The Cable

London Closes Financial Sanctions Loophole

Up until Friday, sanctioned oligarchs and despots could still send their money through banks in the U.K. Now, terrorist financiers and supporters of dictators on the U.K.'s "blacklist" will find it much harder to send money to London's financial center after the British government quietly clamped down last week, closing a hole in its sanctions policy that could have been exploited by people trying to get around asset freezes.

"It would be huge. The possibilities are limitless," said Thomas Crocker, a partner with law firm Alston & Bird.

Sanctioned people outside of Europe could still send money to people in Britain, until the government recently reversed course. The British Treasury announced last month that money sent to the U.K. from all blacklisted people around the globe would be frozen starting Aug. 1.

The change brings the U.K. more in line with U.S. policy, which doesn't allow blacklisted companies or people to send money to anyone in the United States without a special license from the Treasury Department. The U.K. will require a similar license now. But what has many sanctions experts and lawyers scratching their heads: Why did the British make such a loophole in the first place?

"They seem to distinguish between a designated person in the E.U. and outside the E.U. and I'm not sure why they would do that," Crocker said.

The difference in policy meant that until Friday, people and companies sanctioned by the European Union -- over anything from supporting al Qaeda to Russia's support of Ukrainian separatists -- could still send money to people in London, as long as they didn't do it from inside Europe.

The difference suggests that American and European policymakers were not coordinating as closely as they took pains to appear as they confront Moscow about its intrusions into Ukraine.

American companies could also have been disadvantaged because they are prohibited from doing business with or accepting payment from anyone on the U.S. list, while British companies were not under the same strictures.

The British Treasury and the British Embassy in Washington did not immediately respond to requests for comment. The U.S. Treasury Department's sanctions office also did not respond to requests for comment.

British lawyer Maya Lester first noticed the policy change and wrote about it on her European Sanctions blog.

Peter Macdiarmid/ Getty Images News

The Cable

With Confirmation of Captured Israeli Soldier's Death, Hope of a Cease-Fire Fades

This story has been updated.

Second Lt. Hadar Goldin, a 23-year-old Israeli soldier captured Friday in an ambush by Palestinian militants, is believed dead, bringing to three the number of Israeli soldiers killed in the attack and burying hopes of a swift cease-fire.

It remains unclear whether Palestinian militants killed Goldin or if he died during an Israeli bombardment carried out in retaliation for the attack on the Israeli unit. The Palestinian action scuttled a U.S.- and U.N.-brokered 72-hour cease-fire that promised the first significant respite from Israel's 26-day war against Hamas. The conflict's death toll is mounting: 1,700 Palestinians, mostly civilians; and 67 Israelis, mostly soldiers.

The Goldin episode dramatically altered the diplomatic landscape in Gaza and put prospects of a new cease-fire out of reach. With Israeli television showing Israeli tank units withdrawing from Gaza in an apparent wind down of the ground war, Israeli officials made clear on Saturday that they have no intention of participating in ongoing cease-fire talks in Cairo -- or of ending attacks on Hamas.

"We are currently not sending any representative to Cairo," Israeli cabinet member Yuval Steinitz said. "With [Hamas] there is no point in speaking about an agreement or a cease-fire because we have tried it to many times."

Israeli Prime Minister Benjamin Netanyahu piled on: "We promised to return the quiet to Israel's citizens and we will continue to act until that aim is achieved. We will take as much time as necessary, and will exert as much force as needed."

Goldin's capture elicited an almost reflexive emotional response from Israelis. A few years ago, Israel swapped 1,000 Palestinians for a single missing soldier, Gilad Shalit. Hamas would have expected similar far-reaching concessions this time around as well. But Goldin's apparent death spares the Israeli government from having to make such a tough decision and takes away a huge Hamas bargaining chip.

Now Hamas is on the defensive for violating the cease-fire. It also relieved political pressure on Israel, which was sharply criticized by the U.N. and the White House following reports that it shelled a U.N. shelter in Gaza on Wednesday, killing more than 16 civilians.

