By Liam O’Shea, Gonzalo Saiz & Alexia Anna Hack (RUSI); and Olivia Allison (Independent).

The research highlights the correlation between a third country’s support for or opposition to sanctions and the extent of its geopolitical alignment with senders or targets. It finds that SEA is more likely when a third country is economically reliant on the target country, has interests in engaging in SEA and has the trade and commercial capacities to do so – particularly in professional advisory, financial services, shipping and logistics sectors. In these cases, there is likely to be a significant role for a range of private commercial actors within these sectors with economic interests in engaging in SEA. This suggests that policymakers combatting SEA should prioritise economies reliant on these sectors and promote improved sector regulation and enforcement measures.

More broadly, the research suggests that focusing on the role of third countries in SEA by industry sector, rather than just by country, may help to identify more tailored countermeasures. This approach, and the specific nuances and features of particular types of SEA, enables more focused follow-on analysis and potentially more targeted policy responses.

The report examines thirteen third countries (Armenia, Cyprus, Czechia, Georgia, Indonesia, Kazakhstan, Malta, Saudi Arabia, Serbia, South Africa, Spain, Türkiye and the UAE), involved in SEA relating to sanctions imposed on Russia since the Ukraine invasion. It draws from literature, data analysis of media reports, blogs, forums and other open-source information as well as trade and shipping data, spanning from February 2022 to February 2023.

Sanctions are an important tool for exerting influence internationally yet understanding of the impact of sanctions evasion or avoidance (SEA) and third-country involvement remains limited. In this study, third countries are defined as distinct from ‘senders’ and ‘targets’ of sanctions regimes and aims to shed light on their role in SEA.

SOC ACE Research Paper No 21. Birmingham, UK: University of Birmingham, 2023. 35p.

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 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.

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 Cathy Haenlein, Sasha Erskine, Elijah Glantz and Tom Keatinge

Sanctions are increasingly being used to tackle a range of specific issues. These include sanctions that respond to human rights abuses, combat corruption and address malicious cyber activity. As sanctions use has broadened, the question of their application to organised criminal activity is increasingly raised; yet the use of sanctions for this reason has remained limited to a specific set of issuers, notably the US, and more recently, the UN. In the UK, the government has advanced its vision of an ambitious post-Brexit independent sanctions regime, with the Sanctions and Anti-Money Laundering Act 2018 allowing sanctions use ‘in the interests of national security’ (HMG, 2018). New regimes addressing human rights and corruption have emerged. With serious and organised crime deemed a national security threat by the UK government, there is a case to add a sanctions regime to address this particular threat (HMG, 2018). The National Crime Agency itself has called for a legislative amendment to reference serious and organised crime as grounds for sanctions use (HMG, 2021). However, little research or evaluation has been undertaken to assess the impact of sanctions on organised crime. With US sanctions used over almost three decades to disrupt cross-border trafficking, the lack of a body of rigorous relevant research is a key shortcoming. Similarly, few past initiatives have sought to assess the lessons these experiences hold for future sanctions issuers in this space. With interest mounting in the potential use of organised crime-related sanctions, this represents a critical limitation. In seeking to address the gap, this paper reviews existing evidence on the use and impact of sanctions to disrupt organised criminal activity. It focuses on two case studies, Colombia and Libya, in differing regions of the world and with different exposure to organised crime-focused sanctions. While Colombia tops the list of states globally for organised crime-focused sanctions on individuals and entities in its territory (with the third-highest number of relevant listings since 2016), Libya’s exposure is more recent and limited. Libya nonetheless has experience of listings under UN and US country regimes relating to fuel smuggling, people smuggling and human trafficking. Here, it differs markedly from Colombia, which is the epitome of the historic US approach to narcotics-related sanctions. This paper analyses organised crime-related sanctions data, examines the current state of knowledge relating to the implementation and impact of these sanctions, and draws on the tw wo case studies. It identifies a number of factors that influence the effectiveness of organised crime-focused sanctions, including:

• The extent to which the host government of the sanction’s target is willing to cooperate with the sanction’s issuer.

• The extent to which the issuance of sanctions is embedded within a coherent broader strategic approach.

• The overarching focus of the regime within which relevant designations are made.

• The need for clear objectives when applying sanctions.

• Resourcing and engagement of key agencies in both the country of issuance and the target’s host country.

• Divergent levels of vulnerability of key actors across the related illicit trade chain. With these factors and the broader findings of the research in mind, this paper concludes with a set of ten considerations for those countries that may, in the future, consider introducing organized crime-focused sanctions.

SOC ACE Research Paper No. 1. Birmingham, UK: University of Birmingham. . 2022. 51p.