Summary
In early 2024, the Russian-born British citizen Anzhelika Khan took the government to court for targeting her with sanctions on the basis of her association with her husband, the Ukrainian-Russian oligarch German Kahn. The case posed the first major challenge to the UK government’s strategy of sanctioning family members and associates who help sustain networks of kleptocratic influence, particularly where they hold significant assets for the benefit of oligarchs or other primary targets.
Ms Khan moved to the UK in 2013, acquiring a portfolio of luxury properties in London and a significant art collection while her children have attended elite British schools. While Ms Khan herself has never been involved in political affairs and wields no direct influence over Putin, she was targeted with an asset ban having obtained a “financial benefit or other material benefit” from her husband.
The co-founder of Alfa Group, German Khan has given his wife substantial gifts that included “valuable properties here and abroad, and cash gifts totalling some hundreds of millions of pounds over the years”. The court also noted that one gift representing “a significant proportion of the amounts given over the years” was given to Ms Khan just before German Khan was sanctioned in early March 2022.
Ms Khan challenged the UK government’s decision to keep her on the sanctions list following a ministerial review of her designation. As a British citizen with children in the UK, she emphasised the particularly severe impact of sanctions on her family life.
The judge acknowledged the difficulty of balancing these personal, concrete effects with the government’s important but less tangible foreign policy objective of deterring Russian aggression. The High Court nevertheless rejected Ms Khan’s challenge, upholding the government’s rationale for designating her while pointing to the availability of special licences from HM Treasury to mitigate the harsher impacts of sanctions.
Handed down just a week before the Court of Appeal’s dismissal of Shvidler and Naumenko’s challenges, this judgment confirms the high legal bar for those wanting to overturn sanctions. The outcome has boosted the government’s confidence in its sanctions strategy, with the Foreign Office saying it “welcomed the judgment and the message it sends about the strength of the UK sanctions regime”.
Who is Anzhelika Khan and why was she sanctioned?
Anzhelika Khan is a Russian-born former airline hostess who was designated by the UK on 21 April 2022 on the basis of her association with her husband, German Khan, who was sanctioned a month earlier.
German Khan is a Ukrainian-Russian oligarch who co-founded the lucrative Alfa Group, the Moscow-based conglomerate which controls the largest commercial bank and biggest food retailer in Russia. With an estimated total net worth of over $8 billion, he is known for his aggressive business tactics which has helped him rise from being window cleaner in Kiev to amassing a fortune through his shareholding in the TNK-BP joint venture that exploited Russia’s oil fields.
While Anzhelika Khan’s primary role is as caregiver to the couple’s four children, she also manages a number of properties as part of the substantial property portfolio the couple have amassed. They reportedly own several apartments in the affluent Belgravia district in London, including a house on Eaton Square bought for £62 million in 2008. According to evidence before the London court, German Khan’s “very substantial gifts” to his wife include shares in four properties.
Anzhelika Khan has lived in the UK since 2013 and became a British citizen in 2019.
Why does this case matter?
- This case illustrates the importance – and lawfulness – of adopting a network approach to sanctions which covers family members, associates and proxies rather than only the primary target. Given the common use of relatives, even young children, as well as trusted associates to hold or control assets on behalf of sanctioned individuals, there is a real risk that the impact of sanctions will be diluted without a strategy of targeting these broader networks.
- The case provides a rare insight into how oligarchs moved assets in anticipation of sanctions hitting them, acting more quickly than the UK government was able to respond in an attempt to put assets out of reach. The court observed that German Khan gave his wife “many very substantial gifts” over the years, but the “single largest gift to date” was made in March 2022 shortly before he was designated. The timing of this transfer highlights the risk that assets may slip through the net of sanctions, while also pointing to the ambiguity about the circumstances in which circumvention might be criminal. The case highlights that the private sector and enforcement authorities should be on high alert to circumvention strategies, including the sale of assets under value or suspicious activity suggesting assets might be intended for use in future sanctions evasion.
- The judgment raises probing questions about how courts should weigh up the personal, daily impact of sanctions on an individual against the important yet abstract foreign policy goal of deterring Russian aggression. The High Court judge expressed concern about “how two such different things can be weighed one against the other”. Ms Khan’s designation was nevertheless upheld, with the court accepting that individual sanctions contribute to a bigger overarching aim given the networked nature and cumulative effect of sanctions.
