Life Under U.K. Sanctions: Chauffeurs, Chefs and $1 Million Allowances

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 licenses, are an example of how the United Kingdom’s new financial sanctions system, put together after Brexit, has proved shaky. In some cases, oligarchs were allowed more than $1 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 British foreign secretary said last spring 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 the Russian banking tycoon Mikhail Fridman a license to pay for 19 members of 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 licenses. The payment came to 300,000 pounds (almost $400,000) over about ten 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 the Russian president, Vladimir V. Putin, an allegation they both deny and are challenging in court. “We are politically neutral businessman. 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 licenses last year and many more applications are pending, according to official figures seen by The New York 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 last year.

Some of the people who described details about the licenses did so on condition of anonymity because the matters are confidential. A spokesman for the U.K. Treasury declined to comment on specific cases but said licenses 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.

Licenses are part of sanctions systems across the world, including in the United States. But while Washington typically grants licenses 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 license will keep money flowing into the economy. A recent government report says that licenses are “issued to protect individual and U.K. 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 over-promised, financial investigators at times overreached. The National Crime Agency sent around 50 officers to raid Mr. Fridman’s mansion last year and announced an investigation into fraud, perjury and money laundering. This spring, it dropped all but the money laundering inquiry.

Last week, following a legal fight, the British government was forced to remove the 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.

On Thursday, Mr. Fridman will appear in one of Britain’s highest courts to challenge the measures against him. 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 license, 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 Mr. Fridman’s 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 anticorruption 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 William F. Browder, a former major investor in Russia who has led a yearslong 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.”

This tension is not unique to Britain. Belgium, for example, lobbied to allow its diamond industry to keep selling to Russians without violating European Union sanctions.

The Telegraph in London was the first to report details of Mr. Aven’s license and his monthly allowance. Documents obtained by The Times add new details to that report, including that more than two-thirds of his allowance, about £45,000, went to a security firm owned by his financial manager, Stephen Gater.

Mr. Gater himself has been under scrutiny by the National Crime Agency, which suspects him of helping Mr. Aven evade sanctions. Neither has been charged. The agency froze accounts connected to Mr. Gater last spring. HSBC, which held the accounts, believed that they were “ultimately funded and controlled” by Mr. Aven, according to court documents.

The Times is the first newspaper to detail the lavish spending permitted by Mr. Fridman’s licenses, as well as the national licensing data. The British government denied requests from The Times for information on who received licenses, for how much money, and why. A Labour lawmaker, Stephen Kinnock, obtained some records through Parliament and shared them with The Times.

The figures show that, in the year before the war in Ukraine, the government received 11 license applications related to Russian sanctions and approved nine. Since the war, the number of applications has surged to just over 1,000. By the end of last year, the government had approved 82, with many awaiting a decision. It was not clear how many were rejected, so it was impossible to calculate an approval rate.

Comparable numbers in the United States were not immediately available but, as in Britain, applications for licenses have spiked in the past year, a senior U.S. Treasury official said. Washington has received thousands of requests and has approved around 17 percent, the official said.

“U.S. licenses are very specific. They would never do what the U.K. does with letting people just get access to big swathes of money for broad needs,” said David Slim, an international lawyer who has worked on American and British sanctions cases.

But Britain is home to many more blacklisted Russians than the United States, and they represent a larger share of the economy. “It is in the best interests of the U.K. to be more lenient with the people who have invested billions and billions of dollars,” Mr. Slim said.

Some of those people, like Mr. Fridman, are angry that Britain so readily accepted their billions, then turned its back on them. He and Mr. Aven founded one of Russia’s largest private banks, Alfa Bank. The two have undoubtedly profited from the bank’s relationship with the Russian state. But the Ukrainian-born Mr. Fridman has not lived in Russia since moving to Britain in 2015.

The United States has not followed Britain and the European Union in placing sanctions on either man but has imposed light restrictions on Alfa Bank.

Before 2016, sanctions compliance in Britain was mostly left to the European Union. After Brexit, the government established an Office of 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 license 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.