By: Dr Erica Marat (NDU) and Dr Alexander Kupatadze (KCL).

This paper examines the practices used to evade sanctions imposed on Russia after its invasion of Ukraine in 2022, focusing on the import–export operations of Russia, Belarus, Georgia, and Kazakhstan. The research finds that sanctions have not cut supplies to Russia but have instead empowered informal trade networks and intermediaries. Georgia and Kazakhstan have indirectly benefited from the increased transiting trade; however, the impact on the shadow economy and traditional organised crime has been minimal because sanctions-busting is not illegal in these countries. In the aftermath of Russia’s invasion in Ukraine, a conspicuous surge in trade anomalies and import- and export-related red flags has been observed. In many instances, these irregularities can be definitively attributed to strategies employed to circumvent sanctions. The Western focus has been on restricting the re-exports of sanctioned goods to undermine Russia’s military apparatus. However, third-party states, such as Georgia and Kazakhstan, play a significant role in enabling Russia to sustain its international trade activities, yielding substantial financial gains for the country’s military expenditure.

Our research underscores the complexity and challenges of enforcing international sanctions and preventing sanctions evasion. It shows that the sanctions have not been as effective as hoped in cutting off Russia from the global economy, and that Russia has been able to find ways to circumvent them. The paper highlights the need for more concerted efforts and cooperation among Western states, private companies based in the West, and third-party states, to mitigate and prevent sanctions-busting activities.

Future research could expand to include more countries and examine the broader implications of sanctions. It could also examine the extent to which organized crime, such as cybercrime and trade-based money laundering, are linked to sanctions evasion. This research would build on the recommendations of this paper by developing more specific strategies for detecting and preventing sanctions evasion, including the use of new technologies and data analysis techniques.

Research Paper No. 18 University of Birmingham. 2023. 47p.

By Maria Nizzero

The imposition of sanctions against the ‘oligarchs’ following Russia’s invasion of Ukraine has triggered a policy conversation about the potential to move ‘from freeze to seize’: achieving permanent confiscation of assets that are currently temporarily frozen under sanctions. Acting against the oligarchs’ assets represents a way for the UK government to both reaffirm its intention to support Ukraine, and to show that the UK is no longer a haven for the proceeds of patronage, bribery or corruption. However, the UK’s asset recovery mechanisms have previously fallen short when dealing with the challenges related to seizing such proceeds, such as the difficult nature of investigating alleged historical criminality and corruption at the root of the wealth, the vast resources available to those who to manage to hide their assets and, if needed, to prove their licit origin, and the provenance of wealth in uncooperative jurisdictions. In addition, while the intention to move ‘from freeze to seize’ is high on the government’s agenda and has been reflected in several parliamentary debates and the Economic Crime Bill presented in September 2022, there are concerns that such political interest and pressure to act quickly should, however, come with proposals that do not undermine the UK’s status as a rule-of-law jurisdiction and a supporter of fundamental human rights. This paper explores alternative asset recovery mechanisms that could help respond to the immediate policy goal surrounding Russian-linked sanctioned assets and contribute to strengthening the broader asset recovery framework in the UK for the longer term. It sets out the current challenges related to confiscation of proceeds of grand corruption and explores the limitations of UK civil recovery mechanisms when seeking to tackle such proceeds. Given these challenges, the research looks at examples of three alternative mechanisms across four jurisdictions – Australia, Switzerland, Ireland and Italy – weighing their potential and limitations in relation to issues such as a lower standard of proof or reversed burden of proof, as well as reframing around ‘societal danger’, and their legal applicability in UK legislation. With these factors and the broader findings of the research in mind, this paper concludes with a set of recommendations for UK policymakers, which apply equally to the global debate, when thinking about reforming the country’s asset recovery mechanisms. While it does not intend to categorically push for one model to be adopted over others, as developing legislative mechanisms to facilitate the permanent confiscation of kleptocratic proceeds is a challenge that goes well beyond the UK,1 the paper suggests considering amendments to the current asset recovery mechanisms that take account of the social damage and national security interests affected by criminals, and kleptocrats in particular. This is a key gap in UK legislation, and these concepts need to both be included in asset recovery legislation and have full buy-in from the government and law enforcement. Alongside this, some adjustments to existing legislation to include certain elements, such as a full reverse burden of proof and, most importantly, appropriate resourcing of law enforcement, will improve the odds of recovering proceeds of crime in the UK.

SOC ACE Research Paper No. 16. Birmingham, UK: University of Birmingham.2023. 35p.

By Joseph D. Serio

In the 1990s, the so-called Russian mafia dominated newspaper headlines, political analysis, and academic articles around the world. It was the new scourge, a threat so massive that it was believed to hold the Russian economy hostage. Former FBI Director Louis Freeh announced that the Russian mafia was a significant threat to the national security of the United States.

Before the end of the decade, Director Freeh reversed himself, saying that in reality the magnitude of the danger from the Russian mafia had been overestimated. Heading into the new millennium, the international hue and cry about gangsters from the former Soviet Union subsided dramatically, particularly after the terrorist attacks of September 11. Al-Qaeda shifted the spotlight from organized crime to terrorism and U.S. homeland security. Has the Russian mafia been eradicated or has it simply fallen below the radar?

Countless books and articles have reported on the Russian mafia in breathless terms bordering on hysteria. Casting a broad net, Serio brings a different, more analytical approach to his exploration of the subject. In Investigating the Russian Mafia, Part I begins by asking a series of basic questions: What did the Soviets understand 'mafia' to mean? Was this a Russian phenomenon or more broadly-based, multi-ethnic groups? How did the media influence the perception of the Russian mafia? What does a close examination of the official statistics reveal about the nature of crime groups in the former Soviet Union?

In Part II, Serio discusses an overview of attitudes and practices of the criminal world, business, and policing, among others, in Russian history. He demonstrates that many of the forces at work in the 1990s did not originate in the Communist era or arise because of the collapse of the USSR. Part III presents a discussion of the crime groups that developed in the post-Soviet era, the challenges that faced the business world, and the law enforcement response.

Durham, NC: Carolina Academic Press, 2008. 324p.

By Mark Galeotti

Mark Galeotti is the go-to expert on organized crime in Russia, consulted by governments and police around the world. Now, Western readers can explore the fascinating history of thevory v zakone, a group that has survived and thrived amid the changes brought on by Stalinism, the Cold War, the Afghan War, and the end of the Soviet experiment.

Thevory—as the Russian mafia is also known—was born early in the twentieth century, largely in the Gulags and criminal camps, where they developed their unique culture. Identified by their signature tattoos, members abided by the thieves’ code, a strict system that forbade all paid employment and cooperation with law enforcement and the state. Based on two decades of on-the-ground research, Galeotti’s captivating study details thevory’s journey to power from their early days to their adaptation to modern-day Russia’s free-wheeling oligarchy and global opportunities beyond.

New Haven, CT: Yale University Press, 2018. 344p.