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A court in London agreed Monday to relax freezing orders on two bank accounts linked to a suspected Russian sanctions dodger to allow him to pay for certain living expenses and the maintenance of his multi-million pound country estate in Surrey.

Petr Aven, a dual Russian Latvian national designated by Britain and the EU over his ties to the Kremlin, and Stephen Gater, a director of several firms through which Aven manages his U.K. assets, petitioned Westminster Magistrates’ Court last month to vary the terms of two freezing orders obtained by the National Crime Agency in May. The NCA suspects Aven evaded sanctions in connection with several transactions involving two firms run by Gater.

The first, Ingliston Management Limited, functions as a “family office” that manages Aven’s financial affairs in Britain; the second, Lodge Security Team Limited, provides security for several high-value properties, including Ingliston House, the oligarch’s mansion in the Surrey countryside south of London. Both firms hold accounts at HSBC in London.

On Monday, District Judge John Zani amended the freezing orders to “dovetail” them with two licenses that the Office of Financial Sanctions Implementation, also known as OFSI, issued in April and June to permit Aven to pay for private school fees, other “basic needs,” and the security and upkeep of Ingliston House.

OFSI’s licences do not automatically oblige the court to release any portion of the £1.5 million restrained at HSBC, but sufficient “overlap” exists between the U.K. sanctions regime and the Proceeds of Crime Act to warrant relaxing the freezing orders, Zani ruled Monday.

The legislation permits targets of account freezing orders to apply to a court for one of several “exclusions” that would allow them to meet “reasonable” living expenses, conduct “any” business or profession or pay for “other things”—a broad category that, according to Zani’s ruling, could apply to the payments OFSI licensed.

Amending the orders “will not cause any undue prejudice to any future steps” the NCA may take to permanently seize assets, Zani ruled. “I am satisfied that the court has power to make an exclusion for all of the payments within the licenses.”

‘Very unusual’ transactions

The legal battle sheds new light on the NCA’s first publicly known investigation into sanctions violations, and potentially exposes inadequate cooperation between the agency and OFSI.

Westminster Magistrates’ Court heard that on March 3, three days after the EU blacklisted Aven, an Austrian company controlled by Wentworth Trust, a Cypriot entity beneficially owned by the Russian banker, wired £3.7 million to the account that Ingliston Management Limited held at HSBC in London.

On March 7, a week before Aven’s designation in Britain, HSBC froze a total of £1.5 million in Ingliston Management’s account and a second account held by Lodge Security Team, citing broader sanctions against Russia and the bank’s own belief that Aven controlled both.

“It is likely that, along with almost all other banks, HSBC became very cautious whenever money appeared to be linked with Russian oligarchs and submitted suspicious activity reports to the NCA,” Adrian Waterman QC, Gater’s attorney, told the court.

Aven and Gater applied for two specific licenses in April to allow the former to continue meeting some of his regular U.K. expenses through the HSBC accounts controlled by the latter. OFSI granted the licenses on April 27 and June 14 respectively, permitting Aven to spend £600,000 a year from the £1.5 million of frozen funds and replenish the accounts.

But the NCA effectively sidelined both licenses on May 6, when the agency successfully petitioned Reading Magistrates’ Court to freeze both accounts pursuant to the Proceeds of Crime Act.

Tim Akkouh QC, arguing for the NCA, told the court that on Feb. 28, the date of Aven’s designation by the EU, £1 million arrived in Gater’s personal account at U.K. digital lender Monzo followed by transfers to and from other entities he controlled in Britain, including £200,000 of payments to two car dealers.

The agency, which opposed revising the freezing orders out of concern that the funds in the accounts would dissipate, identified 10 violations tied to “very unusual” transactions and “money going round in a circle” in an apparent attempt to disguise its origin, Akkouh said.

“Our claim is not only that there were sanctions breaches, but that the funds came into the jurisdiction with the intention of being used to evade sanctions.”

Waterman, representing Gater, countered that the freezing orders obtained in Reading made no sense, given that the accounts had already been frozen by HSBC and were being closely monitored by the bank, the NCA and OFSI.

Moreover, OFSI by that point had already acknowledged the necessity of allowing certain payments to cover Aven and his family’s living expenses, he said.

Zani rejected Aven and Gater’s petition to scrap the freezing orders altogether on Monday, but noted that the NCA’s failure to inform Reading Magistrates’ Court of OFSI’s decision to license a limited set of payments was, “to say the least, regrettable.”

Aven headed Alfa Bank, Russia’s largest commercial lender, until March, when he resigned from the board of directors to help the lender avoid sanctions.

Helen Taylor, a researcher at U.K. advocacy group Spotlight on Corruption, told ACAMS moneylaundering.com in an email that Aven’s challenge—and the NCA’s ongoing effort to restrain his funds—mark “a crucial test” of Britain’s efforts to tackle sanctions evasion through criminal law.

“The case also raises serious concerns about the lack of transparency and the rationale for exemptions granted in the OFSI licencing regime,” Taylor wrote in an email. “Allowing a Russian oligarch to spend £600,000 per year from frozen funds on what most would consider luxury expenses suggests a soft touch during a cost-of-living crisis.”

Contact Koos Couvée at kcouvee@acams.org