This Week in AML

Sanctions Supporting Ukraine – One Year In

It has been a year since the Russian invasion of Ukraine. One of the immediate responses to Russia’s action was an ongoing coordinated effort by the US, G7 and European Union to limit Russia’s war-making ability through sanctions and export controls. John and Elliot discuss some key elements of the sanction programs and how they have performed since being imposed.



Sanctions Supporting Ukraine – One Year In - TRANSCRIPT

Elliot Berman: Hi John, how are you this week?

John Byrne: Hi, Elliot. Good. I'm down in San Juan for the 19th annual Puerto Rican Bankers Association anti-money laundering conference. So doing a few panels picks up here tomorrow as we're recording this . Chuck Taylor from Right Source, myself and Mary Lou Jimenez, who's on our advisory board we did a round table with several BSA officers here and while obviously it was confidential in terms of who said what, a couple things that we noticed from the conversation was the participants looking for help in terms of what sort of vendors they should use.

That still seems to be a common request. People asking each other based on the size of their institution, what they're doing. And then they had several folks from the banking commissioner's office who high level were asked about challenges that they see with the regulated banks, and not surprisingly similar to what you saw in the US maybe a decade ago, issues like the timing of SAR filings, making sure that independent audits are comprehensive. So things like that. I think it's what's really welcoming here is the commissioner's office is very transparent and very much interested in working closely with the institutions.

It's not a gotcha game by any stretch. Next couple days, there'll be about 400 folks here and several folks from the mainland that will be doing presentations. If anything of note comes out of this, we'll mention it next week. So that's what's going on. Also, with the president going to Ukraine, which is a very heroic act in my view, and then going to Warsaw.

And I guess today as we're recording this, he met with what they call the Bulgarian Nine. The White House has issued a number of statements regarding, one year since the invasion of Ukraine. What has been both the US and the global response. So there's a couple of things.

I know the White House issued a fact sheet that you're going to talk about. I also want to mention that the Deputy Secretary of Treasury Wally A eyemo talked about international sanctions against Russia and outlined both at a press conference and in testimony some of the things that they're doing. And I'll just quickly quote one of the things he said.

He said that going forward, our export controls and sanctions will continue to prevent Russia from accessing the equipment needed to make up for the losses that they've had. And our sanctions will make it harder for the Kremlin to use the remaining resources Russia can access to pay for the weapons that they need. A bunch of other things as well. But that was one. And I know you've looked at the White House fact sheet.

Elliot Berman: Yes. The fact sheet is divided into a number of sections. Not surprisingly, not just focusing on the sanctions. We're talking about humanitarian assistance and financial assistance, fundamental services helping Ukrainians with fundamental services like healthcare and heat and things like that.

I think the same thing appears in both the Treasury Department statement and the White House fact sheet, and that is noting repeatedly that the US has not acted alone, that this has been a global effort. As you mentioned, certainly the G7 and the EU countries and others have participated in various ways, as well as the NATO countries in terms of material.

And the citizens of Eastern and Western Europe have been directly impacted by the changes in energy policy by the Russians, to use it as a tool to try to divide the unified group standing against it. Other things that are covered in the statement are security assistance that the US, again the White House's statement does focus in depth on US activity, in terms of weaponry supported weapons systems provided, ammunition and other things like that.

But humanitarian assistance is a big focus. It mentions that that the US has provided $1.9 billion to Ukrainians in need of assistance, including more than 13 million people from the country who've been forced to flee their homes. As we know from reading the regular press, there's substantial disruption and displacement going on.

We've also accepted thus far, 267,000 Ukrainians who have immigrated to the United States because of their need to flee their homes. And we've assisted our European partners with significant $340 million in refugee assistance because many of the refugees, of course are staying in Europe, but going to the neighboring countries.

They also talk about democracy, human rights and anti-corruption assistance. You and I have spoken regularly about the connection between break breakdowns in civil order and corruption and the danger of corrupt governments. And Russia seems to be continuing to hold one of the lead positions on that list.

