UK Sanctions Regime

Stephen Doughty Excerpts

Wednesday 18th December 2024 Written Statements

[The Minister of State, Foreign, Commonwealth and Development Office (Stephen Doughty)]

Today I am updating the House on how this Government have delivered a step change in the use of our sanctions regimes to tackle malign activity and protect the UK’s national security interests domestically and internationally.

Sanctions are a powerful foreign and security policy tool, and this Government are committed to maximising their impact. Since the election, we have ramped up our collaboration with partners, particularly the US and the EU, to co-ordinate our action and to tackle circumvention.

UK sanctions are targeted, proportionate and robust, within a fair and transparent framework. Our approach has been repeatedly endorsed by the courts.

New sanctions to deter and disrupt malign actors

We have taken ambitious action to deploy new UK sanctions in innovative ways to deliver maximum impact. Since July, we have:

led the way in targeting Russia’s shadow fleet—the UK has targeted more ships than any other actor and has successfully encouraged partners to support our efforts;

delivered the largest single package of Russia sanctions, designed to disrupt Russia’s military industrial complex, since May 2023;

used our sanctions to deter and disrupt Iran’s military support to Russia;

called out the perpetrators of the Russian state’s forcible deportation of Ukrainian children;

clamped down on Russian cyber-criminals who have targeted UK schools and hospitals;

launched a cross-Government review of sanctions enforcement;

legislated to strengthen our sanctions enforcement powers, with the formal launch of the new Office of Trade Sanctions Implementation.

Russia sanctions

We have taken clear action to bear down on Russia’s sources of revenue, including energy revenues.

In July, the Prime Minister led a call to action at the European Political Community summit to tackle Russia’s shadow fleet. This has been endorsed by over 40 countries and by the EU. Russia has invested at least $10 billion into its shadow fleet and sanctions have plunged it into crisis. Since July, this Government have targeted 69 new oil tankers, nine liquefied natural gas carriers and six vessels involved in the transport of military goods. Many UK-sanctioned vessels have been left idling or at anchor, unable to continue their trade in Russian oil and depriving Russia of funds to wage its illegal war.

In November, we launched the largest package of sanctions against Russia in 18 months, disrupting the supply of western-sanctioned goods to the Russian military-industrial complex. This included individuals and entities in third countries. We are also targeting private military security companies, and, in November, the UK was the first G7 country to sanction Russian-backed mercenary group, Africa Corps.

The impact of our sanctions is clear. Sanctions have deprived Russia of over $400 billion since February 2022, reducing Putin’s war chest and forcing him to turn to North Korea and Iran for supplies.

Sanctions are putting grit in Russian military supply chains, increasing costs and delays and reducing equipment quality. The Russian defence sector has seen the cost of components rise by 30% and sanctions have prevented Russia from expanding military supplies to the battlefield.

On the financial side, 70% of Russian importers and 30% of Russian exporters now have to rely on specialised agents to settle payments with foreign partners, increasing the effective price of imports to Russia by 6% to 30%

The Russian Government have also had to undertake the first major tax hike in over 20 years. Interest rates are at 21%, there is runaway inflation, and the rouble has plummeted. Russia’s future energy ambitions are in tatters, and we are seeing increasingly vocal disagreements between Russian officials and industrialists.

Tackling corruption and illicit finance

Last month, we launched a campaign against illicit finance, raising our ambition and backing words with action. We sanctioned kleptocrats who have stashed stolen wealth in Britain and those who aid and abet them. Figures like Dmitry and Lada Firtash who have extracted hundreds of millions of pounds from Ukraine, or Isabel dos Santos who systematically abused her positions at Angolan state-run companies. On 9 December we took aim at the illicit gold trade, targeting five gold smugglers in co-ordination with the US, including three UK nationals. This Government will continue to use our sanctions powers to make the UK a more hostile environment for corrupt actors and to develop our sanctions regimes to address changing threats.

Iran

Sanctions are also important to confronting the threat posed by Iran, including its support for Russia. In September, we introduced new sanctions to disrupt Iran’s unmanned aerial vehicle and missile industries in response to Iran’s transfer of ballistic missiles to Russia for use against Ukraine. In October, following further Iranian attacks on Israel, we sanctioned senior Iranian military figures and organisations, including the Iranian Space Agency for their role in destabilising the middle east. This was followed in November by sanctions on Iran’s national airline, Iran Air, and its state-owned national shipping carrier, the Islamic Republic of Iran Shipping Lines, in line with the commitments outlined by the E3 in September. These sanctions will further restrict Iran’s direct scheduled commercial air services to and from the UK.

Cyber-sanctions

Our sanctions also directly support UK security. On 1 October, in co-ordination with international partners, we designated 16 individuals associated with Russia-based ransomware group Evil Corp, which has links to the Russian state and has sought to compromise UK health, Government and public sector institutions. This sends a clear message that the UK is prepared to stand up to cyber-threats.

Upholding human rights and promoting democracy

This Government have also taken sanctions action to uphold human rights. Following an unprecedented rise in settler violence in the west bank, we designated three settler outposts and four organisations that have supported, incited and promoted violence against Palestinian communities in the west bank.

We have also used sanctions to promote democracy. In September 2024, following Russia’s veto of the renewal of the UN sanctions regime on Mali, we legislated to enable the UK to sanction persons who obstruct Mali’s return to constitutional, civilian rule or who undermine the rule of law in Mali.

On 29 October, along with the EU and Canada, we also announced sanctions to increase pressure on the military regime in Myanmar and its associates. These sanctions target entities supplying aviation fuel and equipment to the Myanmar military and signal our clear opposition to the coup with the aim of undermining the regime’s credibility.

