An illegitimate lifeline for Russia: Sanction Evasion and Avoidance (SEA)

Introduction to Sanctions and SEA

• According to a recent research paper by the Serious Organised Crime & Anti-Corruption Evidence (SOC ACE), sanctions play a crucial role in exerting international influence, but understanding of Sanctions Evasion and Avoidance (SEA) is limited, particularly regarding the role of third countries.

• Third countries, defined as neither sending nor being the targets of sanctions, are the specific focus, encompassing 13 countries with relevance to Russia's sanctions.

• The likelihood of a third country's involvement in SEA is tied to geopolitical alignment, economic dependency on the target country, and trade capacities.

• The research identifies a gap in comprehending the dynamics of SEA, particularly the role played by third countries, stressing the necessity for further exploration in existing literature.

Patterns and Mechanisms of SEA

• The study categorizes SEA into various types, including utilizing corporate structures, evading financial regulations, and participating in the trading of various goods.

• The ease of establishing corporate structures in specific countries, such as through the use of anonymous entities, is recognized as a facilitator of SEA.

• Jurisdictions with concentrations of professional services, particularly in accounting and legal advice, are also acknowledged as facilitators of SEA.

Financial Aspects of SEA Mechanisms

• The study notes that ineffective regulation or a lack of enforcement amplifies the use of corporate structures in SEA.

• Global financial services access, including SWIFT-connected banks and cryptocurrencies, is identified as enabling SEA.

• Specific online payment systems, such as the Mir payment system, are recognized for transferring money from Russia, evading sanctions.

• The study emphasizes that accessibility of financial services to Russian entities, including options like cryptocurrency, is vital for SEA, offering various avenues to bypass sanctions.

Examples and Impact of SEA

• The paper cites instances of SEA involving countries such as Armenia, Cyprus, Kazakhstan, and South Africa, demonstrating the diverse geographical scope of such activities.

• It also details various tactics used in oil smuggling, such as disabling tracking systems, falsifying documents, and ship-to-ship transfers, emphasizing the strategic importance of oil smuggling to Russia.

• Access to professional and financial services in third countries is revealed to facilitate oil smuggling, as demonstrated by examples involving the UAE and its collaborations with other countries.

• The study suggests that the insurance industry, particularly in sanctions-sending countries, can indirectly help counter SEA by restricting insurance for shipments involved in sanctions evasion.