By Olivia Allison David Lewis

Russia’s siege and destruction of the Ukrainian city of Mariupol from February to May 2022 turned the city into an international symbol of the brutality and destruction of Russia’s full-scale invasion of Ukraine. Now Russia is attempting to turn Mariupol into a showcase Russian city to legitimise its occupation of Ukrainian territory. A huge reconstruction programme is underway in the city and Russia plans to make Mariupol the centre of a new transport network, which will ensure the resupply of Russian forces on the frontline and in Crimea. This research paper investigates this Russian programme of investment in Mariupol, which has been accompanied by the illicit seizure of thousands of Ukrainian homes, businesses and assets. There have been widespread allegations of corruption, fraud and profiteering, and new Russian business networks are emerging that benefit from Russia’s wartime economy. These economic practices in many cases constitute criminal activities and may be potential war crimes. Key points • Business seizures: Russian political and corporate interests and their proxies have seized control of thousands of Ukrainian businesses, properties and assets without compensation. • Dispossession: Many Mariupol residents have lost their homes, not only in the war, but also through an illegal programme of nationalisation, and a reconstruction programme that favours local vested interests and Russian incomers. • Profiteering and corruption: Powerful Moscow-based networks are controlling much of the reconstruction programme. Well-connected companies are benefiting from Russian spending that involves the widespread use of illicit finance and corrupt practices. • International trade: Mariupol port is at the centre of an illicit international trade in Ukrainian grain, clay and other materials. • Strategic implications: The new transport networks around Mariupol have important strategic implications, consolidating Russian control. Major Russian corporations are involved in building rail, road and maritime links. Policy implications • Rethinking strategy towards the occupation: A renewed Ukrainian and international strategy could also use political, diplomatic and economic instruments, including targeted sanctions, to raise the cost of Russia’s occupation and to challenge its long-term hold on the territory. • Sanctions: Current sanctions policy by the EU, the UK, the US and other countries towards the occupied territories is often incomplete and poorly coordinated. A more coherent approach would be more effective, particularly one that seeks to raise costs on individuals and companies leading and benefitting from the Russian occupation. EU, UK, US and other sanctions authorities could consider better coordinating their sanctions towards the occupied territories to ensure maximum impact. • Restitution: Many people from the occupied territories have lost their businesses, homes and savings. The Ukrainian government and international donors could develop mechanisms to find ways to compensate them directly for losses of homes or businesses, potentially funded with the profits from frozen Russian assets.

SOC ACE Research Paper No 35.

Birmingham, UK: University of Birmingham. Serious Organised Crime & Anti-Corruption Evidence (SOC ACE), 2025. 64p.

By Vanya Petrova

Illicit cross-border financial flows – estimated at US$1–1.6 trillion a year globally – are harming economic development on a national and global level. This is particularly true when such flows originate in heavily étatist economies, with no effective division or independence of the private from the public or state-owned sector. Autocracies have long utilized obfuscated corporate ownership structures and illicit financial flows (IFFs) for nefarious purposes such as bribery, corruption and improper lobbying to secure anything from technologies and know-how to economic and political influence on countries of interest. Russia has established a pattern of malign economic impact in Europe through its cultivation of ‘an opaque network of patronage across the region that it uses to influence and direct decision-making’ in key markets and institutions. IFFs in the Balkan region, in particular, are manifold, multi-directional and, proportionally, large as a percentage of GDP. While global illicit outflows are 3–5% of world GDP, IFFs in the Balkans are estimated at about 6% of the region’s GDP. The common denominator of the Western Balkan countries is their vulnerabilities kindled by institutional weakness and state capture. IFFs promote rent-seeking and criminal behaviour, reduce governments’ capacity to support development and inclusive growth, undermine the rule of law and jeopardize the business environment. Illicit flows drain public resources, reduce the scope and quality of public services and, thus, undermine confidence in state institutions. The Kremlin has repeatedly taken advantage of its integration into the Western financial system to exploit governance gaps through the corrosive effect of illicit finance.7 The brutal invasion of Ukraine shed a harsh light on the sobering dangers of kleptocracy and the risks to which Europe – and the world – has exposed itself by taking a lax approach to dirty money. Russia’s war in Ukraine could exacerbate these circumstances and accelerate further IFFs in the Balkan region – a crucial entry point and essential route for a plethora of illegal activities, such as drug trafficking, human smuggling, illicit trade and contraband.8 Due to imposed travel bans, Serbia is one of the few remaining routes for Russians to establish themselves in the region. Since the start of the invasion of Ukraine, Russian nationals have registered more than 5 000 companies in Serbia, over 1 000 being limited liability companies and nearly 4 000 entrepreneurial businesses.9 The establishment of so many companies in the country offers fertile ground for money laundering.10 As observed in the Serbian national risk assessment by the Administration for the Prevention of Money Laundering, limited liability companies and entrepreneurs pose a particularly high degree of threat with respect to money laundering. Through such means wealthy Russians could seek investment opportunities and use existing connections to launder money in real estate and other sectors traditionally vulnerable to IFFs in the region. The primary goal of this report is to assess the major enablers and vulnerabilities of illicit finance in the eight Balkan countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, North Macedonia and Serbia) after Russia’s invasion of Ukraine. More concretely, the study aims to analyze the primary IFFs sources and channels in the region, and identify any emerging trends concerning modus operandi, routes, business models, use of information and communications technology. In addition, the study intends to inspect the pressing challenges to border control, police and anti-money laundering authorities to effectively prevent, investigate and counter organized crime involved in cash smuggling and money laundering. Finally, the report aims to suggest feasible recommendations for improvement. The analysis presented is based on information collected through mixed methods research consisting of qualitative and quantitative desk research and in-depth interviews with key professionals from different organizations and professional affiliations in the eight countries. A total of 15 semi-structured interviews were conducted with experts from regional organizations, customs agencies, national anti-money laundering authorities, national revenue agencies, national customs agencies and NGOs, as well as with journalists and academics. A guiding questionnaire with key questions and topics was shared with the field researchers to facilitate the work and to ensure consistency in the information collection process.

