MPs and anti-corruption campaigners have warned that the British government’s proposed ‘Magnitsky-style’ sanctions regime is not enough to tackle money laundering amid fears that Britain has become a ‘global hub for financial crime’.

On Monday, the UK imposed sanctions against 49 people and organisations accused of human rights abuses including those linked to the deaths of Russian lawyer Sergei Magnitsky, who died in police custody in Moscow in 2009, and Saudi journalist Jamal Khashoggi.

Foreign Secretary Dominic Raab said “if you’re a kleptocrat or an organised criminal you will not be able to launder your blood money in this country”.

While MPs and transparency experts welcomed the new powers, they said they fall short of what’s needed to tackle systemic financial crime.

Concerns have been raised that loopholes in British corporate governance are being used to wash dirty money through the international financial system.

Citing research by openDemocracy that found that more than 400,000 British companies do not declare who owns them, SNP MP Alyn Smith called on the foreign secretary in Parliament on Monday to detail the “financial transparency reform that we need in order to clean up the UK’s jurisdiction”.

Financial crime experts said that without wider financial reform, the new sanction regime will be ineffective in tackling money laundering. 

“This policy will achieve very little if it's not accompanied with proper transparency and robust enforcement of the laws we already have,” said Oliver Bullough, journalist and author of ‘Moneyland’.

“Without knowing who owns what and prosecutions of people who break the laws, this is a fine juicy cherry on a cake that doesn't exist.”

Rachel Davies, head of advocacy at Transparency International, said that the UK’s Magnitsky laws are more limited in scope than their US and Canadian equivalents.

“To realise the potential of sanctions to tackle kleptocrats and their associates, they need to be explicitly included within the scope of these measures. Unlike the US and Canada, the UK’s Magnitsky laws do not yet include Government sanctions against individuals for corruption,” she said. 

Britain has frequently been accused of facilitating corruption around the world through the City of London. 

“The Magnitsky sanctions are an important addition to the toolkit but we have got structural and systemic opacity in international tax which the UK is absolutely at the heart of,” SNP MP Alyn Smith told openDemocracy. 

“If we're serious about combating corruption and money laundering we need to recognise that it's the UK that for decades has facilitated and encouraged what Dominic Raab is saying he is against,” he added.

In 2013, then Prime Minister David Cameron, introduced a new rule requiring firms to name a “person of significant control”. However, an analysis of Britain’s corporate registry, Companies House, shows almost 10 per cent of UK firms still do not declare who their beneficiaries are.

openDemocracy also recently reported that over 700 British shell companies had been blacklisted in Ukraine for suspicious activity.

Such firms, often referred to as ‘offshores’, are commonly used to conceal ownership, avoid tax, make illicit payments and launder dirty money. 

Corporate entities from England and Scotland such as limited liability partnerships (LLPs) have been openly marketed as “tax-free offshore companies” in Ukraine and other parts of the former Soviet Union. 

LLPs were used to funnel at least £1.2 billion out of Ukraine to associates of the country’s disgraced former president Viktor Yanukovych.

This week, an investigation by openDemocracy also revealed that UK-regulated electronic money institutions, or EMIs, are being touted as a replacement for networks through which billions of dollars of dark money moved in and out of the former Soviet Union.

On Tuesday, the UK government announced that it is to resume arm sales to Saudi Arabia despite a review finding “isolated incidents” of human rights abuses.

The decision came after a day after twenty Saudi Arabian nationals were sanctioned for human rights abuses under the foreign secretary’s newly announced powers.