Beyond Sanctions

On February 24, 2022, the Russian Federation (Russia) started an unprovoked war against Ukraine. Russian troops attacked several large Ukrainian cities, including the capital, Kyiv, Mariupol, Chernihiv, Mykolaiv, Sumy, and objects of critical infrastructure, including the Chernobyl and Enerhodar nuclear stations, and aviation plant near Lviv. According to the New York City Bar Association, the attack constitutes a violation of the sovereignty and territorial integrity of Ukraine in breach of international law and the Charter of the United Nations.  

One hundred forty-one countries voted in favor of the UN General Assembly resolution "deploring" Russia's aggression against Ukraine and demanding the immediate and complete withdrawal of all Russian forces from Ukrainian territory. Western countries accused Russia¹ of bringing the war back to Europe and disturbing regional peace,  and causing a humanitarian crisis in Ukraine².

The world’s response to Russia’s actions includes a wave of export controls and economic sanctions targeting the country’s major financial institutions (FIs), state-owned corporations, oligarchs, government officials, individuals, corporations, and assets tied to Russian President Vladimir Putin, Russian oligarchs, and the Russian government. Additional sanctions were also imposed on Belarusian individuals and entities supporting and facilitating the Russian invasion. As of March 11, 2022, the United States and more than 30 countries have imposed economic sanctions and export controls on Russia³.

In response, the Russian government imposed export bans on a string of products.  In addition, the Russian Central Bank limited foreign cash⁴ withdrawals for its citizens to $10,000, effectively restricting the financial ability of Russian citizens living abroad or attempting to flee the country to use their assets.

The multi-national sanctions regimes bring new challenges to financial institutions and compliance professionals, as they are obligated to ensure their compliance programs are equipped to quickly enforce the continually changing sanctions, to timely apply asset-tracing and freezing requirements, and to appropriately adjust risk management processes and identify and tackle the new sanctions evasions and money laundering routes and trends.

This article aims to provide an overview of the global response to the Russia-Ukraine war and an analysis of anticipated changes in transactional patterns resulting from that response, with a particular focus on geographic regions and industries of interest. The article also provides financial institutions with tips and practical solutions that can help them address the challenges of the new sanctions and maintain a high level of regulatory compliance.

How Guidehouse Can Help

Guidehouse financial crime consultants work with financial institutions of all sizes to build effective and efficient risk management and compliance frameworks to help clients protect against legal, fiduciary, shareholder, and reputational risk. In addition, Guidehouse specialists’ experience spans Sanctions and TM systems, Financial Crimes Compliance, Gap Analysis, Know Your Customer Support, Transaction Lookbacks, Financial Intelligence Unit Support, Transaction Reviews, and Suspicious Activity Report Alert Processing for banks and FIs. Further, Guidehouse’s experts offer regional, cultural, and linguistic investigative expertise in relation to customers and third parties that pose risks of being tied to Russian oligarchs. Guidehouse professionals include distinguished former prosecutors, regulators, compliance officers, attorneys, and consultants, who leverage their combined experience to help clients conquer their compliance challenges.

Authors: Irene Pasternak, Ekaterina Koroleva, Mariya Stetsyna.

Contributors: Alma Angotti, Olga Chechelovski, Kristina Ivanova

¹ https://www.bbc.com/news/world-europe-60507016 
² https://www.pbs.org/newshour/world/u-n-blames-russia-for-humanitarian-crisis-in-ukraine-urges-aid
³ https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/11/fact-sheet-united-states-european-union-and-g7-to-announce-further-economic-costs-on-russia/
⁴ https://www.business-standard.com/article/international/central-bank-of-russia-limits-foreign-cash-withdrawals-until-sept-9-122030900107_1.html