Geneva, SWIT: Global Initiative Against Transnational Organized Crime (GI-TOC)’s , 2023. 24p.

By United Nations Office on Drugs and Crime (UNODC)

  As defined in the Conceptual Framework for the Statistical Measurement of Illicit Financial Flows,  Illicit Financial Flows (IFFs) are “financial flows that are illicit in origin, transfer or use,that reflect an exchange of value and that cross country borders.”IFFs may arise from criminal activities, but also from some behaviours related to tax and commercial practices. Such flows are either directly generated by illicit income, including cross-border transactions performed in the context of illicit trade of goods such as drugs, or the management of illicit income through investment in financial and non-financial assets. National data on IFFs remain limited worldwide, but significant progress has been made since 2017, when the UN Assembly adopted indicator 16.4.1. ("Total value of inward and outward illicit financial flows") for the monitoring of progress towards Sustainable Development Target 16.4, which aims to significantly reduce illicit financial and arms flows by 2030.  The United Nations Office on Drugs and Crime (UNODC) was entrusted, alongside the United Nations Commission on Trade and Development (UNCTAD), with the custodianship of SDG indicator 16.4.1. The International Classification of Crime for Statistical Purposes (ICCS)  provides definitions of illegal activities generating IFFs. Moreover, since 2017, UNODC and UNCTAD have taken a series of coordinated actions leading to a conceptual framework for the statistical measurement of IFFs, the implementation of pilot measurement exercises and the development of methodological guidelines to measure IFFs from selected illegal market activities. Additionally, in October 2019, the 10th session of the Inter-agency and Expert Group on Sustainable Development Goals Indicators,  held in Addis Ababa, reviewed the methodology and reclassified the indicator from Tier III to Tier II, meaning that the indicator is conceptually clear and has set out internationally established standards, although data are not yet regularly produced by countries. This document details the crime-related IFF estimates resulting from the engagement of UNODC with countries to implement the methodology outlined in the UNODC-UNCTAD conceptual framework.

Vienna: UNODC, 2023. 23p.

By Andres Martinez-Fernandez

Key Points

• National Liberation Army (ELN) guerrillas remain a potent challenge for regional security and development. The ELN is growing in Colombia and Venezuela, thanks to its involvement in illegal mining, now the most important revenue source for the guerrilla group.

• The ELN’s illegal mining remains virtually unrestricted in Venezuela, thanks to the Nicolás Maduro regime’s complicity. At the same time, despite the Colombian government’s recent efforts, illegal mining continues to take place throughout Colombia, benefiting armed groups like the ELN.

• To cut off the ELN from this vital revenue source, the United States and Colombia must work to expand the presence of the state in areas affected by illegal mining, formalize artisanal miners, strengthen the state’s enforcement and investigatory capacities, and isolate Venezuela from global gold markets.

Washington, DC: American Enterprise Institute, 2019. 12p.