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Sanctions, Export Controls Officials Say Catching Russian Evasion a Never-Ending Pursuit

Sanctions and enforcement professionals from the U.K., the EU and the U.S. said although they are pleased with the unprecedented unity and coordination among nations opposed to the Russian invasion of Ukraine, it is an ongoing challenge to fight export control evasion and asset hiding among Russian elites.

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The officials, speaking in Berlin last week at the Atlantic Council/Atlantik-Brücke conference on a panel titled "Building Common Ground: Transatlantic Approaches to Economic Statecraft," said that being unified in imposing sanctions isn't enough. They are also communicating with each other about litigation and enforcement.

David Reed, director of the sanctions directorate in the British Foreign, Commonwealth & Development Office, said his country has a focus on implementation and enforcement equal to what it does on designing new ways to pressure Russia.

"We’ve had to look hard at where there are gaps in our systems," he said, and the administration is spending $61,205,000 (50 million British pounds) on enforcement.

At DOJ, the agency is hiring 25 new prosecutors for corporate investigations that have to do with national security, according to David Lim, co-director of Task Force KleptoCapture.

Michael Lieberman, assistant director for enforcement in the Treasury Department's Office of Foreign Assets Control, said that while it's difficult to invest in enforcement infrastructure, communicating well with private sector players can bring as much or more compliance as enforcement can.

He said: "In many ways, we’ve deputized the private sector to be our eyes and ears. We owe them clarity, we owe them responsiveness when questions arise."

Lieberman said that they still do "bring our enforcement action when we see negligence as well as willfulness."

Lieberman and Lim said that since the Russia invasion, there has been less territory-guarding between DOJ and Treasury, and DOJ has recognized that sometimes it would be more fruitful to take civil action than wait to build a criminal case.

Reed said the U.K. is working on "building out capabilities that fall short of criminal prosecution." They want to do more civil monetary penalties; they had done that for financial sanctions breaches, but want to expand the use more to trade sanctions violations.

"We are learning a lot from our U.S. counterparts in that area," he said.

The moderator asked Reed what he saw when he traveled to Central Asia to talk about export control circumvention.

Reed said the U.K. identified 45 top priority products it really doesn't want Russia to import, and those are not a large quantity of trade.

He said he's found government officials are receptive to "a realistic, targeted, consistent set of asks. With countries like Kazakhstan, for example, we’ve seen a commitment to prevent the re-export of goods," he said, and the trade data are showing results.

The U.K. has offered capacity building to the governments, but he said the cooperative approach isn't the only one. "Of course, there is sort of the threat against targeted action against companies in egregious circumvention."

He added, "This sometimes feels like a game of whack-a-mole, but actually whack-a-mole is success. Every time we make it harder or more expensive for Russia to obtain particular goods, this is success, putting as much grit into the system as possible."

Darta Tentere, policy adviser to EU Sanctions Envoy David O’Sullivan, said that while the EU wishes more countries would join the sanctions on Russia, "we have to accept that neutrality if it’s a neutrality."

But, she said, "if countries are actively used by malign actors to circumvent our sanctions," EU member states are developing tools to address that -- for instance, imposing asset freezes.

Lim said when asset freezes began, the U.S. and its allies were going after high-profile luxury goods, such as megayachts.

"What will really make an impact is going after the facilitators" who help Russian clients hide assets, he said. "They service multiple Russian elites at the same time."