Disrupting Serious and Organised Crime: What Role for UK Sanctions?

Recent months have seen the government take concrete steps in pursuit of its vision of an ambitious, independent sanctions regime outside the EU. In July, the UK issued its first wave of human rights-related sanctions designations against 49 individuals and organisations; in September, it issued the first UK human rights-related designations against a world leader – Belarusian president Lukashenko.

These moves illustrate the government’s intention to pursue a dynamic sanctions strategy that includes thematic designations, rather than sanctioning entire states. To date, this approach has focused on human rights, but there is growing focus on the potential to target organised criminals whose activities harm the UK.

This potential lies in the fact that the primary legislation enabling the UK to act independently – the Sanctions and Anti-Money Laundering Act (SAMLA) 2018 – allows sanctions use for purposes ‘in the interests of national security’. This gives the UK the flexibility to issue sanctions that may not have been possible when acting as part of the EU.

In this context, using designations in response to serious and organised crime could further the government’s ambition to use sanctions as both ‘a key foreign policy and national security tool… allow[ing] the UK to act in line with our own priorities’. As such, if the government deems serious and organised crime to be a national security threat – as it has since 2015 – the potential impact of independent sanctions should be carefully considered.

This potential should be viewed in the context of a threat that is judged to be increasing. Serious and organised crime is now held to affect more citizens, more often, than any other threat, costing the UK £37 billion per year. This represents a notable rise on the previous official estimate of £24 billion per year in 2013. Against this backdrop, it is clear that the UK is not succeeding on its 2015 objective ‘to reduce substantially the level of serious and organised crime affecting the UK and our interests’.

The option to use sanctions to bolster the response therefore appears timely. Faced with a threat of growing scale and complexity, serious and organised crime should now be targeted with all interventions capable of adding value.

Here, UK sanctions have been hailed as an important option. In 2019, RUSI recommended that the government ‘make… full use’ of the opportunity ‘to examine how sanctions could be used to tackle two specific threats…: serious and organised crime; and the abuse of the UK financial system by corrupt actors’. Others have focused on secondary legislation: the UK’s Global Human Rights Sanctions Regulations 2020 have been welcomed for their to reference to ‘serious violation[s of the]… right to be free from slavery… servitude… forced and compulsory labour’. Given the scope this offers to target those involved in modern slavery and human trafficking, it has been argued that the Regulations ‘could become a powerful tool for combating transnational organized crime’.

This growing focus raises the question of the benefits UK sanctions could bring, in practice, in disrupting serious and organised crime. As importantly, it raises the question of how sanctions should sit alongside existing law enforcement responses. This is crucial, mindful of the different options afforded by these tools (sanctions legislation, for example, allows the freezing of assets, but does not enable their permanent removal). A nuanced exploration of these issues is also essential background to ongoing debates, across government, around the need to amend SAMLA to allow greater scope for use via specific reference to serious and organised crime.

Sanctions – To What End?

In assessing the potential value of sanctions use against serious and organised crime, it is crucial to consider the range of objectives – and outcomes – on offer, from disruption to behaviour change and support for global partners.

In terms of disruption, sanctions could be a potent new addition to the UK’s existing toolbox, targeting transnational criminals’ access to the business infrastructure on which they rely to run their activity and conceal their wealth. Most organised criminals are motivated by financial gain; such a tool thus represents a clear point of leverage. As noted by RUSI’s Taskforce on the Future of UK Sanctions Policy, where designated actors deem assets in the UK, the security offered by UK asset markets, or UK lifestyle benefits to be of value, this could grant the government the power to disrupt operating models and hasten behaviour change.

This speaks to the fact that much serious and organised crime impacting the UK has a transnational component. The threat today is complex and multi-jurisdictional, with a UK nexus that is dynamic and multi-dimensional. This poses challenges to the ability of law enforcement to dismantle those groups targeting the UK via overseas command structures, enablers and supply chains. In this context, if used appropriately alongside law enforcement activity, sanctions could allow the UK more effectively to target higher-level, overseas criminal actors via their financial networks.

Prohibiting UK transactions and blocking UK property and assets could also have wider-ranging disruptive impact, if aimed at both direct perpetrators and those enabling their activity via technical or financial support. At the same time, sanctions could act as a potential deterrent, dissuading criminal actors without significant assets in the UK from investing in or targeting the country.

Beyond the potential UK benefit, sanctions use could have wider international value: disrupting access to the global infrastructure needed by transnational criminals could similarly curtail their operations abroad. By flagging identified individuals to global partners, the UK could also encourage complementary action. In reverse, sanctions could allow the UK to support those seeking similar outcomes, including the US, as the most aggressive user of sanctions to disrupt transnational crime.