The UK strongly supports the use of UN sanctions to promote international peace and given the global signal they send and their reach across all 193 UN member states. On 8 November, the UN Security Council sanctioned two individuals involved in ethnically motivated atrocities in Sudan. This is part of wider efforts to apply pressure on conflict parties to stop fighting, allow humanitarian access and bring about a political transition as called for by the people of Sudan.

Co-ordination across the sanctions coalition

We co-ordinate with like-minded partners to disrupt, deter and respond to shared threats. We have repeatedly emphasised, alongside our G7 partners, that Russia must pay for the damage it has caused to Ukraine. On 22 October, the Chancellor announced that the UK will provide £2.26 billion in further support to Ukraine, as part of the G7 extraordinary revenue acceleration loans to Ukraine scheme. This is earmarked for military spending, further bolstering Ukraine’s ability to defend itself against Russia’s illegal war. The UK’s contribution will be repaid using the extraordinary profits generated on immobilised Russian sovereign assets held primarily in the EU.

Tackling Russia’s efforts to circumvent our sanctions remains a key strategic UK objective and a shared G7 commitment. Together with our G7 partners, particularly the US and EU, we continue to co-ordinate to tackle circumvention risks across priority countries in central Asia, the middle east, and the Caucasus. I have personally underscored the importance of tackling sanctions circumvention in my recent meetings with the Deputy Foreign Ministers of Uzbekistan, Kyrgyzstan and Kazakhstan. Diplomatic outreach at all levels has led to all these priority countries introducing Russia-facing controls on common high priority goods and a reduction in supply to Russia.

One-off engagement however is not enough. My officials, together with their EU and US counterparts, including during joint visits, are engaging with countries of concern and have secured commitments to control the re-export of the most sensitive goods, though we need to keep up the pressure. To underpin our commitment to tackling circumvention, the UK Government have deployed regional sanctions co-ordinators throughout our priority regions to provide leadership and expertise in our global network and to co-ordinate action across like-minded international partners in-country. We have complemented this with capacity-building programmes and technical assistance. The Prime Minister’s announcement last week highlights that approach in relation to the Republic of Cyprus as it establishes its new national sanctions implementation unit.

We are also playing a leading role in regional fora. The UK leadership in tackling the shadow fleet has seen our inclusion in the Nordic-Baltic forum alongside Denmark, Estonia, Finland, Germany, Iceland, Latvia, Lithuania, the Netherlands, Norway, Poland and Sweden. This forum is confronting the risks posed by the shadow fleet, especially in the environmentally sensitive waters of the Baltic sea and the North sea and is exploring new possibilities for common measures against the shadow fleet within the framework of international law.

Strengthening sanctions enforcement across Government

This Government continue to work with industry to maximise compliance with our sanctions, but we are clear that failures to comply should be met with the full force of the law. Punishments include seizures at the UK border and, for the most serious breaches, large fines or criminal prosecution.

A range of Departments have responsibility for the enforcement of UK sanctions, including the Home Office, Department for Business and Trade, Department for Transport and HM Treasury. In October, we introduced new sanctions enforcement powers for the Department for Business and Trade and the Department for Transport, including the power to impose civil monetary penalties for breaches of the UK’s aircraft, shipping and certain trade sanctions. These powers also introduced new reporting requirements for suspected breaches and give us the option to name and shame sanctions offenders. These powers underpinned the launch of the new Office of Trade Sanctions Implementation.

The creation of OTSI will strengthen the implementation and enforcement of the UK’s trade sanctions. OTSI will work in partnership with HMRC in enforcing trade sanctions and its focus will include the movement of goods and services across third country borders to Russia or other sanctioned destinations. These third country powers are an important expansion of our toolkit in tackling sanctions evasion and circumvention.

We are committed to doing what is necessary to clamp down on sanctions offenders and the introduction of additional capacity and powers is starting to pay off. We are seeing this in the increase in reporting of suspected breaches, which we expect will result in further fines and referrals for prosecution.

Since February 2022, HMRC has issued six compound settlements against UK companies that have breached the Russia sanctions regulations for a total of £1,363,129, including one in August 2023 for £1 million and the latest in August 2024 for just over £58,000. On 27 September 2024, the Financial Conduct Authority fined Starling Bank Ltd £28,959,426 for financial crime failings related to its financial sanctions controls and screening. In September 2024, following a proactive investigation, the Office of Financial Sanctions Implementation issued a monetary penalty of £15,000 to Integral Concierge Services for breaches of financial sanctions imposed on Russia in response to its illegal invasion of Ukraine in 2022. ICSL did not challenge the penalty and paid in full. I want to see many more enforcement actions in the coming months to maximise the deterrent effect of our sanctions and hold people and institutions accountable.

I plan to go further to strengthen the UK’s sanctions system, and I have launched a cross-Government review of sanctions enforcement with the support of Ministers from HM Treasury, the Department for Business and Trade, the Department for Transport and the Home Office. In parallel, I have been speaking to the leaders of the overseas territories, including at the recent Joint Ministerial Council, where we agreed on the importance of strengthening sanctions implementation and enforcement across the entire British family. We are matching our commitment with action, including providing direct support to enhance sanctions enforcement capability in our overseas territories.

I will use the review to consider where we can go further and deeper to improve our sanctions system. I want us to look at how we can make our sanctions easier to comply with, how we can build our cross-Government capabilities to combat sanctions circumvention and how we can expand and improve our sanctions toolkit. I look forward to substantially enhancing enforcement efforts and reporting the outcomes to Parliament.

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