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Demo requestOn February 24th, Russian forces crossed Ukraine’s borders, with attacks reported across the country. While President Putin has claimed Russia does not intend to occupy the country, Ukraine has called the attack “a full-scale invasion.” Ukrainian President Volodymyr Zelensky has imposed martial law across the country, and barred males aged 18-60 are also barred from leaving.
On Sunday February 27th President Putin placed Russia’s nuclear deterrent forces on high alert, condemning “aggressive statements” from NATO.
While peace talks are ongoing between the two sides in Belarus, there are few signs of a significant breakthrough so far.
The three main sanctions regimes targeting Russia so far are the United States, European Union & the United Kingdom. Continue below for more in-depth details of what these sanctions are and how they affect your organization.
Announcing tough new sanctions on Wednesday, February 24th President Biden pledged, according to the Wall Street Journal, to make Vladimir Putin “an international pariah.” Taken together, the Office of Foreign Assets Control (OFAC) says the actions target 80% of Russia’s banking assets.
The measures announced include:
The individuals listed include:
In his March 2nd State of the Union address, President Biden announced that the US Department of Justice is building a task force “to go after the crimes of Russian oligarchs.” Biden specifically called out the seizure of apartments, yachts and private jets.
The president also confirmed the US would close its airspace to all Russian flights.
Alluding to additional measures, Biden said Putin “has no idea what’s coming.”
On Tuesday, March 8th President Biden announced a US ban on imported Russian oil. Europe’s greater reliance on Russian energy imports makes this one potential area of action against Russia where Western powers won’t be fully aligned. The UK, however, has pledged to phase out Russian oil imports by the end of 2022.
On April 7th, these measures were further codified with Congress overwhelmingly approving a bill to ban imports of oil, gas, coal and other energy products from Russia.
As the conflict in Ukraine continues, US enforcement bodies are increasingly turning their attention to enforcing the extensive sanctions that have been imposed. On March 31st, OFAC designated 21 entities and 13 individuals as part of a crackdown on Kremlin illicit procurement networks and tech companies helping to fuel the conflict by evading US sanctions. OFAC focused heavily on technology companies alongside a renewed drive against cyber actors, including TsNIIKhM, which was involved in a 2017 cyberattack on a Middle Eastern petrochemical facility.
European Commission President Ursula von der Leyen has said EU sanctions “will target the strategic sectors of the Russian economy by blocking the access to technologies and markets that are key for Russia.”
Specific measures announced include:
On February 24th, the EU also agreed on further sanctions targeting Russia’s financial, energy and transportation sectors. Export controls and financing, visa restrictions and additional sanctions against Russian individuals will also be announced.
On February 25th, the EU confirmed it would freeze the assets of President Putin and Foreign Minister Sergey Lavrov.
On February 27th, President Ursula von der Leyen announced three new tranches of sanctions, including banning all Russian aircraft from EU airspace, measures targeting the Russia Today and Sputnik media outlets, and a widening of sanctions targeting Belarus.
On March 3rd President von der Leyen said the EU was waiting to see the impact of the sanctions it has already imposed before instigating any more, but suggested that further steps could include targeting crypto-assets.
On March 15th, the EU imposed sanctions on individuals including Roman Abramovich and Marina Ovsyannikova, the boss of a viral anti-war protestor at Russia’s Channel One. The EU also announced a ban on investments in Russia’s energy sector, and exports of precious stones, clothes and carpets worth more than 300 Euros.
Much media and analyst speculation has focused on how the EU will approach extending its sanctions regime to the energy sector, given the reliance of many European countries on energy exports from Russia. On April 8th the bloc made some progress, announcing a fifth sanctions package, including:
In addition to energy market measures, the EU also announced:
Prime minister Boris Johnson has said that the UK will impose its “largest ever” set of economic sanctions on Russia. This will include a push to end Russia’s use of the Swift international payment system, as well as freezing the assets of all major Russian banks. Cash held by Russian nationals in UK banks will also be limited, and more than 100 individuals and entities will be sanctioned. Aeroflot, the Russian airline, will be banned from landing in the UK.
The government also brought forward its economic crime bill, enabling assets to be targeted more effectively as well as greater transparency around ownership. Truss also said Britain had compiled a “hit list” of oligarchs who will face sanctions. Those confirmed as facing sanctions so far includes:
The UK has also sanctioned President Putin and Foreign Minister Lavrov. Liz Truss also said the government would launch an Oligarch Taskforce comprised of ministers and officials from several government departments to coordinate cross-government work on sanctions, and to support building an effective case for oligarchs identified as targets.
