In a decisive strike announced this morning, the UK intensified its sanctions against Russia, focusing on cutting off crucial supplies to Moscow’s military efforts in Ukraine and its influence operations in Africa. In a press release issued by the Foreign, Commonwealth & Development Office, the expansive sanctions package targets 56 entities and individuals involved in supplying military tools, microelectronics, and drone components.
What’s more, in a first for the G7, the UK has also targeted Russian-backed mercenary groups operating in Africa, like the newly sanctioned Africa Corps, which aims to destabilise regions across Africa for Russian benefit.
For Anti-Money Laundering (AML) professionals, this bold action provides valuable insights into the crucial role of compliance programmes in safeguarding international security.
In this article, we take a look at what the new Russian sanctions are and what they mean for AML compliance.
The role of sanctions in promoting global security
Sanctions are an essential tool to restrict trade and financial transactions with countries, entities, and individuals that are deemed to pose a threat to national security, foreign policy, or human rights.
By tightening these controls, today’s sanctions against Russia aim to slow its military campaigns and curb its influence in unstable regions.
🔗 What are sanctions and what do they mean for compliance?
What’s changed?
The latest sanctions serve as a reminder of the importance of careful monitoring across industries that could unintentionally become involved in sanctioned activities. Many of these entities and individuals named today have complex ties to the Russian state, posing challenges for AML compliance teams to identify and track.
New additions to the sanctions regime against the war in Russia include:
- 28 suppliers of machine tools, microelectronics, components for drones, ball bearings or other goods to the Russian military-industrial complex
- 4 individuals who have benefited since the invasion in key sectors for the Russian state
- 5 individuals who have supported the supply of goods to the Russian military
- 1 entity connected to Russia’s financial system
- 11 individuals connected to private mercenary groups with links to the Kremlin
- 2 private mercenary groups with links to the Kremlin
- 3 Private companies with links to the Wagner Group
- 1 private mercenary group with links to the Kremlin made under the Libya (Sanctions) (EU Exit) Regulations 2020
- 1 individual under the Chemical Weapons (Sanctions) (EU Exit) Regulations 2019
What does this mean for AML professionals?
For compliance teams, this move stresses the importance of vigilant sanctions screening, especially in the wake of evolving regulatory measures. Today’s announcement is a reminder of the need to refine onboarding and monitoring procedures quickly and accurately in direct response to regulatory change to identify any clients (be it individuals or entities) that may have direct or indirect links to Russia’s military activities.
Firms must also ensure that their AML screening processes address sanctions against entities in various countries – including China, Turkey, and Central Asia – highlighted as key suppliers to Russia.
After nearly 1,000 days since the first invasion of Ukraine, the situation remains volatile, and as a result, compliance teams must stay informed of new designations on an ongoing basis and rapidly adapt their firm’s monitoring and screening processes in line with any change.
Key takeaways from this morning’s announcement include:
- Evolving sanctions list: The newly sanctioned entities include individuals and firms beyond Russia’s borders, particularly in China and Turkey. AML programmes must now integrate monitoring with these emerging players in Moscow’s supply chain.
- Indirect beneficiaries and hidden ties: Many of the sanctioned groups operate through intermediaries or complex ownership structures. Compliance teams must increase efforts to identify beneficial ownership structures and scrutinise any entities with links to Russian state-aligned industries.
- Targeting non-military sectors: Today’s sanctions extend to technologies like microelectronics and drone components, which are not exclusively military but have dual-use capabilities for Russia to continue its invasion of Ukraine. This raises awareness of how non-military sectors can inadvertently become part of sanctions evasion schemes, emphasising the need for industry-wide vigilance.
Key implications for AML compliance
For AML compliance teams, the broader impact of these sanctions is a clear reminder of the importance of due diligence and thorough risk assessments, both of which play a crucial role in identifying and mitigating high-risk activities tied to sanctioned states. Many sanctioned entities have layered or hidden connections to their home state or its military, making it crucial for compliance teams to identify and flag activity tied to sanctioned entities or those closely associated with them.
The need for comprehensive screening systems: With the addition of new entities – from drone part suppliers to microelectronics vendors – AML teams should make regular updates to their sanctions databases and use screening tools capable of catching even subtle changes in a sanctioned entity’s status. For instance, knowing that dual-use technologies and suppliers in certain countries are potential red flags is essential for effective monitoring.
Improved scrutiny of beneficial ownership: Complex and often opaque ownership structures mean that compliance teams must go beyond surface ownership records. Conducting in-depth ownership checks, especially with clients connected to high-risk countries or industries, can help prevent accidental facilitation of sanctioned activities.
Proactive monitoring of high-risk jurisdictions: With suppliers to Russia originating in countries not typically known for direct military trade, compliance teams must expand their scrutiny of high-risk jurisdictions beyond the usual suspects. In this case, Turkey and China are highlighted as integral to Russia’s war efforts, which necessitates a nuanced understanding of these markets and the key players involved. Risk assessments should incorporate geopolitical factors and emerging markets to identify entities that may act as indirect support channels for sanctioned states.
