Russian Assets: Seizure

Roger Gale Excerpts

Tuesday 14th March 2023 Commons Chamber

[Sir Iain Duncan Smith]

The hon. Gentleman is right, and I obviously completely agree.

If we did this, we could have tougher sanctions. A recent example involved Eugene Tenenbaum, a close associate of Roman Abramovich—I am told that “Abram-oh-vich” is the correct pronunciation—and former Chelsea football club director, who was given permission by the Treasury to sell his Surrey mansion for £16 million a month after the Government designated him for UK sanctions and froze all his assets. How did that happen? Why did that happen? Who is not talking to someone else to tell them what they are doing? We are letting stuff slip through because we are not being serious about implementing measures properly.

I could give plenty of other examples. Yevgeny Prigozhin, the boss of the Wagner Group, is deeply involved in another current row about aircraft leased by western companies to Russia that were seized after sanctions were imposed. The Russians are refusing to pay reparations or hand the aircraft back. Huge amounts of money are available to these people. I have a list, but will not go through all the names, because I realise that many others want to speak.

Putin’s brutal invasion has now entered its second year. The Government must amplify their efforts. They have done a great deal, and I congratulate them on much of it, but much more is needed. The Government need to get right down into this issue and make sure that we have a plan for reparation and rebuilding of Ukraine. Let us start with the dirty money—that is the key. We may yet have to give more money, and so may America, but let us start where the bill lands first: with those who are responsible for this brutal invasion of Ukraine. The Ukrainians are a peaceful and decent people whose lives have been turned upside down. Families have been destroyed or have had to flee, and many young men and women are now having to go to the frontline for the first time as soldiers and put their lives on the line, standing for the freedom of their country. We must seize those assets wherever appropriate and ensure that Russia is held to account. As I said earlier, there is much to say “Well done” to the Government for, but there is also much more that needs to be done.

I will leave hon. Members with this simple thought: as we come together across the House, let us also try to work out how we can bring all the other western Governments together in this action. To do it by ourselves will, I recognise, be a slight problem, but if we could get the US Congress, the Canadian Parliament and the European Union to engage on this, then we would have something that would frighten the Russians completely and give us the tools to finish this particular job.

[Mr Deputy Speaker (Sir Roger Gale)]

As hon. Members have recognised, we are honoured to have been joined by colleagues from the Ukrainian Rada who are in the Gallery this afternoon. We welcome you; we salute you and the courage of your country in your fight for democracy.

I must just gently say to hon. Members that the winding-up speeches will start at 6.30 pm.

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[Liam Byrne]

I think that we can use the same tactics to seize private and public assets, but I am conscious that we have to change the context and parameters of international law first. That is how we maximise the safety of domestic legislation, which has to be the third step. We in this House are lucky that my hon. Friend the Member for Rhondda has set out precisely how to do that in his ten-minute rule Bill.

Crucially, we need to ensure that the State Immunity Act 1978, which gives immunity to central banks, is revoked or at least conditioned in a way that allow laws to be presented here so that we in Parliament can order the seizure, forfeiture and repurposing of assets.

My final point is a little more short term, meaning now. If we are to maximise the assets that we seize and repurpose for the reconstruction of Ukraine, we have to get serious about sanctions enforcement. Right now, frankly, we are not. There will be a lot more money available if we stop the nonsense that is going on in the dark at the moment. The truth is that sanctions enforcement in this country today is the proverbial riddle wrapped in a mystery inside an enigma.

As the right hon. Member for Chingford and Woodford Green said, we have been told that as of October 2022, £18.4 billion-worth of Russian assets have been frozen in this country. We then learned from the scandal exposed by openDemocracy that the Treasury has been issuing licences like confetti, even to warlords such as Prigozhin, the head of the Wagner Group—in his case, to fly English lawyers to St Petersburg to prosecute an English journalist in an English court in order to silence him because he was writing the stories that triggered the sanctions against Prigozhin in the first place. What a nonsense!

As I began to dig into this, much worse was revealed. In the last Office of Financial Sanctions Implementation report, it was revealed that the Treasury is no longer issuing licences to individuals one by one to authorise specific expenditure; it is now issuing general licences that authorise an entire category of spending. In fact, 33 general licences were issued last year, so I naturally asked what the value of those general licences totalled. I was told on 15 February in a parliamentary answer:

“The Office of Financial Sanctions Implementation (OFSI) does not disclose data from specific licences it has granted under UK sanctions regimes.”

When the Exchequer Secretary to the Treasury came to the House on 25 January, we asked him whether, if he cannot tell us what the total value of the licences is, he could at least tell us what the licences were issued for. He said he could not tell us that because

“there is a delegated framework”

and that these decisions

“are routinely taken by senior civil servants.”—[Official Report, 25 January 2023; Vol. 726, c. 1014.]

I then asked what this delegated framework was and whether we in this House might have a look at it. I first tried a parliamentary question. The answer came back on 8 February:

“There are currently no plans to publish the delegation framework.”

I then had to try a freedom of information request, and I have it here in my hand. It came back to me on 9 March, and it says:

“we can confirm that HM Treasury does hold information within the scope of your request.

The information we have identified…we believe may engage the exemption provided for by section 35(1)(a)—formulation or development of Government policy.”

We now have a situation where Ministers are saying that it is the civil servants’ job, and the civil servants are saying that it is advice to Ministers. For that reason, we cannot get to what this delegated framework looks like.

I then asked whether they could at least tell us how many people we have busted for sanctions evasion. The Office of Financial Sanctions Implementation confessed that there were 147 reports of a breach last year, but when I asked the Minister for Security how many criminal investigations had resulted from that, he said that he could not answer

“For reasons of operational security”.

