This Week in AML

The Impact of Sanctions on Peacemaking and Other Things

The International Crisis Group issued a report on the impact of sanctions on peacemaking. John and Elliot discuss critical insights in the report. They also examine whether or not sanctions against Russia have been effective and several other news items of the week.



The Impact of Sanctions on Peacemaking and Other Things - TRANSCRIPT

Elliot Berman: Hi John, how are you today?

John Byrne: Hi Elliot, great very excited here my daughter Melissa delivered her first baby, our first grandchild. Owen Ryan was born on Sunday morning, and is actually staying with us for a couple of days, so very exciting activity around the Byrne household.

Elliot Berman: I can tell you as a grandparent for a while now that it is the best job on the planet.

John Byrne: Yeah, it sounds great, man.

Elliot Berman: So you guys enjoy it. I know that they're going to be living near you for a while. So that's exciting too.

John Byrne: Yeah, absolutely. So even with all that going on, focused on a couple of things this week, and, we are now approaching Labor Day. So in the US Congress will be back.

There's no guarantees the Congress will do things of value, but you never know. But there definitely was a number of reports and storylines that we want to at least briefly highlight. One of them, we've talked a lot about sanctions. The value proposition, why sanctions can be improved by having jurisdictions connect with one another, but there's an organization, the International Crisis Group, that released a report just a couple days ago, and the report is entitled Sanctions, Peacemaking, and Reform, Recommendation for US Policymakers.

And I know you took a look at that as well as I did, and I thought what was interesting about it is looking at sanctions, describing them as valuable that they are a worthy tool of US statecraft as they characterize it, but also there are adjacent and collateral impacts. And that's something I know we've addressed, but this report, it's about 50 pages, goes into detail, doesn't say get rid of sanctions, of course, but does say there's some things we can be doing differently.

So I assume you saw that.

Elliot Berman: I did see that, and this is from a very interesting lens, recognizing that sanctions have their use has accelerated substantially in the last number of years, as we know, and that many of the uses have had to do with trying to combat wars or trying to hem in the participants in wars.

And the best example, of course, is the Russian sanction regime both in the US and internationally as a result of their invasion of Ukraine. And this report looks at sanctions and says, okay, so they're useful as statecraft, but they have potential adverse impact on peacemaking. So if you're trying to have an impact on war, ultimately the state you want to get to is peace. John, you and I talked briefly before we started recording that the authors noted that there were potential adverse impact to peacemaking.

John Byrne: Yeah they did. I would reflect on the fact that sometimes the activities that obstruct peacemaking need to be violence prevention, conflict resolution, and the more you use those sanctions, the more far reaching the downsides are.

So that's one of the reasons why it matters. What should be done, though, is an alignment with policy with peacemaking efforts. So clear objectives. So what are the objectives of the program? We've heard that before. They need to be subjected to rigorous periodic review, and they're arguing for permanent carve outs for peace activities.

I think that sounds easier than probably it can be implemented, but I get the point. And then the last one is to address concerns of our private sector's representatives about investing in previously sanctioned jurisdictions.

I think there's a lot more questions it raises than answers, but I do think we are starting to see more people pay attention to the collateral damage, if you will, which is only something that was briefly touched on when these things were first crafted. But I would just say that as they conclude the report, they say change is possible, but you need a commitment.

As we said, you need these objectives. You need flexibility. And I think all of that is something we should continue to follow. And it's obviously relevant to the AML community, because anytime, you're prosecuting, investigating, reporting activities, there are other impacts. And I think the more we hear about them, the more we can maybe sit down and address them. Again, the report just came out from the International Crisis Group based in Brussels. This is a report to US lawmakers dated August 28th, and the organization sells itself as preventing war, shaping peace.

Elliot Berman: The other thing that, that article prompted was for both you and I to be looking around and there were a number of articles that we saw in the last few days related to how effective is the sanction regime against Russia? In the US and in Europe and there was an a piece that came out from the Diplomatic Service of the European Union, the headline is, yes, the sanctions against Russia are working. And they go into a lot of economic analysis, to reach the conclusion that they're having a significant impact on Russia's economy.

There was also an article about a speech by Vladimir Putin, that occurred Monday of this week, where he was talking about the Russian economy and calling on the Central Bank and other parts of the government to do what they could to ease inflationary pressure.

There've been a number of articles about the impact of the sanctions on the overall economy and the loss in value of the ruble and things like that. So there's a lot floating around talking about it. But my conclusion after seeing all those things is, it depends how you look at it and how you measure it. But one of the things coming out of that ties back to the report and that is that sanctions that are put in place tend to be very sticky.

