Shortly after the start of Russia’s full-scale invasion of Ukraine in February 2022, Australia, Canada, France, Germany, Italy, Canada, France, Japan , the United Kingdom, the United States and the European Commission have launched a program of coordination and information sharing in the application of the pressure of sanctions on Russia. The group, dubbed the Russian Elite, Intermediaries and Oligarchs (REPO), included representatives from the finance, justice and interior ministries.
To bolster compliance with sanctions measures, in March 2022, the U.S. Department of Justice created the KleptoCapture Interagency Group, which, in addition to the Justice Department, included representatives from the FBI, tax services, immigration and customs. The main purpose of the group was to enforce far-reaching sanctions, export controls, and economic countermeasures imposed by the United States and its allies.
The sanctions imposed on Russia in response to its aggression in Ukraine have already affected more than 5,000 Russian legal and natural persons who have profited from their illegal cooperation with the Russian government and the invasion of Ukraine. However, various tricks and financial intermediaries around the world help Russia evade these sanctions and circumvent many of them.
To help private companies and banks identify these methods, the US government has issued a clarification detailing the means and types of sanctions evasion.
Methods discussed include the use of family members and close associates to ensure continued access and control over assets, the establishment of complex ownership structures, and the transfer of assets and funds to countries that have not joined the sanctions. against Russia, including the United Arab Emirates, Turkey, China, Brazil and India.
Identifying complex sanctions-busting schemes is associated with certain challenges and risks. What private companies and banks need to pay attention to to detect sanctions evasion and protect themselves in doing so, explained sanctions experts from the US Department of Justice, Treasury and Commerce before the Atlantic Council.
According to Scott Anderson, a security expert at the US Department of Commerce, the main task for companies is to observe basic “due diligence”, especially when dealing with new customers.
“If you’re dealing with a company that wants to buy high-tech (goods) from you and they don’t even have a website, that’s definitely a red flag. If you were approached with an offer of cooperation by a company that didn’t exist before February 24, 2022, that could be another pretty big red flag,” he said.
The deputy director of the KleptoCapture group, representative of the US Department of Justice David Lim notes that the classic ways of circumventing sanctions by US departments have been known for a long time. “What we are doing here is nothing new. Export control and the application of economic sanctions are activities in which the Department of Justice has historically been involved for a long time. We are simply raising the level at which we focus on this issue, covering disparate structures or involving regulators at an earlier stage.
According to the expert, the most important task at this stage is to inform private companies around the world, helping them to identify and stop cases of circumvention of sanctions.
Lim noted that this work is particularly active in “difficult” regions in terms of export controls. “We’re looking at Central Asia, the Caucasus, some countries in the Middle East – those are countries where we’re really trying to raise awareness, trying to help them come to the conclusions that we’ve come to,” Lim said, pointing out that Over the last few months, a lot of time and effort has gone into traveling to these regions.
For most companies and financial institutions, this is a new area of work, according to Seth Bridge, coordinator of the US Treasury Sanctions Group, but it has helped strengthen public-private partnerships and broaden the dialogue between financial institutions and the government.
“In this sense, we are at a new frontier, and I think it is high time to do so,” he said, adding that unprecedented cooperation between different departments, as well as interaction with private companies, have already yielded tangible results. “By March, when we announced the creation of REPO, member countries had frozen over $58 billion in Russian assets.” He also added that the work of the group continues and focuses not only on compliance with sanctions, but also on making additions to the legislation as new loopholes are discovered.
“REPO’s work covers a wide range of issues, from operational cooperation in law enforcement, freezing and seizure of luxury real estate, to working on legal frameworks to extend or properly size existing frameworks to freezing and seizure of assets,” Bridge said.
According to David Lim, all funds confiscated from Russian oligarchs and their intermediaries should ultimately be sent to Ukraine. He noted that at present, the confiscated funds amounting to 5.4 million dollars have already been transferred and expressed the hope that these money transfers will become regular.
“From the very beginning, when we sought to confiscate important assets such as yachts or real estate, the goal was always to find a way to legally transfer these assets to the Ukrainian people. They have a long road to recovery ahead of them. A significant amount of resources will be required, and if we can make a small contribution, we will certainly strive to do so,” said David Lim.
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