Finance

Government accused of ‘absurd’ sanctions loophole after giving Russian bank customers 30 days to ‘wind down’ assets

Britain has been accused of opening a loophole in sanctions designed to hobble the Putin regime by granting one of Moscow’s biggest banks an “absurd” month-long exemption from the enforcement of an assets freeze.

Prime Minister Boris Johnson announced last Thursday that the state-owned VTB Bank, which is the second-largest Russian bank and its largest investment bank, was the subject of a “full and immediate” asset freeze in the UK as part of the Government’s attempts to help derail Vladimir Putin’s invasion of Ukraine by targeting key finance houses.

But the following day the Treasury unit in charge of enforcing the UK’s sanctions quietly issued a 30-day license granting permission for any individual or entity to “wind down any transactions” with VTB until 27 March.

The notice, issued by the Office of Financial Sanctions Implementation (OFSI), states that the withdrawal of any funds or assets cannot directly benefit the bank, nor infringe any of the wider sanctions in place to curb the Kremlin’s aggression in Ukraine.

Leading campaigners and opposition politicians criticized the broad nature of the exemption, saying it appeared to place no curbs on individuals or entities who may have links to the Russian state but who have so far not been named in the sanctions regimes announced by London, Washington and the European Union.

Bill Browder, the American-born financier who has become one of the leading campaigners against corruption in Russia and the Putin regime, told i: “This is a ridiculous position for Britain to put itself in. An asset freeze needs to be immediate and total. If you are leaving those subject to it a month for the sanction to become active then anything you want to freeze will be long gone. It’s absurd.”

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VTB has an investment bank subsidiary, VTB Capital, which has a substantial office opposite the Bank of England in London.

Britain and America, which has also indicated that there will be a deferral of some of its sanctions measures targeting Russian financial institutions, have said the winding down provisions are necessary to avoid legitimate Western account holders from being unfairly penalized by having their assets frozen before they can take action.

Opposition politicians said there was an urgent need for the Treasury to explain how the 30-day window would help only UK companies rather than supporters of the Putin regime.

Despite announcing last week that it intends to sanction 100 Russian oligarchs and entities, the Government has yet to reveal full details of who is being targeted and to what extent.

Liberal Democrat foreign affairs spokesperson Layla Moran said: “As long as the Government keeps us in the dark about who it has and hasn’t sanctioned, we’ll never know whether Putin’s cronies were able to take advantage of this 30-day period. That’s why the Government should immediately publish these names and open them to scrutiny.

“Ministers need to come forward with a thorough explanation of how they’ll ensure this window period only benefits UK businesses trading with Russia and not Kremlin-linked oligarchs.”

VTB Capital, which has helped raise tens of billions of pounds for the Russian state and Russian companies via its access to the City, has said it is working to “resolve the situation” with each of its clients, adding that it is “determined to continue co-operation with clients and partners in accordance with the law”.

Campaigners in Ukraine and Belarus, which is also the subject of UK sanctions, said Britain had to address what they said is a gap between its rhetoric in support of Ukraine and its actions in targeting Russian money in London.

A spokesman for the Professional Union of Belarusians in Britain (PUBB), which was among the first organizations to raise concerns about the wind-down licence, told i: “So far, UK sanctions against Russia and Belarus lack both determination and consistency. Whose side is the UK on in the current war, the people of Ukraine fighting for their country and freedoms or Russian blood money?”

The Treasury did not respond to a request for comment.

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