Following the US?

Here, some point to the US record using the Foreign Narcotics Kingpin Designation Act (Kingpin Act) to illustrate the potential effectiveness of such an approach. Since 1999, the Kingpin Act has served as the primary authority for applying US sanctions to disrupt international drug trafficking operations, aiming to deny foreign narcotics traffickers, related businesses and operatives access to the US financial system, and prohibit trade and transactions with US individuals and companies.

The Office of Foreign Assets Control (OFAC) reports designating more than 2,000 individuals and entities as of June 2019 and freezing more than half a billion dollars of assets under the Act between 2000–2019. These designations extend to foreign entities that provide support, are owned or controlled by or act on behalf of significant foreign narcotics traffickers, aiming to create a ‘pariah effect’, whereby legitimate business is deterred from illicit activity, complicating criminals’ efforts to launder their proceeds.

A 2017 House of Representatives Committee on Foreign Affairs hearing provided multiple examples of disruptive impact. These included cases where the regime had led to the negotiation of voluntary surrender and extradition, convictions following revived local investigations, and the dismantling of business empires engaged in laundering criminal proceeds. Witnesses cited the Act’s ‘significant impact’, describing it as ‘one of the most important and powerful instruments the US has in its quiver to fight organized crime networks’. The challenges in assessing impact, however, were also cited, including that of isolating the effects from parallel policy and enforcement efforts.

In general, the power of US sanctions owes to the US status as the world’s largest economy and the US dollar as the principal currency for trade and international payments – credentials the UK cannot claim. Yet London’s status as one of the most prominent global financial centres, its leading financial services sector, and role in processing a large proportion of the world’s daily transactions nonetheless affords it a crucial strategic position at a key crossroads of global finance.

Equally critical is London’s role as a hub for illicit finance, as a favoured destination to launder and invest the proceeds of transnational crime. Notably, ongoing abuse of UK financial infrastructure means sanctions could play a crucial disruptive role. Despite lacking a robust assessment of scale, the National Crime Agency (NCA) puts the value of money laundering impacting the UK annually in the hundreds of billions of pounds. Across its financial infrastructure of Overseas Territories and Crown Dependencies, use of opaque corporate structures remains a key tool to hide financial crime.

The UK’s strategic location at the intersection of licit and illicit finance could therefore afford its sanctions outsized potential impact. As such, the UK is well positioned to consider advancing its sanctions ambitions beyond human rights, to the potential benefit of the fight against serious and organised crime. Any move in this direction, however, raises challenges around how sanctions should sit alongside existing law enforcement tools, and what sanctions can achieve that these tools cannot.

The Place of Sanctions

The potential benefits outlined above depend on sanctions being used coherently and strategically alongside existing responses. Importantly, deploying sanctions should not be a goal in itself; this should be a means not an end. Sanctions cannot replace arrest and prosecution.

Notably, while offering the benefits of ease and speed of response (imposing sanctions and freezing assets can be done rapidly), the punitive impact of actions such as asset freezing is limited. This is by design: the government is clear that the UK ‘does not impose sanctions as a means of punishment’. This points, however, to the need to ensure that use of sanctions does not preclude law enforcement action, and that the two can take place in parallel.

Indeed, if sanctions use were to impede law enforcement action, this could inadvertently work in the criminals’ favour. This owes, in part, to the fact that sanctions legislation allows the freezing of assets but does not enable their permanent removal. This raises questions on the interaction between SAMLA and the Proceeds of Crime Act (POCA) 2002, which offers the legal framework for recovery of criminal assets. At present, questions remain as to how criminal and asset-freezing powers under POCA interact with financial sanctions, including when each should be used and when is it legitimate to freeze assets indefinitely via sanctions legislation over a POCA claim in the courts.

Similar questions were raised in evidence to the 2019 House of Commons Foreign Affairs Committee (FAC) inquiry on UK sanctions policy. Across all relevant designations, the Law Society of England and Wales outlined the need ‘to avoid one set of tools getting in the way of the effective operation of the other’. As an example, it noted that if the ‘NCA were in the process of recovering criminal assets and the FCO designated the same individual, the NCA would no longer be able to recover the assets without an OFSI licence’. This speaks to the importance of coordination – an issue on which the FAC expressed concern, describing the ‘highly fragmented’ cross-Whitehall structures underpinning sanctions policy-making, implementation and enforcement.

