The idea looks morally superior, intellectually impeccable and financially astute: impose "costs" on Russia for its military takeover of Crimea by freezing assets that Russian officials own in the West. But if and when the United States and Europe ever decide to slap Moscow with economic sanctions, they will face reality. An asset freeze is impossible to implement legally and fairly. It would also backfire. And, it would be a distraction from the real problem: the long-standing eagerness of Western banks - and the City of London - to accept shady money from Russia.
The main question is who to punish. Under a rule-of-law - the sort that Western governments and investors rightly urge Russia to adopt - there is no such thing as collective guilt. The issue recently appeared in Ukraine. It was one thing to freeze the assets of deposed leader Viktor Yanukovich and his immediate family, as countries, including Switzerland, have already done. Another to decide which of the Ukrainian oligarchs, always quick to switch allegiances, should also be held responsible.
A suggestion after Crimea has been to freeze the assets of Russian government officials - cabinet ministers and members of the parliament that approved Vladimir Putin's request for military options in Ukraine. But since a Putin edict prohibiting ministers and civil servants from holding assets abroad, much of the money has been siphoned off into front companies. Tracing it will require high-level financial forensics - and generate endless lawsuits.
Finally, a blanket asset freeze will trigger reprisals and much collateral damage among the companies with a significant presence in Russia.
The real question is not how to freeze the money but why it is there in the first place. For the past 20 years European banks have been chasing Russian wealth without being too demanding on its origin - be it corruption or the looting of resources. Regulators and leaders can push banks to be tougher on suspected money-laundering and other misdeeds. In Britain, in particular, that would improve the integrity of the financial and legal systems and cut London's interdependence with Moscow. In turn, Europe would have more freedom of movement the next time Russia goes rogue. That's where the crackdown should start.
