While most analyses of the newly published Integrated Review refresh (IR2023) – which sets out the UK’s overarching national security and international strategy – have focused on defence spending and dealing with China, the document also features crucial points on tackling corruption.
In particular, the IR2023 commits to “scaling up” the investigation and prosecution of corruption at home and abroad and – in a significant and welcome departure from the IR2021 – recognises the need to strengthen the UK’s own institutional integrity. It also includes the first mention of “kleptocrats” in a national security strategy. Finally, the IR2023 announces the creation of a new “Economic Deterrence Initiative” to improve sanctions implementation and enforcement.
Investigating and prosecuting corruption
First, the IR2023 previews the forthcoming Anti-Corruption Strategy’s goal to end the UK’s role as a money laundering hub for corrupt elites. As part of this, it commits to increase law enforcement capabilities – singling out the new Combatting Kleptocracy Cell (CKC) in the National Crime Agency – “to detect, investigate and prosecute corruption both domestically and internationally”.
The alarming lack of transparency to date around the CKC’s budget, and whether it is being funded on a multi-year basis, will make it hard to monitor whether this commitment is being fulfilled.
UK law enforcement has been long starved of resources, and needs a major uplift if the UK is serious about tackling corruption and economic crime. The lack of funding for fighting economic crime – equal to about 0.042% of GDP – contrasts starkly with commitments in the new IR2023 to increase defence spending to 2.2% of GDP this year, with aspirations to reach 2.5% over time.
With economic crime costing the UK the equivalent of 14.5% to 17.5% in annual GDP, resourcing must match the scale of the problem. There is a clear solution: reinvesting receipts from economic crime enforcement activity back into the economic crime fighting agencies.
As our report last year showed, reinvesting funds raised by these agencies between 2016-2021 would have nearly doubled agencies’ existing annual budgets.
Strengthening the UK’s institutional integrity
Second, the UK can’t tackle corruption and illicit finance on the global stage without getting its own house in order. So it is positive to see the IR2023 reflect that the new Anti-Corruption Strategy – due for publication this Spring – will “assess the resilience of our democratic institutions to corruption” in order to “strengthen the UK’s institutional integrity”.
We need to see this commitment further developed in the upcoming Strategy so that it includes clear action on improving regulation of UK politicians’ ethical standards, from lobbying to conflicts of interest.
It is worth noting that the government has yet to commit to implementing the raft of recommendations made well over two years ago in reviews into lobbying and public standards by Sir Nigel Boardman and the Committee for Standards in Public Life, to which a response is long overdue.
Another key measure the government could commit to if it really means business is to introduce much clearer rules for political parties to prevent dirty money tainting our democracy. A modest first step in this direction would be to accept an amendment Peers voted through earlier this month, which would require political parties to ensure they do not accept donations from foreign powers or their intermediaries.
Beefing up sanctions implementation and enforcement
Finally, the IR2023 announced the creation of a new “Economic Deterrence Initiative” (EDI) that commits, among several other things, to improving sanctions implementation and enforcement. With “up to” £50 million being spent on the EDI over two years, it’s unclear how exactly this money will be allocated.
There is no doubt that the UK needs to up its game on both sanctions implementation and enforcement. The IR2021 committed to the introduction of a specific anti-corruption sanctions regime, but that regime, introduced in April 2021, remains woefully underused. The UK has just 35 individuals on its list, compared to over 300 sanctioned by the US for corruption.
The UK has been otherwise and rightly occupied over the past year with imposing sanctions on Russia. But there are real questions over whether these sanctions – which the government says are “the most severe…ever imposed” – are being undermined by a lack of real enforcement and serious loopholes. For example, there have been no civil fines issued since Russia’s full scale Ukraine invasion began, and no criminal convictions for sanctions evasion.
The government says the CKC has secured nearly 100 “disruptions” against “Putin-linked elites and their enablers”, with a third classed as “major”. In addition, 42% of these 100 disruptions relate to the freezing of funds, and a quarter of that to civil recovery provisions – so we can estimate that the number of account freezing orders (which the government says it has made as part of these disruptions) amounts to around 10.
To compare, since February 2022 France has initiated 17 criminal investigations into Russian-related money laundering (though it’s unclear how many have sanctions evasion as the predicate offence), the Netherlands has started 45 criminal investigations into evasion of sanctions on Russia, and the US has indicted over 30 individuals and two corporate entities accused of sanctions evasion and related crimes.
Meanwhile, the UK government has declined to tell MPs how many Russia sanctions related investigations it has started due to “operational security”. This means that the public and Parliament itself are unable to hold the government to account, as MPs pointed out in a debate yesterday. Unless the government starts to get a lot more transparent about its sanctions-related enforcement (and how it funds it), this will remain the case.
There are also serious questions over the implementation of UK financial sanctions on Russia. These include generous carve outs, such as through the General Licence for legal fees, which risk rendering sanctions toothless (also highlighted by MPs in yesterday’s debate); the failure to sanction networks of associated people and relatives; and the fact that the UK has far fewer entities than the US does on its Russia sanctions list.
Additionally, despite language about cooperating with allies, the UK is still failing to do joint designations simultaneously with its allies to prevent money being moved into safe jurisdictions before sanctions are imposed.
To sum up…
IR2023’s anti-corruption commitments are welcome, but could go further and will depend on strong ministerial backing, detailed policy work and, of course, serious funding for law enforcement. We look forward to seeing these commitments developed and expanded upon in the upcoming Anti-Corruption Strategy and Economic Crime Plan.