Russian sanctions busting linked to British Overseas Territories

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Companies registered in the British Overseas Territories exported $134mn worth of goods to Russia in 2024 in an apparent breach of UK sanctions, according to FT analysis of Russian filings.

The UK’s Russia sanctions legislation, which has been extended to the territories, bars companies and individuals from enabling Russia to obtain military, dual-use or luxury items, as part of British efforts to deny the Kremlin’s war machine access to high-end technology and increase pressure within the economy.  

However, a lack of open ownership records in the Overseas Territories complicates efforts to establish who is involved in such shipments. Russian documents suggest that a large volume of controlled exports are being organised via opaque entities in the British Virgin Islands, in particular.

According to FT analysis of Russian documents, the bulk of the 2024 shipments were made by Rise International Group, which shipped $119mn of consumer electronics covered by UK controls, while giving its address as that of a BVI fiduciary business.

The ownership and officers of the company, which does a lot of business around China, are not known; the FT has contacted the agent that runs the address it uses to request comment. 

The Rise case is typical of how shipments via the overseas territories tend to occur. The BVI entity is listed on Russian paperwork as the exporter of the goods, giving an address in Road Town, the capital of the territory. The goods were, however, physically shipped into Russia from China. 

The FT also identified a separate case in 2023 of shipments worth $2.3mn made via the BVI to SMT-iLogic, which the US sanctioned last year, calling it a “large-scale procurement network to obtain foreign-origin technology for the . . . manufacture of Orlan drones”.

David Lammy, UK foreign secretary since July’s general election, stated while in opposition that “fighting kleptocracy will be a focus of the next Labour Foreign Office”, and focused particular attention on the Overseas Territories.

“It is clear the previous government did not make this a priority,” said a Labour source. “We are doing just that.”

The findings shed a light on weaknesses within the UK’s policy to choke off Russia’s supply of critical technologies used by the country’s military industrial complex in the wake of its 2022 full-scale invasion of Ukraine. 

According to a new report by the Transparency International Russia campaign group, Russia last year received about $350,000 worth of monolithic integrated circuits — a critical component for the country’s military infrastructure — from one firm registered to a PO box in Tortola, BVI. 

But campaigners note that these secretive jurisdictions cause wider problems. “We know that a large number of companies registered in the BVI have earlier been involved in money laundering schemes,” said Vladislav Netyaev, researcher at TI Russia and author of the report.

“We see them act as intermediaries, but we know close to nothing about the final beneficiaries.” 

Earlier this week, members of the UK parliament called on Lammy to press ahead with the establishment of public registers of beneficial ownership in the territories and dependencies. The annual Joint Ministerial Council, where UK ministers meet their counterparts from the overseas territories, will take place this week. 

“Put simply, we need public registers so we can follow the money to identify potential wrongdoing,” said the letter signed by 41 UK MPs. “These registers are critical to identify and stop the flow of dirty money which harms the UK economy and that of our allies.” 

The UK parliament in 2018 voted to make the ownership records public, and gave the Cayman Islands and the BVI a target deadline of December 2023, which they did not meet. 

“The British Virgin Islands as a jurisdiction does not tolerate money laundering, tax evasion, or any form of illicit financial activities,” said BVI premier and minister of financial services Natalio D Wheatley.

“Where we identify, or are made aware of financial crime, we will continue to act decisively and support the UK and our partners.”

TI Russia analysis of trade data has also pointed to a number of “red flags” in shipments to the UK, with some records missing important data or displaying large rounded numbers for the prices and weight of goods. 

For example, one Russian company made seven separate shipments of jet fuel and protective drying fluid to the UK in 2022, all of which both weighed 15mn kilogrammes and cost $15mn. 

The TI Russia report also highlights that the use of shell companies to enable sanctions breaches in the UK are not limited to the overseas territories: “Firms with mass registrars and office addresses in London and Edinburgh are also used for trade deliveries to Russia.”

These firms “have among their general and limited partners persons involved in previous money laundering schemes”.

Stephen Doughty, minister for the Overseas Territories, said: “We have convened ministers from across government, launched a full review of enforcement, and have been supporting the Overseas Territories to investigate and act on any evidence of possible sanction breaches.

“Those enabling any such actions should be on clear notice — we will not hesitate to act.”