(Bloomberg) -- Lawmakers have blasted the UK’s sanctions regime as “underprepared and under-resourced,” noting the war in Ukraine is also exposing the institutional decay inflicted by the City of London’s decades-long welcome of “dirty money.”
Most Read from Bloomberg
There is little evidence that the UK had a clear plan of whom to sanction and how they would go about it following Russia’s invasion, according to a report Thursday by the House of Commons’ influential Foreign Affairs Committee.
“The government appeared to lack a grip on both the enablers of potential sanctions targets and, crucially, their proxies to whom wealth was transferred,” the report said.
The UK also needs to move further and faster to introduce legislation to stem the flow of dirty money through the City of London, a decades-long trend that threatens national security and undermined attempts to punish Vladimir Putin and his allies. It means, the UK has “left itself unprepared to act internationally and hamstrung domestically,” the report said.
Sweeping changes to funding and legislation are needed. “We need much more fundamental – and long-lasting – legislative changes to weed out the scourge of dirty money,” said Tom Tugendhat, chairman of the committee.
LISTEN: London Struggles to Wean Itself From Russian Billions
The strident conclusions are likely to heap further pressure on Boris Johnson’s government, which has repeatedly trumpeted the scale and impact of its sanctions -- and a slate of legislation it says will end London’s reputation as a haven for dirty money.
Foreign Secretary Liz Truss on Thursday said she didn’t accept the committee’s conclusions, telling Sky News “we have sanctioned as a country more individuals and entities in Russia than any other government in the world.”
Those range from wealthy business people such as Roman Abramovich to the adult children of the Russian president and Foreign Minister Sergei Lavrov.
Changes called for in the report include a public register of beneficial ownership and reform of corporate criminal liability laws, along with a substantial increase in funding and expertise at the National Crime Agency, Serious Fraud Office and other enforcement agencies.
The UK’s sanctions taskforce should be given more resources for the duration of the Ukraine crisis and a “professional sanctions cadre” created in the Foreign Office, the report said.
The report also urges authorities to close loopholes in Tier 1 Investor visa scheme, a route to permanent residence and British citizenship that was popular with Russian oligarchs before it was shut down over concerns about national security and fraud. But current golden visa holders can still apply to extend or request family members to join them.
The report found at least eight such visa holders are sanctioned in relation to Ukraine.
(Adds Liz Truss comment in seventh paragraph.)
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.