Mike Miller, Economic Crime Manager for ICAEW, told MPs on the Treasury Committee that while Russian sanctions have been successful in removing Kremlin-linked money from the City of London, they have been less effective in the longer term in reducing Russia’s ability to wage war.

“There are certainly effective sanctions in terms of limiting components, but as we've already discussed, there are ways around that. Now the EU in its current sanctions package is looking at ways to potentially put more liability on manufacturers for if their product ended up in Russia despite going through other third countries. It’s changed the UK approach a lot, and I think it’s changed the western approach a lot to Russia, but it’s also forced other geopolitical shifts.”

He added: “Sanctions are a good tool in the short term, but if you leave them there for a long time, then people find a way to adapt.”

Miller explained that ICAEW saw a lot of divestment from clients among the membership with many taking an overtly risk-averse approach due to the legislation being originally difficult to interpret. “Some of the guidance was a little bit challenging and a lot of the feedback was to seek legal advice. I think people took the lowest common denominator of essentially trying to get rid of any clients associated with Russia that could affect their business.”

Clarity was required around the intention of the sanctions, Miller said: what are they actually there for and how best to apply them with practical guidance. A lot of accountancy firms are very small; they probably don’t have exposure to this, but they still need to do their client due diligence. They still want to adhere to the sanctions. A lot of them are perhaps more concerned than they would be because they read the legislation and don’t really know how to adapt to it.”

When asked about the possibility of seizing frozen Russian assets, Miller said it was important to be wary of unintended consequences: “We’ve built what is the international rule-based order on following the norms of international law. And if we break that, I think there is a question about the knock-on effect,” he said. 

Neil Whiley, Director of Sanctions at UK Finance, also told the committee that there was an imbalance on spending on financial crime and the results: “The [banking] industry spends £34.2bn a year to fight financial crime. That is apparently 75% of the Department of Defence budget in the UK,” he said. “It’s a staggering amount of money, and you would expect a much bigger result.”

Whiley agreed that the government was not being clear when it came to sanctions designations: “When we approach the government for clarification, quite often the response we get is to seek legal advice. And I know that when we seek legal advice, we will speak to three different law firms because we want to make sure that we’re getting a good spread of legal advice. They’ll come back with three different answers.”