On Monday, February 28th, Chancellor Rishi Sunak announced the UK would join the European Central Bank and Federal Reserve in sanctioning Russia’s central bank. British citizens will not be able to make transactions with the central bank, its finance ministry or its wealth fund. The Atlantic has argued that central bank sanctions “could potentially bankrupt the entire Russian banking system and push the ruble into worthlessness.”
On March 9th, Liz Truss outlined new powers to detain Russian aircraft, and a ban on the export of aviation and space-related goods and technology.
On March 15th, the UK announced a huge swathe of new sanctions against 370 Russian and Belarusian individuals and entities, including 51 oligarchs and their families with a total estimated net worth of over £100bn. Defence Minister Sergei Shoigu, former president Dmitry Medvedev and Mikhail Fridman, founder of the largest non-state controlled bank in Russia – Alfa Bank – were all sanctioned.
On March 1st, Truss also announced the UK’s first sanctions on Belarus as a result of its support for Russia’s invasion. Belarus’ Chief of the General Staff and 3 other deputy defense minsters have been sanctioned, alongside two military enterprises.
In line with measures imposed by the US and EU, on April 6th the Foreign Secretary announced a suite of new measures to “bring an end to the UK’s imports of Russian energy and sanction yet more individuals and businesses, decimating Putin’s war machine.” Specific measures included:
Prime Minister Justin Trudeau has announced two tranches of sanctions against Russia, including:
On March 3rd Canada also become the first country to revoke Russia and Belarus’ status as preferential trading partners, instigating a 35 tariff on all exports from the two countries.
On March 7th, Trudeau imposed sanctions on 10 individuals close to President Putin based on a list compiled by opposition Alexei Navalny.
On March 15th, Canada’s government imposed sanctions on 15 more officials ahead of an address by Ukraine’s president to the Canadian parliament. The primary focus of the latest sanctions are Russian military defense officials, and wealthy private citizen Victor Pinchuk.
Canada’s foreign minister announced on March 21st that the country will impose new sanctions on Russia, announcing the details later this week.
Reflecting the unprecedented scope and scale of sanctions against Russia, Western powers have launched a number of bodies to coordinate enforcement. The European Commission launched a “Freeze and Seize” task force, while the US Justice Department announced a task force known as KleptoCapture. Both aim to work alongside the Russian Elites, Proxies, and Oligarchs (REPO) task force, coordinating finance, justice, home affairs and trade ministries across Australia, Canada, the European Union, France, Germany, Italy, Japan, the United Kingdom and the United States.
In addition to keeping allies aligned as the economic impact of sanctions bites, such bodies – and their aggressive publicization by governments – act as a pre-emptive warning to oligarchs and others who have been sanctioned. In this way, they aim to encourage proactive compliance with sanctions policies, and reduce the extent to which governments must directly enforce the measures they have imposed.
In what may be the beginning of a wider program of counter sanctions, on March 15th Russia sanctioned 13 US officials including President Biden, Secretary of State Antony Blinken, Defense Secretary Lloyd Austin and former Secretary of State Hillary Clinton. All are now blocked from entering Russia, and any assets held in Russia are frozen. Russia stressed, however, that the sanctions will not affect high-level diplomatic work.
By contrast, China has announced it will open fully to Russian wheat imports, and a Foreign Ministry spokesperson highlighted Russia’s “legitimate security concerns” including American arms sales to Kyiv. China’s president, Xi Jinping, has called on Russia to hold high level talks with Ukraine. A UN Security Council resolution tabled on February 25th calling on Russia to withdraw all troops from Ukraine was met with an abstention from China, alongside India and the United Arab Emirates.
On February 28th, Bloomberg reported that Russian gas giant Gazprom took a step toward “potentially its biggest-ever natural gas supply deal” with China, signing a contract to design a pipeline that will stretch across Mongolia toward China.
Analysts have also argued that while Western powers exclude grain, oil and gas – Russia’s main exports – from sanctions, “the talk of China providing a lifeline to Russia in the short term is not that relevant.”
Sanctions regimes against Russia are changing fast. As a provider of real-time global sanctions screening, our customers rely on us to provide continued accurate coverage.
Updates made so far
Many sanctions updates are captured automatically, with automatic scrapers on sanctions lists. However, government officials sometimes announce new sanctions before they are officially designated. Other measures are announced through non-standard sources such as press releases, or require major changes to legislation, as is the case in the EU.
