The UK's Putin-Shaped Blindspot

published on 08 March 2022

There is a gaping hole in UK sanctions against Russian individuals.

Boris Johnson claims 100 Russian oligarchs have had their UK Assets frozen.

This simply isn’t true.

Most of the Putin acolytes are not UK residents and, in all likelihood, do not have any directly-held UK assets.

The reason?

To avoid UK taxes as both non-resident / non-domiciles.

No doubt, there are some of these Oligarchs’ children and spouses who have UK Citizenship and are tax resident but non-domiciled.

But most of the afflicted assets, such as high-value properties in London may escape the sanctions.


Most clients investing in a UK Business or buying property here, will be advised to do so indirectly via a web of offshore companies.

On top of this, they will layer one or more offshore entities including:
1.      Trusts
2.      Foundations
3.      Hybrid Entities such as protected-cell companies and companies limited by guarantee
4.      A Private fund

So will these sanctions have any impact?

The answer lies in a document published by HM Treasury.
Specifically, Paragraph 4.1 deals with ownership and control.
In summary:

1.      If 50% or more of the shares or voting rights in an entity is held (directly or indirectly).
2.      The person has the right directly or indirectly to appoint or remove a majority of Directors.

The sanctions hit a snag in jurisdictions where the share register is not public; or they list one of the above entities owning the shares.  

There is no mention of at all of trusts.

What’s ironic is that trusts first originated in English law, separating legal title and beneficiaries.

In a Discretionary Trust no beneficiary has any fixed entitlement or right.
A Beneficiary does not usually control a Trust.

Therefore, the likelihood of anyone having anything but directly-held UK assets frozen is fairly remote!

Sadly, Russians who have adopted good tax planning when acquiring UK assets are not going to be troubled by these sanctions. 

The Treasury must urgently alter their definitions of entities to affect the henchmen of the brutal Putin regime! Rishi Sunak

Source: Chatham House
Source: Chatham House


This explained why so few Oligarchs have been sanctioned in the UK!
The Economic Crime (Transparency and Enforcement) bill currently being debated in parliament today, is still toothless!

The first part dedicated to forcing overseas entities holding UK property to disclose their beneficial owners.
It does NOT include trusts in it's definition of entities!

These are defined solely in relation to the second part of the act for Unexplained Wealth Orders .

However, only 10 have ever been made and they can be challenged in Court!


The new rules as drafted, remain weak and ineffective.

Unlikely to effect Oligarchs, who will be able to hide behind trusts and other hybrid vehicles.

There may well be lengthy litigation in relation to any new Unexplained Wealth Orders

That is unlikely to yield much either.

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