This Week in AML

Should Russia be Designated a State Sponsor of Terrorism?

John and Elliot chat about an interesting Op/Ed piece that appeared in The Washington Post this week. The author, an expert in international law, examined the implications of designating Russia a State Sponsor of Terrorism. John and Elliot discuss the importance of understanding the impact of that designation and the potential unintended consequences. They also review the latest sanctions announced against Russian elites close to President Putin, including a new action targeting evasion of earlier sanctions.



Should Russia be Designated a State Sponsor of Terrorism? TRANSCRIPT


John Byrne: Hey, Elliot, how are you doing today?

Elliot Berman: I'm good. How are you, John?

John Byrne: Well, we're both in Buffalo, New York, in one of our offices for AML RightSource, looking over at lake Erie, which is pretty exciting to see all the boats out there. So we're here for an advisory board meeting. I think many of the folks, hopefully listening to this, have heard from a number of our board members who have been part of webinars.

Over the past couple of years, part of our strategy tomorrow is to plan future content programming for the next couple of years. So we're excited, and we haven't actually had an in-person board meeting since May of 2019 because of COVID. So, that's right. There was a bunch of things that went on during the week.

I saw a speech given by the acting comp control of the currency on cybersecurity issues. So I tell folks, take a look at that when you get a chance. But there were a couple of pieces that we talked about regarding sanctions and two particular pieces. One was an op-ed piece in The Washington Post.

And the second is the most recent. I say the most recent cuz these things probably come out every day, but the treasury announces on sanctions. 

Elliot Berman: Correct. 

John Byrne: So I know that you read the op-ed piece. It was written by Ingrid Brunk Wuerth. I believe that's how she pronounces her last name, among other things. She's editor-in-chief of the American journal of international law.

And she talks about the fact that you know, there's a lot of comments about designating specific oligarchs in Russia about being state sponsors of terrorism. And you, you see that a lot. You see a lot of both sides of the aisle saying that this is something that the president should do or the treasury should do.

She takes a different perspective. She says there are actually some negatives behind it. The designation. Do you recall some of her points there?

Elliot Berman: I do. And it's a little bit of a technical explanation, but I think oftentimes, you know, the technical stuff behind the idea is really where you need to go to understand whether the idea makes sense is a good one.

So the author acknowledges that the statutes and the rules are very technical, and you need to. But she points out what would happen as being a state-designated a state sponsor of terrorism is it would take away some of the immunity that foreign governments have from being sued by US citizens in US courts.

And what happens is then there would be opportunity from one point she makes is that the approved litigants are very limited in the litigation. They'd be US persons or members of the US armed forces, or other US government employees. So that's a pretty narrow group. Secondly, to the extent that any members of that group were successful in this litigation and could get damages.

They would try to collect those damages from frozen Russian assets, which isn't a bad thing, except to the extent that the call for this is being done in the context of helping Ukraine. The Ukrainians would be able to access the courts through this change in the immunity and the frozen Russian assets that might someday be accessible by the Ukrainians. Other ways would be diminished by any successful suits by US persons.

And, so I think her point is in large measure that it's not exactly what everybody thinks it is when they say they want to equate them with. North Korea, for example, who's, you know, another designated state sponsor of terrorism.

John Byrne: Yeah. Not that different from the debate about domestic terrorism, right? Because, and I've been quote, "guilty" unquote of this as well saying we have to start labeling things, for statutory and other reasons, but some on the other side, say, if you do that, there's already current statutory.

Tools that can be utilized. And so have we utilized those to the, to the degree that we should. And it's much more nuanced, kind of like what the professor has written about here, in terms of it not being that simple of a solution. So, right.

Elliot Berman: The other component of all of this that you mentioned is that there are existing tools that the US and other countries have used against Russia sanctions.

The best example is that we've talked about those sanctions since the war started. And, as you mentioned yesterday, or the day before, the treasury issued some more sanctions, again, aiming at some individuals who are closely aligned with president Putin and also identifying organizations for further sanctions as a result of their efforts to evade existing sanction programs that impact them.