The question is, at some point, if this conflict gets to a negotiating table to try to come up with some political solution, that would end the fighting, part of the carrot for Russia will be the easing of some of these sanctions. And the question is, will the US, the UK, the EU and other sanctioning bodies and countries be willing to lighten up on some of these as a part of the bargaining process to get to peace?

John Byrne: I interviewed with some folks this week. They were doing a study regarding Recommendation 8 of FATF, which we've talked about. And one of the things they asked me, and this is relevant to your point about Russia and the reaction are these organizations effective? Of course, I do believe FATF is effective, but just suspending the Russian Federation and not kicking them out I think that's problematic.

You wonder about these things. Should we ever allow Russia back in? I'd say not unless there's massive change, and I don't see that happening anytime soon, but, that's I'm pretty hardcore when it comes to that. I think there should be more sanctions, small s against rogue countries.

One other thing I want to mention, I know we don't have a ton of time here, but we also picked up on a story in the Daily Mail. They're going back to our age old issue of de-risking and financial access and inclusion and all of that. The Daily Mail calls it de-banking, which I guess that's a term being used in the UK, but it's a story about a religious charitable organization, that had their accounts closed by Bank of America.

And they went to the Tennessee Attorney General, I guess they're based in Tennessee, saying that they were exited solely because their conservative Christian views. Bank of America denies that as you would expect but more importantly, they actually do say no, we closed it because they have these debt collection policies and we don't have accounts of clients that have debt collection services.

It's against B of A's policy. So even though in most cases letters on closing an account are supposed to be broad because of the potential that maybe SARS will file, that sort of thing we've talked about. This is a clear case where they've said, no it's actually the systems or the process that you're using.

And the Daily Mail makes it a both sidesism story here, in my opinion, and I don't know what you thought of that. But by looking at the name of the organization, by the way, they were called World Shine USA, but now the organization changed its name to Indigenous Advanced Ministries, and they support victims in Uganda. But because they have other websites that talk about their core religious beliefs they argue that's why their accounts were closed and for no other reason.

Elliot Berman: I did see the article. It struck me as interesting, this is happening in Tennessee and there has been a lot of activity in Tennessee in the legislature with regard to what might be called anti-woke activity. And so I'm wondering how much of this complaint is in part driven by feeling like they have an interested audience, and it ran in the Daily Mail and there definitely appeared to be a tie to the fact that Nigel Farage has been complaining that he was kicked out of his bank and that this seemed to be riding in the coattails of that.

I can tell you that from my days, working in banks, that there are clients who come to the bank with a perfectly legitimate business plan, but choose to add things to that business plan after they're onboarded. And those things are beyond the bank's risk tolerance. And if those things are identified, the bank will go back as B of A is saying they did. and say now you're no longer in our customer profile.

John Byrne: Yeah, all you need to know is the group representing them is the Alliance Defending Freedom. So you can Google that at your own time and you'll see what their mission is. And I think that's all you need to know about the propriety of this particular effort. So take a look at that. A lot more Congress is back in at the US late next week after Labor Day. So we will obviously see what what goes on. They're probably only in for about six weeks, so any activity would have to be fairly quickly discussed or publicized if they're going to get something done before they go back out they usually go out around Thanksgiving, so we'll see what happens there.

Elliot Berman: And what do you have in the pipeline, john?

John Byrne: This morning I interviewed Steph Casella, and I jokingly said to Steph you have now made history. This is the third time you've been a podcast guest. And I said, once you get to five, like with SNL, you'll get a free jacket. He talked about where we are with some asset forfeiture issues, Globally, because he's been doing a lot of global training, and a Supreme Court case that's up for the fall that could, depending on the outcome, could dramatically change the use of asset forfeiture laws in the US.

Elliot Berman: That'll be a good interview, and , we'll likely post that late next week. Also we had our August webinar. It's on best practices for your AML program. You should be seeing the full recorded version of that showing up on the website at the latest early next week. And our September webinar is September 28th, 1 pm Eastern Time, 6 pm BST and it's on managing a fraud program in the current environment. Chuck Taylor, our colleague Chuck Taylor is going to moderate, we've got Several excellent panelists, if you're involved in the fraud side of the business I think you'll find it really interesting.

John Byrne: All right, Elliot. Sounds good. You have a nice enjoyable Labor Day weekend, and we'll certainly catch up again next week.

Elliot Berman: You too, and have a great time with your new grandchild.

John Byrne: Thanks a lot. Take care.

Elliot Berman: Yeah. Bye bye.