Essentially, this boils down to the purposes for which sanctions versus existing law enforcement tools are designed and deployed. While tools such as Unexplained Wealth Orders are aimed at detecting and preventing the enjoyment of funds suspected of being proceeds of crime, sanctions are not a tool to directly combat dirty money, as such.

Instead, they are a tool to apply pressure – to make it harder for designees (in this case transnational criminals) to advance their activity, and to encourage them to change behaviour. As described in ministerial evidence to the inquiry, their ‘purpose is to deter, change behaviour and restrict the actions’ of those who are their focus. To achieve this, sanctions must be able to be lifted – if there is no prospect of their removal, targets are unlikely to respond as desired.

This is shown in the US case. As noted by one witness to the Committee on Foreign Affairs hearing, ‘Kingpin designations are not designed to “take out” anyone, in the sense that they lead to incarceration… [Instead, they are a] tool to reach transnational criminal networks that, for one reason or another, are beyond the reach of traditional law enforcement techniques.’ This tool aims to deliver constraining effect – which is strongest if countries where criminals reside follow OFAC designations, and impose their own sanctions and criminal investigations. This is the case in Colombia, where being designated is known as ‘civil death’. This has in some cases led to criminal justice outcomes: ‘At times’, the inquiry heard, ‘it is the OFAC designation that brings the cartel… leaders to the table to negotiate their criminal culpability.’

Whether or not this specific result is achievable by the UK, the goal of sanctions would likewise be to make it harder for designated individuals to pursue their criminal ventures. The Law Society, here, describes sanctions as ‘a conceptually different tool’ to those designed to detect and remove the proceeds of crime already committed. This is not to say that assets of those designated could not subsequently be removed under POCA, where appropriate. Clarity, however, is needed on when and how designations should be lifted to allow this.

Clarity is also needed on the likely limitations of sanctions, given that those targeted are unlikely to be passive, likely seeking to circumvent (or challenge) decisions. Circumvention may be a greater issue where individuals reside in countries with weak regulatory capacity and ability (or will) to collaborate with the UK. As noted, in the US case, impact is strongest where these countries follow OFAC lists; where this is not the case, designees may enjoy greater leeway. At the same time, OFAC has seen designees seek to evade investigators through organisational or operational changes, complicating evidence gathering and designation processes.

These challenges point to the importance of a clear assessment of the relative merits and conceptual distinctions between all available responses. Ultimately, this speaks to the need for a clear strategy on how sanctions could most usefully be deployed in concert with other law enforcement instruments. Here, consensus is needed on the ways, and specific circumstances, in which sanctions could add value – around, or in the absence of, options to use existing tools. While this will clearly be assessed case by case, such a strategic understanding is key to positioning sanctions as valuable interventions against serious and organised crime.

Questions around the positioning of sanctions within a broader approach are closely linked to considerations around their scope for application. Indeed, any assessment of sanctions’ potential value comes back to the scope relevant legislation allows – or should allow – to exploit this. Here, some argue that broader use cases should be permitted. It is clear, for example, that the Global Human Rights Sanctions Regulations allow relatively narrow scope for use against organised criminals – requiring specific criteria to be evidenced on how human rights abuse had directly produced funds in the UK.

In the same vein, the NCA has argued that SAMLA itself is too restrictive. It has done so, notably, in evidence to the Intelligence and Security Committee (ISC) inquiry into Russian interference in UK politics, calling for a legislative amendment to reference serious and organised crime specifically as grounds for imposing sanctions. The argument holds that sanctions use could be limited in practice by the need to evidence the national-security threat posed – a dimension that is not always clear-cut. The NCA also called for closed material proceedings to protect sensitive intelligence in the granting of, and any appeal against, sanctions – with the ISC offering its strong support for the NCA’s suggested amendments.

Any such moves to amend existing legislation will depend ultimately on how far the government wishes to take its sanctions strategic ambitions. A potential indication in this regard can be seen in policy proposals to establish a UK international corruption sanctions regime, alongside the Global Human Rights Sanctions Regulations. This is an important step, as the current Regulations omit provisions relevant to international corruption. However, sanctions to cover corruption ultimately address only a subset of the wider serious and organised criminal threat picture.

To aid further decision-making in this area, and to guide any further expansion in relation to serious and organised crime, it is vital that the potential role of sanctions be explored holistically, in the context of the broader response. As the complexity of the threat grows, and the government looks to retain the UK’s global leadership on sanctions, such a comprehensive assessment is key to inform a nuanced understanding of the benefits of expanding the UK’s sanctions regime to an area of critical importance to national security.

Cathy Haenlein is Director of the Organised Crime and Policing research group at RUSI. Her research covers a range of issues linked to organised crime, illicit trade and environmental crime.