, gone are the days of ministers posing in front of detained yachts or proposing to seize oligarchs’ villas to house Ukrainian refugees. Despite continuing to sanction individuals for their support for Russia’s aggression – the UK has so far sanctioned over 1,200 Russian individuals – and a couple of parliamentary debates on the matter, it has been months since the last attempt to freeze (and seize and confiscate) oligarch assets. This inaction is indicative of two elements: the persistent confusion among UK policymakers surrounding the ultimate goal of confiscating Russian sanctioned assets, and the inadequacy of the UK’s asset recovery frameworks when faced with this task.

Time to Refocus

Countries in the Western alliance are grappling to develop legislation that enables asset confiscation while adhering to the rule of law, a process that has produced a number of different approaches. Sanctions evasion offences are likely to have limited reach as a starting point for asset forfeiture, given that they would only capture the specific proceeds of the evasion itself. The seizure of the yacht Amadea is a case in point. As such, this approach is likely to be only a minor solution in the “freeze to seize” debate.

The REPO Taskforce has made it clear that the goal of recovery initiatives should be to hold “Russian elites and their cronies” accountable “for their complicity in Putin’s illegal invasion”. In the US, this has translated into cases being brought forward on loosely related grounds, including violation of bank fraud, money laundering, and sanction statutes.

Canada has taken a different approach, where new legislation will allow the government to directly issue an Order seeking permanent asset forfeiture based on individuals who risk a “grave breach of international security”. This type of administrative, government-issued forfeiture order, however, is unlikely to stand up to challenges in the courts and may risk diluting the meaning and impact of the wider sanctions regime.

A common thread uniting these initiatives is the attempt to bypass the stumbling block of proving the underlying corruption of the oligarchs, a process that is too challenging, slow and time-consuming. This legal creativity seeks to deliver the short-term goal of constraining the oligarchs and responding to Russia’s invasion of Ukraine. It does not, however, tackle the bigger issue of kleptocracy.

In the first commentary of this series, the author highlighted the need for policymakers to “carefully consider the primary purpose of this asset confiscation”. Without identifying such a purpose or the characteristics of the property to be confiscated, recovery efforts will be confused, disjointed and likely to fail. A choice is needed, one that the UK is yet to make: while some MPs would like confiscation efforts to tackle the UK’s dirty money problem, others firmly believe they should be linked to Russia’s invasion of Ukraine. Given the limitations highlighted above, and the threat that dirty money poses to national security, a long-sighted strategy aimed at tackling corrupt proceeds would be more advisable. However, no strategy can be brought forward until its ultimate goal is decided.

Tweaking the Law

Once the ultimate goal of asset confiscation is clear, it is possible to look at ways to recalibrate the current legislation to include provisions that target oligarch assets. If the goal is to go after kleptocracy, it is clear that the current provisions are simply not capable of overcoming the hurdle of procuring evidence from overseas and proving the oligarchs’ underlying corruption.

Potential amendments to the Proceeds of Crime Act (POCA) to provide a broader definition of “unlawful conduct” may be a way forward. These could include, for instance, “assets obtained through political patronage”, or “assets which may be made available to support a hostile regime”. Full reverse burden offences have also been proved human-rights compliant in a range of jurisdictions and may be a useful component of future amendments. As explained in a previous commentary, categorising kleptocracy as organised crime may also provide another avenue to overcome some of the challenges inherent in asset confiscation.

A Matter of Resources

Intention and legislation aside, much of the inaction in the UK results from law enforcement’s ability to go after the assets in question. A recent investigation found that £700 million worth of luxury homes linked to sanctioned oligarchs have not been flagged for asset freezes. This is due not only to the ongoing role of offshore secrecy jurisdictions, but also to law enforcement’s current lack of specialism and resources to go after these assets. How is it even possible to talk about moving from freeze to seize if the assets are not frozen in the first place?

Law enforcement agencies are also confronted with sanctioned individuals’ appeals. In UK courts, the first major sanctions evasion case sees a Russian billionaire requesting that two Account Freezing Orders are overturned because of the “chaotic and unprincipled approach” of the National Crime Agency (NCA). A setback in this case could seriously affect future efforts in this area, in much the same way as the Baker case did with Unexplained Wealth Orders. To obviate these challenges, the NCA needs enough time and resources to trace assets and provide evidence to bring watertight cases to court. This means ensuring a funding stream that is long-term and increasing in order to face the growing threat posed by illicit finance – something that has so far been lacking.

Late to the Party … Ready to Dance?

The UK is still far from being successful in freezing, seizing and confiscating the assets of sanctioned Russian oligarchs, but can of course catch up.

Firstly, it is important that the UK government finally makes up its mind on the ultimate goal of asset confiscation. Granted that linking asset confiscation to the actions in Ukraine is not the recommended option, it is still possible to target hostile regimes and their associates on the basis of kleptocracy or national security interests. Secondly, once decided, changes in legislation that are meaningful and respectful of human rights and due process are needed. Lastly, resourcing and specialism need to be prioritised to tip the balance in favour of law enforcement agencies. It is now time to refocus, recalibrate and resource: only in this way will it be possible to turn sanctions-based asset freezes into asset recovery opportunities.

Maria Nizzero is a Research Fellow at the Centre for Financial Crime and Security Studies at RUSI. Her research examines the UK economic crime landscape, asset recovery, with a focus on sanctioned frozen assets and proceeds of kleptocracy, and the foreign policy dimension of illicit finance, including active financial measures. Prior to joining RUSI in 2021, Maria worked for a London-based agency specialising in financial crime and previously for financial news company Dow Jones. She holds a LLM in Criminology and Criminal Justice Policy from the University of Barcelona, and a MA in International Relations from the Institut Barcelona d’Estudis Internacionals (IBEI).