As of 13.00 GMT on April 8th, here are the sanctioned entities added to our database since the Russian invasion of Ukraine: |
|
United States |
1148 |
Switzerland |
907 |
United Kingdom |
892 |
European Union |
863 |
Canada |
753 |
Belgium |
707 |
France |
696 |
Australia |
638 |
New Zealand |
507 |
Japan |
229 |
Singapore |
6 |
United Nations |
2 |
Ensuring data quality
While updating sanctions designations quickly is important, data quality is also critical. So our team assesses data before it is pushed into production. This helps to account for potential inaccuracies or discrepancies in information provided to ComplyAdvantage – in fast-changing situations where governments and regulators are moving quickly, this is inevitable.
Systems and controls
Are firms’ client and payment screening platforms able to detect relevant risks? Once detected, are they able to manage these risks? For example, blocking transactions and/or freezing funds when required. Where sanctioned customers/entities are identified, apply a block on transactions to freeze accounts and allocate these funds to a relevant suspense account, making sure to continue to meet terms of contract. For financial institutions operating in securities markets, they should ensure sanctioned persons and entities can be identified in executed trades.
Training
Firms should provide appropriate training and guidance for compliance staff to help them understand the latest sanctions measures, how to handle affected clients and/or transactions, along with updated communications as the situation changes. In a highly volatile situation, firms should aim to minimize the number of ‘false alarm’ alerts that are raised when these could have been discounted with the right training.
Exposure
Firms should consider how they go about understanding their exposure not only to sanctioned entities, but also the wider nexus around them. For example, do they have systems in place to do this, or will it be a manual exercise?
This should include:
Continuous monitoring
Compliance staff need a mindset similar to that adopted by traders watching the stock markets. It’s critical to monitor the latest news and alerts in real-time.
Holistic understanding
As well as understanding what sanctions are in place, compliance staff should be keeping up-to-date with geopolitics, trade, commerce and wider world events simultaneously. These are all likely to converge, with potential for cross-over sanctions risks.
At the client level – It’s key that firms ensure they have a full understanding of the ownership structures of their clients. Where they don’t have this, they may want to enrich this information, either by requesting variable evidence from the client or using an external service/software provider that can pull such information together.
At the transaction level – When a firm does not know who the ultimate beneficial owner(s) (UBOs) are for a payment, they should take extra care by taking reasonable steps to do due diligence on the party involved, and to understand the nature and purpose of the transaction. They can use open source information (if available), request further information from the client (with evidence if available) and/or using an external service/software provider.
This is a key point – it can be especially challenging for smaller firms (whether that be legal, FinTechs or accounting firms) to manage sanctions risks. Large banks have big teams in compliance, whereas some smaller firms may only have one person in their compliance team. They should consider if technology and automation can help them spot risks – doing so manually would be very difficult. Regardless, they should be cognizant that they could be exposed, and so should be thinking about if they are capable of understanding and managing the sanctions risks.
Systems and controls, as well as training, are essential. Systems and controls ensure that PEP risks can be detected and managed. Systems used should be able to appropriately identify RCAs (Relatives or Close Associates). Training is also essential so that staff, including not only compliance but also sales etc, are aware of risks and know what they need to do when they identify PEPs and how to manage the associated risks.
In a joint statement on February 26th the European Commission, France, Germany, Italy, the UK and the US, Western leaders committed “to ensuring that selected Russian banks are removed from the Swift messaging system.” They argued that this would “ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.” While the names of banks to be expelled have not yet been disclosed, a German government spokesperson said that all currently sanctioned banks will be affected, as well as other institutions if necessary.
The BBC reports that more than 1 percent of Swift messages are “thought to involve Russian payments.” Russia is particularly reliant on Swift for its oil and gas exports. Iran is the only country to have been removed from Swift before, which led to it losing 30 percent of its foreign trade.
Russia’s exclusion from Swift also risks boosting China’s alternative platform, known as CIPS – the Cross Border Interbank Payments System. Launched in 2015, CIPS facilitates the transfer and settlements of international payments in yuan. At least 23 Russian banks are already connected to CIPS.
Explore our piece on SWIFT, BIC and Sanctions Compliance
There are risks associated with the use of crypto to evade sanctions, and there is precedent in the example of Iran. However, crypto alone cannot recoup the financial losses Russia has sustained through Western sanctions. More likely, crypto will become a tool used by regular Russians to protect their wealth as inflation spirals and the value of the Russian ruble declines.
Explore our piece on Crypto, Russia and Sanctions Evasion Risks
It has never been more important – or more difficult – for firms to protect themselves from statutory asset freezes and travel bans imposed by governments around the world.
Explore our wider content on the Ukraine crisis, and sanctions best practices:
Guide: The Evolving Use of Sanctions
Putin’s Challenge and Western Sanctions
How to Ensure Russia Sanctions Compliance
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Demo requestOriginally published 24 February 2022, updated 08 April 2022
Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
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