How Current Russian Sanctions Impact AML Regulations

February 24, 2023, marked the one-year anniversary of the Russian invasion of Ukraine. It has been a year of brave resilience and unjust suffering for the people of Ukraine, but it has also been a time of great economic and political uncertainty for the world.

In response to the invasion, many governments imposed strict sanctions on Russia and its leaders. As noted in our previous guide on the subject, these sanctions initially focused on the Federal Assembly of Russia (known as the “Duma”), as well as the import and export of luxury goods.

But since then, the noose has continued to tighten on the Russian economy. If you’re an international business, it’s important to understand what these sanctions are and how they change the global KYC and AML landscape.

EU Sanctions on Russia in 2023

The European Union has imposed sanctions on three countries following the war in Ukraine:

· Russia: For its “unprovoked and unjustified invasion of Ukraine”.

· Belarus: For its involvement in the invasion.

· Iran: For supplying drones used in Russian attacks.

It has frozen over €21.5 billion of personal assets and has blocked a further €300 billion in the EU and across G7 countries.

Shortly after the invasion, the EU banned Russia from SWIFT, effectively cutting off Russian banks from the international banking system. In December 2022, it sanctioned the importation of crude oil; in February 2023, the same restrictions were placed on refined petroleum products.

These are some of the biggest sanctions, but there have been others:

· Exportation of luxury goods

· Exportation of products used for military purposes (guns, navigational equipment, engines, drones)

· Importation of solid fossil fuels

· Importation of gold, steel, iron, and other materials

· Importation of cigarettes and cosmetics

· Ban on many services being provided to entities in Russia (including accounting, PR, bookkeeping, auditing, and legal services)

· Ban on many Russian broadcasting activities

USA Sanctions on Russia in 2023

The United States has blocked banks, businesses, and individuals in Russia and Belarus. It has also targeted the company behind the Nord Stream 2 pipeline.

These sanctions increased steadily in the year following the invasion and they were stepped up further on the anniversary, including:

· Sanctions against entities in the Russian metal and mining industry

· Raised tariffs on certain Russian products, including chemicals, metals, and minerals

The USA also joined other G7 countries in establishing the Enforcement Coordination Mechanism, which will initially be chaired by the US. This new endeavor has been described as a tool that will aid with information sharing and enforcement related to sanctions.

UK Sanctions on Russia in 2023

The UK has worked closely with the United States and the European Union to organize sanctions against Russia, Belarus, and Iran.

These sanctions include targeting “every item” that Russia has been using on the battlefield. It has also sanctioned people linked to key Russian decision makers, as well as the companies responsible for manufacturing the weapons being used in the war.

There is a lot of Russian money in the United Kingdom, and London especially. So much so, in fact, that experts were initially predicting a sharp fall in house prices as Russians abandoned the city and sold expensive properties at reduced prices.After just a couple of months, the UK sanctioned Russian oligarchs worth tens of billions of pounds. Those sanctions have continued, but there has been more of a focus on Russian metals, minerals, and oil in late-2022 and early 2023.

How Other Countries Have Sanctioned Russia

The Russian invasion of Ukraine was almost universally condemned and many countries followed the US, UK, and EU in sanctioning the invasion.

Canada, Australia, and most of Europe have imposed sanctions since the invasion. Singapore imposed banking-related sanctions in February 2022 and became the first Asian nation to do so. Taiwan (a non-UN member state) and Japan followed suit, with restrictions on everything from Russian aircraft and banking to gold and other metals.

Norway was also quick to sanction Russian ships and even the typically neutral Switzerland sanctioned Russian companies and oligarchs.

Many countries also closed their airspace to Russian private and commercial jets.

There are still many countries that have not agreed to sanctions against Russia and Belarus, but a number of these are actively avoiding “workarounds”, so they still have limitations in place.

How Do Russian Sanctions Impact KYC and AML Regulations?

Russian sanctions don’t just impact Russians. They have also changed the AML (Anti-Money Laundering) and KYC (Know Your Customer) landscape, as organizations based in the UK, US, EU, and other countries must now ensure they are not doing business with sanctioned entities.

KYC rules are used to confirm an individual’s identity. If you offer legal, accounting, or financial services, you are required to follow KYC regulations to confirm the identity of the person you’re doing business with.

Are they on any currently active sanctions lists? Do they live in a sanctioned country such as Russia or Belarus? You can’t simply take their word for it, so KYC regulations provide the confirmation needed to ensure that sanctions are followed.

AML regulations are also important. Sanctions have frozen hundreds of billions in Russian money while also seizing homes, yachts, and other assets. It has placed AML regulators on high alert, so companies must do everything they can to remain compliant and ensure they are not unwittingly assisting sanctioned entities.

Understanding Sanctions Lists and Conducting Proper Due Diligence

AML and KYC regulations can be a bit of a minefield at the best of times, but sanctions have increased the pressure on businesses. There’s a lot to consider and a lot of rules to follow, but that’s where we come in.

At A Data Pro, we offer a range of services designed to help you stay compliant.

Our sanctions lists and due diligence reports are scraped from a variety of global sources and updated regularly. We can help to ensure that you don’t do business with sanctioned entities, thus keeping you compliant, safe, and legal.