Companies Need to Stay Vigilant to Spot Evolving Sanctions, Controls Evasion, Panelists Say
Russian sanctions and export control evasion attempts are still ongoing. Companies need to remain vigilant across a wide range of areas to minimize their risk of enabling evasion, experts said during a Sept. 1 webinar discussion hosted by the Association of Certified Sanctions Specialists (ACSS).
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Compliance personnel should look at several key behaviors, said Alexander Witt, an ACSS sanctions and export controls consultant, from the irregular use of official vehicles to asset transfers from unusual sources. The transfer of assets directly to states that have no Russia sanctions in place also is worthy of deeper scrutiny, Witt said, especially the United Arab Emirates, Turkey, China, Brazil and India. Indicators of possible evasion also include the changing of ownership to non-Russian family members, overly complex corporate structures, and pooled accounts in situations where asset sharing would otherwise be unreasonable. Compliance officers also should be aware of past asset movements, especially when done just prior to designation and professional service charges such as consulting and accounting well above market rates, he said.
Additionally, "lots of easy-to-access tools" like virtual private networks (VPNs) or Tor, which allows for anonymous browsing, "can be used by evaders and criminals to mask identity and location," said Tracy Manning, LexisNexis director of financial crime compliance. These present huge problems for compliance with area-based sanctions or specifically designated persons. With a huge rise in digital transactions during the COVID-19 pandemic, financial institutions became more accepting of digital identification and certificates. Fortunately, Manning said, regulators have started to take the digital realm more seriously in both the U.S. and Europe.
"As the pandemic came into play, we saw enforcements and settlements" from the Office of Foreign Assets Control focused on leveraging location information through apps and websites as a sanctions control. Agencies in the U.S. and Europe have started issuing guidance on virtual currencies, but unfortunately, a lot of actors are still looking to profit from "essentially underwriting criminal activities," Manning said.
With essentially all banks having virtual currency risks, regulators are beginning to take the space more seriously, she said, but there is still a distinct lack of in-depth guidance. In the meantime, compliance officers need to look deeper into relatives, associates, potential enablers, and venture capital and private equity funding when making risk assessments, she said. Looking at financial activity prior to sanctions implementation can be key, Manning said. Seeing patterns of transactions before sanctions increase scrutiny can and will help assess possible evasion activities.