LexisNexis examines findings from the first wave of sanctions against Russia and finews.asia takes a closer look at the key ones.

Anyone who believes the current wave of sanctions imposed after Russia invaded Ukraine was completely unforeseen and unprecedented has probably not been paying all that much attention to geopolitics for the better part of a decade, maybe even two.

The infographic (PDF) released Monday by data consultancy «LexisNexis Risk Solutions» serves as a pointed reminder that the conflict accentuated trends that had already been there, even if the level of sanctions activity was extremely high after the initial outbreak of hostilities.

The consultancy analyzed events between 20 February and 24 March 2022, remarking that most of the sanctions then imposed derived largely from existing programs already in place in the EU, the UK, and the US, with Russia's 2014 annexation of Crimea serving as the legal foundation for many.

Constant List Updates

The LexisNexis analysis did show that there were 40 sanctions list updates in February and March related to Russia, which was significantly more than the 24 seen in all other programs during the same period. That resulted in 2,384 new designations of individuals and entities related to the conflict, against only 150 otherwise.

At times, regulators updated lists several times a day, putting significant burdens on bank compliance departments and the stack of alerts they needed to work down and remediate, not to mention having to run system updates with the fresh lists.

«No one can predict how the coming months will play out, but the speed and breadth of regulator activity about the situation in Ukraine has already made for a perfect sanctions storm, deploying virtually all typologies of sanctions to restrict dealings with certain individuals, companies, aircraft, ships, items or locations,» said Vincent Gaudel, a LexisNexis Risk Solutions financial crime expert, said in a media release sent together with the infographic.

Plurilateralism but No UN

Another historical trend «accelerated and amplified» by the war in Ukraine, as LexisNexis puts it, is the plurilateral sanctions regime, which seems to be making up for the inability of the UN Security Council to reach a consensus on any kind of action, given the veto powers of permanent members which, in this particular case, had been Russia.

To make up for it, increasingly large blocs of countries have resorted in recent years to implementing ever-larger programs mirroring each other, although they are not identical. They also seem to include countries that previously did not have a tradition of imposing unilateral sanctions, Switzerland being a good example of that. But there have been others as well, such as Iceland and Singapore, to mention a few.

LexisNexis did indicate that an important thing that gets forgotten in all this is that it is relatively easy for governments to impose sanctions and restrictions but that most of the responsibility for complying with them is held by the private sector, and, with that, finance.

Questioning the Impact

That being said, there are voices in the west that are beginning to ask about the impact of the initial volley of sanctions given the recent increases in inflation, news of food supply shortages, particularly Ukrainian grain, and elevated energy prices, particularly oil and gas.

If North Korea serves as any kind of historical model, there is not likely to be all that much societal appetite to wait for up to 70 years for anything tangible, given it was the 1950s when the US first imposed sanctions against the regime. Or, even for that matter, 40 years, in the case of Iran.

But, despite the lack of any discernible, immediate impact, the LexisNexis infographic did suggest that sanctions levied against Russia will have a «lasting» impact, given that they are often both easily imposed and then removed slowly. Moreover, beyond sanctions, the current regime of restrictions against Russia includes a SWIFT transaction ban against major Russian banks, prohibitions against the country's central bank, and extensive import and export bans to and from the EU.

Evading Sanctions

Other voices in the west seem surprised that it is at all possible for Russia to evade the current sanctions regime by using shell entities, unknown intermediaries, and illicit activities such as ship-to-ship transfers of oil on the high seas, not to mention employing digital assets, including diverse crypto vehicles.

In that, what gets laid by the wayside is that the regime is plurilateral, not universal. Not only are the two largest countries in the world by population, China and India, not part of it, but that is unlikely to change. And even if it did, it is often forgotten that the private elements in both countries have a long history of being able to evade all types of external restrictions by using front companies and third-party intermediaries, as a May interview in «The Times of India» with UK defense think-tank expert Nick Reynolds hints at.

China itself has a desolate, thinly populated direct border with Russia. That means that, as with North Korea, private efforts to evade sanctions do not necessarily even have to be all that creative. The Chinese border city of Dandong, about a mile across the border from the Pyongyang regime, has ostensibly helped served as an evasion conduit for years, if not decades. As an example of that, The Bank of Dandong was severed from the American financial system in 2017, as have shipping companies in the neighboring port in Dalian, just over 500 kilometers away by sea.

Additional Compliance Burdens

What does all this mean? Given the impetus is on the private sector to fully implement the measures, it means a very significant additional burden for banking sector sanctions specialists and financial crime experts.

It means going way beyond basic regulatory list updates and processing alerts from new hits. Much of the work, even in wealth management, will be focused on confusing detail, investigating the ownership and governance of vague, amorphous shell companies and entities, looking twice or even three times at unusual transfer instructions, odd invoices, uncharacteristic investments, and strange sources of wealth - and funds.