New Dynamics in Illicit Finance and Russian Foreign Policy
By David Lewis and Tena Prelec
This paper provides an analytical overview of how Russian actors and proxies are using illicit financial flows (IFF) to support Russian foreign policy goals. It shows how Russia has used illicit finance to fund political interference campaigns, promote disinformation, and support military operations outside Russia, including the international activities of the Wagner network.
IFF includes a wide range of illicit and illegal cross-border financial activities, including high-level corruption, money-laundering, and sanctions evasion. Illicit finance played a significant role in Russian foreign policy pre-2022 invasion of Ukraine. Subsequent international sanctions against Russia have further amplified Moscow's reliance on illicit business and financial practices.
Russia has become increasingly reliant on IFF in three important areas:
First, IFF facilitates sanctions evasion and is central to Russia’s efforts to source weapons and dual-use technology.
Second, IFF is used to fund political interference and information operations globally, with an increasing trend towards activities in the Global South.
Third, IFF supports Russia's involvement in armed conflicts, through the funding of paramilitary forces such as Wagner and commercial deals that accompany Russian military activities in the Middle East and in Africa.
Unless effectively countered, Russia's growing use of illicit financial and economic tools will give it an advantage in its war against Ukraine. The Wagner network demonstrates how illicit financial networks can support military proxies in ways that pose a serious threat to international security.
An effective response to illicit finance requires a holistic approach, combining effective sanctions with systematic efforts to tackle money-laundering and illicit finance in key financial and logistical hubs, including in the UK and other Western countries.
SOC ACE Research Paper No 17. University of Birmingham. 2022. 43p.