- Ms Khan’s challenge brought the purpose and efficacy of the sanctions licensing regime to the fore of the debate about the impact of sanctions. Licences are intended to mitigate the unintended consequences or disproportionate impacts of sanctions, but a severe backlog and inadequate scrutiny of licensing applications have undermined public confidence in HM Treasury’s licensing processes. Ms Khan has been granted no fewer than 18 licences and, while facing serious delays obtaining permissions for basic expenses, the judgment reveals that HM Treasury also authorised private school fees and personal staff. While HM Treasury has since tightened its policy and guidance, much more transparency is needed to foster public confidence that generous carve-outs are not undermining the impact of sanctions.
Further context: What the Khan case tells us about ‘Londongrad’
The UK has long been a magnet for kleptocratic wealth, with oligarchs purchasing high-end property, enjoying luxury lifestyles, sending their kids to private schools, and making donations to elite UK institutions. Far from discouraging this, the UK in fact rolled out the red carpet for dirty money through its lax investment visa scheme, with many Russians benefitting from these “golden visas” before the route was closed down in 2022.
The UK government is now having to work overtime to close the many doors ‘Londongrad’ previously held open for oligarch riches. This has required a networked approach to sanctions that aims to close the net around targets by designating their family members, proxies or close associates. Both the UK’s National Crime Agency and the multilateral Russian Elites, Proxies and Oligarchs (REPO) Task Force have issued warnings that specifically identify the role of these groups in circumvention.
There is still a long way to go in order to fully disable these enabling networks, but the court’s dismissal of Ms Khan’s sanctions challenge strengthens the UK government’s hand to pursue not just primary targets but also those close to them.
Details of the UK case
Ms Khan’s challenge took issue with her designation as a person “associated with” her sanctioned husband, asking how her individual designation was likely to dissuade Russia from destabilising Ukraine. She also raised human rights concerns about being targeted simply because she is the wife of a Russian oligarch, and the impact of sanctions not only on her property rights as a British citizen but also on her family life.
On 24 February 2024, the High Court dismissed her case in full in a judgment that underscores the government’s broad powers under the Russia sanctions regime.
In line with previous judicial decisions on sanctions challenges, the court accepted the government’s reasons for how individual designations are connected to the overarching objective of the sanctions regime. Far from being irrational, the court considered it “perfectly comprehensible that Ms Khan’s designation links to, and is capable of serving the statutory purpose in the ways identified” by the government. This included “sending a signal to Ms Khan and via her to the Government of Russia and the international community … that the UK does not accept acts which destabilise the Ukraine”.
While upholding the government’s exercise of its broad sanctions powers to designate Ms Khan, the judgment highlighted the “difficult” weighing up of personal, daily harm to families against broad foreign policy objectives. The court accepted that her designation caused “significant difficulty and disruption to Ms Khan’s life and that of her children”, describing these effects as “grave”. The High Court judge also grappled with the challenge of weighing up the important foreign policy objective of deterring Putin against the personal impact of sanctions on individuals and families, noting that this proportionality assessment “strays so far from any empirical measurement that it becomes difficult to comprehend”.
The government meanwhile pointed to the availability of special licences from HM Treasury as an “amelioration” to mitigate the harsher or unintended impacts of sanctions. Strongly contesting the effectiveness of this licensing regime, Ms Khan’s lawyer detailed the “lengthy and tortuous” exchanges involved in “dealing with the OFSI process and its sometimes Kafkaesque manifestations”. Ms Khan complained of delays and difficulties buying groceries, visiting her sick mother and obtaining treatment for one of her children facing serious mental health challenges.
Notwithstanding these complaints, the court noted that OFSI had already granted Ms Khan no fewer than 18 licenses in total – including payments for international flights, private school fees, sports activities and salaries for personal staff including security staff.
Finally, the court noted that sanctions are “designed as temporary both in intent and in operation” rather than entailing asset seizure. Although no insight was given into the government’s delisting policy, the court noted that “[i]t is contemplated that they will cease”.
Court documents
- Khan v Secretary of State for Foreign, Commonwealth, and Development Affairs [2024] EWHC 361 (Admin)
Further court documents can be requested by emailing info@spotlightcorruption.org.
