The Missing Pillar: Illicit Finance and War-Fighting Readiness

The Strategic Defence Review sets out an ambitious vision of “war-fighting readiness” delivered with “innovation at a wartime pace.” It commits the UK to new capabilities in cyber, missile defence, and a sharper focus on sub-threshold attacks. What it does not commit to – or even recognise within its own definition of sub-threshold action - is illicit finance.

Illicit finance has migrated, over the last decade, from the serious-organised-crime brief into the national security mainstream. The UK’s role in facilitating malign Russian corruption, the growth in hybrid-war awareness, and the full-scale invasion of Ukraine made that shift unavoidable. The next step is national defence and recognising this as a domain in which the UK should be capable of acting offensively itself.

A reactive posture, not a capability gap

The UK’s problem is not capability. We run one of Europe’s most active sanctions regimes, host exceptional financial depth across the City, the Overseas Territories and the Crown Dependencies, and operate one of the world’s most sophisticated cross-border enforcement networks. What we lack is the stance to put that capability to offensive use.

Defence planners often talk about effects on a 4D spectrum: deny, disrupt, degrade, destroy. The UK’s illicit-finance posture lives almost entirely in the first two boxes. We deny adversary access to our system through anti-money laundering regulations and we disrupt their flows once we see them. Degrade and destroy - the sustained, deliberate erosion of the financial spines that hostile state networks depend on – is not in our vocabulary.

A concept of ‘offensive illicit finance’ would mean the UK changing from only responding to an adversary’s action to proactively choosing what effect we want to have in an adversary’s financial architecture, identifying the appropriate nodes, and reaching for whichever lawful instrument fits. The asymmetry is not in our toolkit. It is that we have no posture in which the UK proactively creates financial problems for an adversary regime as a deliberate strategic act.

This is not how Russia operates. Russian doctrine - from the 2014 Military Doctrine through the 2023 Foreign Policy Concept - treats the financial system as terrain to be contested, with economic and financial security elevated to a national security domain in its own right. The UK treats the same terrain as a perimeter to be defended.

The cyber precedent

The UK has done this before. When the Government decided to compete in cyberspace rather than defend it, it built the National Cyber Force (NCF) around three published operational principles (accountable, precise, calibrated), and clear parliamentary oversight. The NCF’s premise was simple that the UK could not leave cyberspace an uncontested space where adversaries operated with impunity. Substitute “the international financial system” and the same sentence applies. The analogy is imperfect as finance carries different legal authorities and escalation dynamics, but the mentality shift is one the UK has already made and won.

Lawful action, not coercive chaos

A respectable objection is that “offensive illicit finance” is economic warfare under a different name. It is escalatory, norm-eroding, and at odds with the UK’s self-image. This domain is already contested whether we like it or not but we can still choose to act in line with our values. Three principles separate lawful disruption from lawlessness:

Authority. Russian financial coercion operates without meaningful parliamentary or judicial constraint while UK offensive action would operate under powers subject to parliamentary authority.

Oversight. Unlike our adversaries, UK actions are already subject to judicial review and Parliamentary scrutiny. This would equally apply for any offensive action.

Legitimacy. The state already develops tanks, drones and munitions whose explicit purpose is lethal effect. Declining to develop a lawful, non-lethal capability of strategic value is harder, not easier, to justify.

A second respectable objection is that this stance risks the UK losing both its leverage over adversaries and damaging a vital sector of the UK economy through militarisation. Both concerns can be managed by separating doctrine from deployment. The doctrine itself - principles, tiers of action, safeguards - could be public, transparent and parliamentary, which is how a democratic state secures the legitimacy and oversight of any new capability and how it reassures the City and its international partners that the instrument is bounded. Deployment, like the National Cyber Force, would in most cases be covert, used sparingly, and held in reserve for the moments that justify it.

The brass tacks

There is a spectrum of scenarios from competition to crisis to conflict where the Government could benefit from offensive options in illicit finance. These options can include but are certainly not limited to the following:

Proactively degrading the financial spines of adversary operational networks such as Russian corruption networks, covert funding of its intelligence networks, or sanctions-evasion procurement chains. This could be done in conjunction with international partners through a range of methods such as asset freezes, offensive cyber, and law-enforcement action against UK enablers.

Utilising financial intelligence as targeting data by converting the UK’s vast sources of financial intelligence into sources of targeting data for the military and intelligence communities.

Exposing adversaries through targeted information operations on their financial vulnerabilities. These exposures would be on our timing to erode trust within networks, expose enablers, or place pressure on a host jurisdiction.

Continuous mapping of adversary financial assets across the UK and its Overseas Territories and Crown Dependencies as a standing practice. This would position us ready at the moment of escalation rather than improvising under the conditions of it.

The case is not that the UK should deploy this capability offensively against Russia or any other adversary tomorrow. As with the rest of the UK’s military build-up. It is a question of readiness and that decision makers should be able to choose to deploy this capability at a time and place of our choosing to ensure maximum effect.

In defence terms, this is a cheap capability to develop and one where the UK enjoys asymmetrical advantage given the size of our financial services. Another advantage is the relative ease of building as most of the underlying architecture already exist such as the financial intelligence regime, the corporate transparency reforms of recent years, the offensive cyber remit under NCF. What is missing in these options is gateways between financial intelligence and military intelligence, a mentality shift in the civilian illicit finance infrastructure, and notably, full access to the beneficial ownership registers of the Overseas Territories and Crown Dependencies.

An opportunity for the UK

Internationally the space on ‘offensive illicit finance’ is open. The UK’s combination of convening power, geographic reach, financial depth, intelligence capability and post-Brexit autonomy makes it unusually placed to lead its allies on this. If 'war-fighting readiness' means anything, it means having capability developed, clear strategies, and authorities in place before the moment of need arrives. Illicit finance is the obvious gap in that readiness and closing it now while peacetime allows time for proper scrutiny, debate, and the careful drawing of progressive principles is manifestly better than improvising under wartime pressure.

Matthew McGlynn is an independent consultant specialising in Russia and illicit finance, following close to a decade of operational and policy experience in the UK Government. Matthew led the Home Office's work on international illicit finance for over five years including its work to tackle Russian illicit finance in the UK.

Image courtesy of Creative Commons.