John Byrne: Right. And the press release around this specifically says sanctioning elites and companies but points out that part of the reason is that they generate substantial revenue for Russia. So it's, as we know, sanctions are a way of getting funding away from a variety of criminals. But they make that point here. So they list a number of the quote elites that are close to the Kremlin. And that's listed there as five or six of those. And then there's a section on sanctions of Asian attempts.

And if hopefully some of you have already listened, we did a podcast last week with Kit Conklin, who talked about export control of Asia and the reason why FinCEN and The Department of Commerce issued a joint alert. So this is consistent with what the treasury and other agencies are focused on, including FinCEN, and that's, you know, you issue these sanctions. Still, then when there are attempts to evade those sanctions, there are additional penalties for that as well. I think the summary of all of this or these last two items that we talked about is really that this is not gonna go away anytime soon, maybe ever. And the US and other governments will continue to look for effective tools. And as we either create new ones or use existing ones. In this situation will be important for us to really understand not only at the policy level but at the technical implementation level what the result will be.

John Byrne: I totally agree with that. And as we've always said, sanctions are not as simple as it seems. Some have characterized it as sort of an administrative requirement that if you mess something up, there's a penalty, but it's a lot more nuance than that.

Some of it is the tools, the technology you use, the ever-changing additions, hardly any deletions, but additions of sanctions. And then there's a long debate, and the professor does cover that early on in her piece, saying that there's some question about the value proposition of sanctions. She's not saying that there is none.

You're saying that is still to be determined. So in, specifically regarding Russia and Russia's attack on Ukraine,

Elliot Berman: Right. Sanctions in the US as a foreign policy tool in one form or another have been around the civil war. Right. And so, different administrations have used them differently for different circumstances.

Some stand for a long time or are meant for a long time. I think a good example of that is the Cuban sanctions, which have been in place now for many years. Even if the program isn't turned off, the focus of it fades away a little bit. And so it's lessons because circumstances change.

John Byrne: So take a look at that. As we always say, you should be subscribing to the Treasury Department's plethora of press releases. Obviously, we focus on AML sanctions that CTF, but obviously, they are in the thick of things regarding the economy. So if that's of interest to you, a lot of good information there with treasury, obviously of issues things virtually every day as well. And I'm sure the OFAC experts are listening to this already know all of this, but those of you that work adjacent to that space, just to be on top of things and understand what's out there, probably makes a lot of sense. Coming up for August on the 25th, there will be a webinar that we're putting together.

We're excited about this, as we are with all our webinars, of course, but this one will focus on the concept of some of the laws and regulations designed to increase transparency and where they sit. Based on a practitioner, Jonathan Lopez, a former DOJ lawyer who's now in private practice, and Gary Coleman, who's with transparency international and advocacy group.

And I'm going to talk to both of them about the practical issues with the push for transparency, whether it's shell companies, more reporting, and all that. And Jonathan's, take on as he represents clients, what are some of the regulatory and compliance challenges. So we're gonna give you some excellent, we hope, practical advice that day, August 25th.

You can register on our website. And we've got some more things coming up in the next few weeks. I hope to be doing an interview with Steph Castilla, who is an expert on asset forfeiture. We're hoping to do that third week of August. Obviously, we'll try to get it up and post it maybe in early September.

That's another area sort of like sanctions, which is not off to the corner, but asset forfeiture is something that people talk about, but I don't really understand how it's practiced the value and all of that. So, we talked to Steph a few years ago, and there's been a lot that's happened in the best couple of years. So he's gonna update us on what's going on, not just in the US, but globally.

Elliot Berman: Great John. So next week we won't be together, but you'll be able to hear us again a week from this Friday and ideally every Friday. So I look forward to talking with you and actually having dinner with you, which I haven't done in a long time.

John Byrne: Take care, and you'll be on vacation next week. Although we'll still talk, so enjoy your vacation.

Elliot Berman: Thank you very much.