With the Israeli public strongly supporting military action in Gaza, Netanyahu's tough approach to the confrontation will only be strengthened by Hamas's cease-fire breach, giving the Israeli leader a freer hand to intensify military strikes.

After the cease-fire's collapse ignited renewed violence in Gaza throughout the weekend, U.S., U.N., and other international dignitaries cast blame squarely on Hamas.

"I have unequivocally condemned Hamas and other Palestinian factions that were responsible for killing two Israeli soldiers and abducting a third almost minutes after a cease-fire was announced," President Barack Obama said Friday at a White House news conference. "If they are serious about trying to resolve this situation, that soldier needs to be unconditionally released as soon as possible."

Obama also acknowledged that it would be "very hard to put a cease-fire together if Hamas can't follow through."

U.N. Secretary-General Ban Ki-moon made clear that although his organization had "no independent means to verify" what happened in Gaza, the blame likely rested at Hamas's feet. "The secretary-general condemns in the strongest terms the reported violation by Hamas of the mutually agreed humanitarian cease-fire," a statement from Ban's office read. "He is shocked and profoundly disappointed by these developments."

While much of the international community chided Hamas, Israel upped its offensive. Israeli forces bombarded the area around Rafah, the area where Goldin was captured during an operation to find and destroy Hamas's underground tunnels in the area. Palestinian health officials say that Israeli shelling in Rafah killed more than 70 Palestinian civilians. Hamas also carried out rocket attacks against Israel throughout the weekend.

Hamas's military wing, the Qassam Brigades, issued a statement on Friday denying that it breached the cease-fire. The group said it clashed with Israeli forces that advanced into eastern Rafah an hour before the cease-fire took effect.

"Until now, we have no idea about the disappearance of the Israeli soldier," the statement read. "We do not know his whereabouts or the conditions of his disappearance." Hamas said that it had lost touch with its "troops deployed in the ambush" of Goldin's unit. "Our account is that the soldier could have been kidnapped and killed together with our fighters."

During his Friday news conference, Obama said Hamas's violation of the cease-fire questions whether Hamas actually has control over Gaza's armed militants. "It's going to take some time" to repair the diplomatic damage, Obama told reporters.

Since fighting began on July 8, the United States, Israel, Egypt, Jordan, and Saudi Arabia have sought a cease-fire plan that would deny Hamas any political rewards for its military actions and strengthen the Palestinian Authority, which has little to show Palestinians after several months of fruitless U.S.-brokered negotiations with Israel.

Hamas has fired nearly 3,000 rockets at Israel in the current conflict and has mounted a series of cross-border raids on Israel through its vast underground tunnel network. Hamas's leaders say they will keep fighting until several of their demands are met, including opening border-crossing points into Egypt and Israel, and the release of Palestinian prisoners.

Israel is reportedly open to the idea of easing some restrictions on life in Gaza, but only if it is backed by a credible plan to disarm Palestinian militants and to restore control over Gaza to the Palestinian Authority.

"This complicates things because the stakes have been raised," Hussein Ibish, a senior fellow at the American Task Force on Palestine, said before Goldin was presumed dead. "One of the primary goals of Israel is to deny Hamas any kind of benefit. The capture of the soldier makes that more difficult because now they have an asset, this human being that Hamas can trade for tangible deliverables, like a prison swap."

Robert Danin, a former State Department official and a senior fellow at the Council on Foreign Relations, said he didn't know if Israel would have negotiated Goldin's release in the first place. Furthermore, Israeli troops were told to take exceptional steps to prevent one another's capture, even if it meant gravely wounding a fellow soldier, Danin said.

Israeli officials know they paid too high a price in the Shalit trade, which only increased Hamas's incentive for capturing more Israeli soldiers. They "are not necessarily going to play it the same way. They don't want to be in that situation" again.

What Israel will do, Danin said, is use military force: "They are going to pound Hamas.

"They feel they now have the moral high ground once again," he said. On Friday, "they were being condemned from the White House for hitting a U.N. school and today even the U.N. is quite strongly criticizing the Palestinians and criticizing Hamas. On the diplomatic level, and in the face of world public opinion, they must feel in a stronger position today." 

Jack Guez/ AFP/Getty Images