I went back to the Office of Financial Sanctions Implementation report to double-check, and of 147 reports of a breach, there have been a grand total of two monetary fines, both to fintech companies.

So there we have it: £18 billion frozen and licences issued like confetti in a secret regime that Ministers say is down to civil servants and civil servants say is actually advice to Ministers. Despite this flagrant abuse—and we know the scale of it, because the Financial Times told us that $250 million has been laundered by the Wagner Group—we have just two fines that total £86,000. Well, £86,000 in fines is not going to do much to help us rebuild Ukraine. I ask the Minister on the Front Bench to explain to us how she is going to do an awful lot better than that.

Sanctions enforcement in this country stinks to high heaven, and what concerns me most is the culture of secrecy around it. Many of us in this House have been around long enough to know that such a culture is never a recipe for good public policy. We in this House have to be realistic about the scale of finance that is needed; maximise the use of our Bretton Woods institutions; and move internationally and domestically, together with our allies, to change the parameters of international law and maximise the safety and security of domestic legislation that we pass here. But let us move now to send a clear signal from the UK—the home of the rule of law—that this is not going to be a safe haven for sanctions evasion. We are going to send that clear message by getting tough, and getting tough now.

[Mr Deputy Speaker (Sir Roger Gale)]

If we are going to get everybody in, we are going to have to have a self-denying ordinance of about six minutes.

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[Alyn Smith (Stirling) (SNP)]

It is a pleasure to wind up for the SNP in this very constructive debate. We support the motion. I commend the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for moving it; I can hardly do anything but support it, because I called for the same thing from this spot on 26 April last year and reiterated that call on 25 May and 22 September.

The SNP has long been pushing for a Marshall fund to aid the reconstruction of Ukraine. We have also been pushing for greater financial transparency within the UK’s financial sector. That is a good thing in and of itself, but the crisis in Ukraine has brought an urgency to the need to deal with the UK’s long-standing problem of dirty money. We want to see action, so I hope the Minister is taking good note of the constructive pressure she is feeling today. We want to see more, better, faster and broader action than we have seen to date.

I appreciate that it is difficult. I am a financial services lawyer—if we go back far enough—so I know that we are dealing with some of the slippiest, best advised and best resourced people in the world, who are very able to exploit loopholes wherever they exist, but there is a unanimity here and there is a will. I implore the Minister to do better than we have seen to date.

The London laundromat has been a long-standing problem for national security. My predecessor in this role was Stephen Gethins, who is well known to many colleagues as the former Member for North East Fife and who is now a professor of international relations at the University of St Andrews. He has put it very well:

“For years we have turned a blind eye to Putin’s dirty money, propaganda and influence in our democracy. Those who called out the corruption were badged as anti-Russian when it was the Russians who were Putin’s first victims. It is a shame that many are only paying attention to his crimes after such grave events. I hope that real action will be taken. After years of inaction we owe the people of Ukraine and Putin’s other victims at least that.”

As we have heard in the many excellent speeches this afternoon, the scale of reconstruction required in Ukraine is vast. Estimates vary from €600 billion to upwards of €1 trillion, but who can calculate it while the conflict is ongoing? It is going to be a major financial exercise in reconstruction, but the wider moral principle is surely that it should be Russian dirty money that pays. If Russian dirty money is good enough to be sequestrated, it is good enough to be requisitioned for reconstruction.

This has been a constructive debate. Let me give some examples of how other states are dealing with the issue. Estonia’s Government have declared a blueprint for the legal seizure of frozen Russian assets. The Frozen Assets Repurposing Bill is working its way through the Canadian Parliament. There is a Swiss law on asset recovery. Today, the European Parliament is debating precisely how to tackle the issue. I associate myself with other hon. Members’ comments that we need an internationally co-ordinated effort, because any loopholes that are allowed to exist will be exploited. I particularly commend the actions of the Italian state: the Guardia di Finanza has made strong strides in seizing assets.

There is a wider lesson for us all. I very much appreciate the speech of my hon. Friend the Member for Glasgow Central (Alison Thewliss) about properly resourcing the new financial transparency regime that is working its way through this House. The Guardia di Finanza proves that if there is a strong and properly resourced domestic enforcement mechanism, we will see better results; I strongly believe that the Government could take that on board. Likewise, the Dutch Parliament has already created a trust fund that will be funded by assets in due course, and is working out how it can legally seize them. There is a huge willingness to see the Government do more and do better.

Let me end with a couple of, I hope, constructive points. First, we want to see a wider coalition: we have already seen a coalition in support of Ukraine, but we also need to see a coalition in support of these legal measures. I should be grateful for an assurance from the Minister that the overseas territories will be very much part of the UK’s new regime in this regard, because we are seeing pretty significant evidence that they are being exploited through these loopholes. [Hon. Members: “Hear, hear.”] I am glad to hear some support from the Conservative Benches.

My second point raises what is, perhaps, a broader issue. A number of the UK’s allies are actively engaged in assisting the Russian state and the oligarchs themselves to get around these systems, and they will be the source of the loopholes that will be exploited. Surely the UK is in a diplomatic position to put considerable pressure on those allies.

Having made those two points, and having referred to the unanimity we have seen today, I add my own salutations to our Ukrainian colleagues. There is a coalition of the willing in this House, and I hope the Government can rise to the opportunity that it presents.

[Mr Deputy Speaker (Sir Roger Gale)]

I call the Opposition spokesman.