Global banks and businesses face unprecedented challenges in applying sanctions, export controls, and prohibitions against providing certain services to Russia since its invasion of Ukraine on 24 February, according to a white paper published by Thomson Reuters.
Entitled The fog of sanctions, the paper observes that many global banks and businesses have responded to these new restrictions by expending considerable resources to know their customers better to keep doing business with unsanctioned parties in Russia.
But it concludes that some financial services firms’ compliance teams find themselves lacking the resources and the talent – as well as the funding – to fully address the additional burdens heaped on them over recent months.
Banks’ responses
Some financial institutions have opted to “de-risk” and avoid Russia entirely, exiting account relationships and disentangling themselves from funds transfers tied to the country according to paper.
It says sanctions and anti-money laundering compliance officers meanwhile are working long hours and spending unprecedented amounts of time with senior officers and legal counsel as they struggle to meet all of the new operational demands imposed on them over recent months.
Troubling lack of clarity
The paper examines the evolving sanctions environment in several countries, including the US, UK and the European Union.
As well as examining what each country is doing by itself and in concert with others, the paper looks at what it describes as the “troubling lack of clarity and cooperation” among allies in properly applying sanctions against Russia on a global basis that would arguably have the most impact.
AML/CFT gaps exposed
The paper also looks at how some countries, especially the US, are addressing gaps in their anti-money laundering and counter financing of terrorism (AML/CFT) efforts that have been exposed by the sanctions.
Challenges faced by global banks and governments are also examined in the paper, including the rise of so-called reputation launderers working with Russian oligarchs to help them evade the sanctions or obscure their assets and the problem of asset flight as more global players (both Russian and not) move their assets out of the oversight of regulatory agencies.
Lacking resources and talent
The paper also looks at the state of financial services firms’ compliance teams as they find themselves lacking the resources and talent to fully address the burdens the new sanctions regime has placed upon them.
It concludes by suggesting compliance professionals short of desperately needed funding may wish to share this reality – and the white paper itself – as they push for additional resources.
The Thomson Reuters white paper, The fog of sanctions, can be found here.
Categories: Trade Based Financial crimes News
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