John Byrne: Yeah. I've seen some as they say, talking heads in the past couple days, being asked about sanctions as they always are. Are they valuable? Do they work? And, one of the key themes is it takes a while for sanctions to have their impact.

And the deputy secretary points out that Russia's economic data appears to be better than expected early in the conflict, but some of the US' first actions and they include immobilizing, Russia's central bank reserves, as well as sanctioning and what they call de-SWIFTing, taking them off SWIFT, sent the rubble into a 50% decline. The central bank to stem the bleeding by putting in place draconian capital controls that prevented money from leaving the country. That provided capital from the central bank to prop up the financial sector. But despite their best efforts, the Russian economy continues to deteriorate.

And they quote a Bloomberg Economics estimate that the Russian economy is on track to lose $190 billion in GDP by 2026 relative to its pre-war path. So clearly sanctions are working. All those other things are having an impact, and I think that's really the essential part of this is to recognize what's been going on. Also the deputy Secretary also says the economic size of the US' Coalition has been critical in enabling the US to go after oligarchs. So we've talked about that, the oligarchs and elites that continued to enable Putin's regime. And they talk about the task forces that were created to freeze and block assets.

So a lot going on a lot different levels and I think it's really important that people see that. And, it's clear from, as we're recording today, there were several members of the Republican side of the House that did go to Ukraine to speak to President Zelensky.

So even though the media tends to spend its time on those, on the far ends that want to see us limit the help that we've been giving Ukraine, that as you say we've been doing multilaterally, it is good now to see that there are bipartisan responses, which is so essential to supporting the good people of Ukraine .

Elliot Berman: Yes. One of the future efforts of the sanctions alliance, if you will, is to really increase and renew the effort for rigorous enforcement of both sanctions and there's also export controls which are in place trying to make sure technology support that might be generated in the various countries doesn't make its way to Russia.

Coming back to your point about the fact that are sanctions working and they take a long time, there is, as you alluded to, there is a capability by a large economy like Russia to be able to do some things in the near term, but

those resources don't necessarily renew. And with GDP deteriorating and and a budget deficit accumulating , without the ability to fund it with sales of, government bonds or other government instruments the way other countries that have deficits do, including the United States. I think the passage of time is not on Russia's side economically.

John Byrne: I agree. So we'll continue to follow this going forward. We have a number of interviews that we've done that will continue to be posted over the course next couple weeks. The one that you did with Homeland Security is up and on our site today. That's the second of a three part series.

Always pleased when we can spotlight our law enforcement partners. Also shortly, a former enforcement lawyer from the OCC, Jim Vivenzio, who's now in private practice. I was able to talk to him a bit ago and we're gonna post that about both his experience at the OCC and what he sees in terms of the challenges to continue for the financial sector.

In March, I'm really excited about this, we've done interviews before about Wolfsberg, but we're going to do a webinar with William Langford and Alan Ketley to talk not just about the mission of Wolfsberg, but some of the principles, guidance documents and statements they've issued and how that multinational organization.

Is what they work on thematically works for institutions of all sizes. So excited about that, and that'll be coming up in March, but what's happening in February?

Elliot Berman: So February our colleague Chuck Taylor is going moderate a panel of experts from mid-size banks, and they're going to be talking about their compliance challenges based on their size, so a mid-size bank these days is still pretty good size. They have super bank sized problems, but maybe not the same level of resources. So how to be nimble and effective at those varying sizes to tackle the challenges that members of our community face every day. We're excited about that. We think it'll be interesting and practical. That's Tuesday, the 28th. You can still register for it on our website aml rightsource.com. And as soon as that one is over with, you'll be able to register for the one in March, which you mentioned.

John Byrne: That sounds good, Elliot. Good talking with you. Stay safe. We'll talk again, and as I said, if I pick up some insights from some of the many panelists here and speakers at the Puerto Rican Conference, I will pass those along.

Elliot Berman: All right, sounds great. Have a good time and fly home safely.

John Byrne: Take care.

Elliot Berman: Goodbye.