Life under UK sanctions: Chauffeurs, chefs and $1.3 million allowances

LONDON – The British government has allowed Russian oligarchs to spend hundreds of thousands of dollars on perks like private chefs, chauffeurs and housekeepers, despite ostensibly having their bank accounts frozen, documents show.

The exemptions, known as licences, are an example of how Britain’s new financial sanctions system, put together after Brexit, has proved shaky.

In some cases, oligarchs were allowed more than US$1 million (S$1.3 million) a year in living expenses. In others, officials had to abandon criminal investigations and remove sanctions after legal battles.

“We will keep increasing the pressure on Putin and cut off funding for the Russian war machine,” the then British Foreign Secretary Liz Truss said in March 2022 as she announced Russian sanctions in the

first weeks of the war in Ukraine.

In the months that followed, Britain was quietly more welcoming. It granted

Russian banking tycoon Mikhail Fridman

a licence to pay for 19 staff, including drivers, private chefs, housekeepers and handymen, during the first year of the war, according to documents reviewed by The New York Times and people directly familiar with the licences.

The payment came to £300,000 (S$510,000) over about 10 months. Mr Fridman also received a roughly £7,000 monthly allowance to cover his family’s basic needs.

Officials permitted his former business partner Petr Aven a monthly allowance of £60,000. The majority went to a security company owned by Mr Aven’s financial manager, who has been under investigation for potentially helping Mr Aven evade sanctions, court records show.

It is unclear what checks the government carried out before approving the transactions.

Mr Fridman and Mr Aven are described by the British government as “pro-Kremlin oligarchs” who are closely associated with Russian President Vladimir Putin, an allegation they both deny and are challenging in court.

“We are politically neutral businessmen. That is all,” said Mr Aven, reached by phone in the Hamptons.

The former business partners are among several Russians who have had

sanctions imposed in public since the war,

only to see those restrictions eased in secret. The British Treasury granted at least 82 licences in 2022 and many more applications are pending, according to official figures seen by the Times.

Law enforcement agents, who deal with potential criminal breaches of the financial blacklist, have at times been frustrated with those decisions and by a licensing system that they see as undermining the sanctions.

Treasury officials allowed Mr Aven, for example, to spend more than £1 million while technically cut off from the British economy. At the same time, law enforcement officers investigated him for possible sanctions evasion and raided his countryside mansion in 2022.

Some of the people who described details about the licences did so on condition of anonymity because the matters are confidential.

A spokesman for the British Treasury declined to comment on specific cases, but said licences were granted to allow payments for “basic needs” and are “strictly monitored”. A National Crime Agency spokesman said it would not be appropriate to comment because it is investigating Mr Aven and Mr Fridman.

Licences are part of sanctions systems across the world, including in the United States. But while Washington typically grants licences for humanitarian reasons or to cover basic living expenses and legal fees, Britain’s criteria are broader.

Among the considerations, according to interviews with lawyers and former Treasury officials, is whether a licence will keep money flowing into the economy. A recent government report says that licences are “issued to protect individual and UK business needs”.

The Russian sanctions were the first high-profile challenge for a new, untested sanctions system set up in 2021 following Britain’s departure from the European Union. More than a year later, the government’s ambitious pledges have proved challenging to meet.

Just as politicians overpromised, financial investigators at times overreached. The National Crime Agency sent around 50 officers to raid Mr Fridman’s mansion in 2022 and announced an investigation into fraud, perjury and money laundering. In 2023, it dropped all but the money laundering inquiry.

Last week, following a legal fight, the British government was forced to remove Russian businessman Oleg Tinkov from the sanctions blacklist. Mr Tinkov argued he was wrongly included: He is an outspoken critic of Mr Putin and has renounced his Russian citizenship.

Mr Fridman’s lawyers argued in one of Britain’s highest courts on Thursday that the search warrant was unlawful. It did not specify the correct date and relied on inaccurate information gathered as part of a smear campaign, they argued.

Several other Russian tycoons will take to court in coming weeks to argue, like him, that they have been unfairly targeted simply for being Russian. The government is yet to approve a licence, applied for six months ago, allowing Mr Fridman to pay for legal representation in these proceedings.

Mr Fridman is also expected to argue in a later case for the right to keep his household staff, which the government allowed him to maintain during the first 10 months of the war.

As in Mr Aven’s case, the National Crime Agency raided Mr Fridman’s mansion on suspicion of money laundering. After that, the government denied his request to maintain his staff.

The licensing figures highlight a persistent tension as the government joins with the United States and Europe to freeze the assets of Kremlin-connected oligarchs.

Britain has been a safe haven for Russian wealth for decades. The anti-corruption group Transparency International estimates that Russians accused of financial crimes or linked to the Kremlin own £1.5 billion worth of British property.

Sanctions against these Russians might send a message to Moscow, but they hurt British businesses, too. Law firms, accountants, real estate agents, art dealers and many others have benefited as Russian money flowed through a capital that has been derisively nicknamed Londongrad.

So while Britain has all but declared the end to the Londongrad era, oligarchs are finding ways to keep the country open for their business.

“It’s an indication of why this country has been so bad at curbing dirty Russian money,” said Mr William F. Browder, a former major investor in Russia who has led a years-long human rights campaign against Mr Putin.

“There seem to be loopholes everywhere you look, and here is the government giving oligarchs its full support to get around its own sanctions.”

Before 2016, sanctions compliance in Britain was mostly left to the European Union. After Brexit, the government established an Office for Financial Sanctions Implementation, with a team of about 45, to help businesses comply. Russia’s invasion catapulted it to political prominence, and the team has since grown to about 100.

Licensing can save taxpayers money, because once the authorities seize an asset, they are responsible for its upkeep. Yachts and mansions carry eye-watering maintenance costs, and a licence can keep the target of the sanctions paying for commitments that could otherwise fall to the state.

That would not explain exemptions allowing people to keep their chauffeurs and chefs. NYTIMES