Over the last week, social media has been exploding with news and debates in relation to the Intelligence and Security Committee of Parliament (ISC) report on Russia. “The Russia Report” was published on 21 July 2020 and looks into allegations of Russian interference in British politics, including alleged Russian interference in the 2016 Brexit referendum.
“It appears that the UK Government at the time held the belief (more perhaps in hope than expectation) that developing links with major Russian companies would promote good governance by encouraging ethical and transparent practices, and the adoption of a law-based commercial environment.”
“What is now clear is that it was in fact counter-productive, in that it offered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat’.” This also provided Russians with connections at the highest levels “access to UK companies and political figures”.
In order to tackle these criminal activities, Unexplained Wealth Orders came into force in 2018, which require an individual with unexplained assets over £50,000 to provide legitimacy of these assets.
The Security Minister said that Unexplained Wealth Orders were “acting as a deterrent”: “We know from both intelligence and open source that people are approaching financial advisers about how to get their money out of Britain as a result of these Unexplained Wealth Orders.”
The director of the NCA pointed out that Unexplained Wealth Orders might be not as useful in relation to Russian investors: “… unexplained wealth does have to be unexplained and, unfortunately … Russians have been investing for a long period of time … you can track back and you can see how they will make a case in court that their wealth is not unexplained, it is very clearly explained.”
Additionally, the NCA lacks the resources: “We are, bluntly, concerned about the impact on our budget, because these are wealthy people with access to the best lawyers and the case that we have had a finding on … has been through every bit of court in the land, and I’ve got a very good legal team based within the National Crime Agency but they had a lot of resource dedicated out of my relatively small resource envelope on that work.”
The Sanctions and Anti-Money Laundering Act 2018 is too restrictive, as underlined by the NCA. The proposed change that the NCA would like to see in legislation are:
- “including serious and organised crime as grounds for introducing sanctions; and
- providing for Closed Material Proceedings to protect sensitive intelligence in the granting of, and any appeal against, sanctions (the Special Immigration Appeals Commission procedures offer a useful model for this).”
To which the Foreign Secretary replied, that he is: “quite enthusiastic about sanctions against individuals because we are all quite sceptical that sanctions against countries have a huge effect and they often hurt the very people that you are trying to help”.
The NCA’s suggested amendments to the legislation were strongly supported by the committee.
Russia denies all the allegations. According to Interfax, a Russian news agency, the content of the report was described by Maria Zakharova, the Russian Foreign Ministry's spokeswoman, as "fake-shaped Russophobia".
The report calls for new legislation to replace the outdated Official Secrets Act, suggests updates for the Computer Misuse Act to reflect modern use of personal electronic devices, and suggests amendments to the Sanctions and Anti-Money Laundering Act 2018.
It is proposed that the Official Secrets Act be replaced with a new ‘Espionage Act’. One specific issue that a new Espionage Act might address, using an example of the US Foreign Agents Registration Act (FARA), is a requirement for individuals acting on behalf of a foreign power, other than accredited diplomats, to register with the Ministry of Justice, disclosing their relationship with the foreign government and information about related activities and finances. Anyone who should have registered but who has not done so can be prosecuted and, in the case of non-UK citizens, deported.
The Computer Misuse Act “was designed for a time when we all didn’t carry six phones and computers and let alone have criminals who do the same”. However, no specific changes to the Act where addressed in the report.
In relation to the Sanctions and Anti-Money Laundering Act 2018, as discussed in more detail above, the NCA proposed to include “serious and organised crime as grounds for introducing sanctions” as the current sanctions regime does not encompass serious crime. Closed Material Proceedings in relation to the sanctions were proposed as another amendment to the Act.
It seems likely that all of the UK authorities now will be under more pressure to scrutinise any transactions that have a Russian angle to them. However, in light of their recent failure in the NCA v Baker and others case, where the NCA suffered a major setback, as permission to appeal the discharge of three UWOs was denied by the Court of Appeal, they will also be wary to ensure that they do so only in the clearest of cases.
The views expressed herein are solely the views of the authors and do not represent the views of Brown Rudnick LLP, those parties represented by the authors, or those parties represented by Brown Rudnick LLP.