‘Soundbite policy’ on Russian bank accounts fails in the real world

A ban on all Russian citizens holding more than £50,000 in British bank accounts has not been imposed six months after it was proposed.

It was part of a package of financial measures drawn up by the Foreign Office under Liz Truss in February on the day Russia invaded Ukraine. At the time the banking industry warned privately that such a wide-ranging sanction was impracticable and would not hurt President Putin’s regime.

It is understood that the Foreign Office is still exploring the policy but a City source said: “It’s such a badly thought through bit of soundbite politics that doesn’t work in the real world.”

London became a magnet for Russian money after the fall of the Soviet Union and the rise of Putin; some of the money is believed to have been looted through the privatisation of state-owned industries in a process that created Russia’s oligarchs.

Britain did little to stanch the flow of cash into the UK until Russia declared war on Ukraine. The outbreak of war prompted the government to set out what Truss, the frontrunner to become the next prime minister, described on February 24 as an “unprecedented package of measures” aimed at inflicting “devastating economic pain on Putin and Russia”.

The move raised questions for banks, including how they should treat Russians with multiple accounts or joint accounts with people of other nationalities. Bank IT systems are not set up for such a ban, which means they would need to spend huge sums on overhauls.

There are also worries that it would contravene equality legislation. City experts said a blanket limit would have widespread consequences and that rather than hurting oligarchs it would affect ordinary Russians in the UK who might have sold a house, or students with large sums for their university fees.

The Foreign Office declined to comment.