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December 16, 2021

Global Sanctions Dashboard: Holiday Edition

By Julia Friedlander, Michael Albanese, Maia Nikoladze and Castellum.AI

In our previous edition of the Global Sanctions Dashboard, we covered the US Treasury Department’s targeting of criminal cryptocurrency exchanges and what the Pandora Papers say about the efficacy of sanctions. For this month’s ‘holiday edition,’ we zoom in on coordinated actions against Belarus, global human rights abusers, and examine targets in Africa across multiple regimes. But our story would not be complete without the greatest gift of all—anti-kleptocracy reform. 

Last week, the White House unveiled the first-ever United States Strategy on Countering Corruption, which outlines a plan to curb abuse of US jurisdiction for illicit financial purposes. The announcement from the White House came just days before the Summit for Democracy on December 9th, giving political legs to overdue regulatory reform, such as tightening reporting requirements for the real estate sector, a notorious loophole to stash ill-gotten cash or to launder criminal proceeds. Real estate reporting requirements dovetails with ongoing efforts to implement the beneficial ownership legislation that came out of the 2021 defense authorization.

Preventative measures go hand in hand with sanctions enforcement. US authorities have had little ability to track whether sanctioned actors move money within the US despite best efforts by commercial banks. This is a question of government priorities. In focusing on punitive measures versus prevention, the US has effectively operated as if the hard work is issuing the sanction itself when in reality, that is the easy part. Implementation and compliance are actually where the success of any policy hangs in the balance, as well as the ability and willingness of the private sector to cooperate. 

Democracy Summit

The Summit pledged a hefty $424 million in anti-corruption assistance last week, while Treasury rolled out a series of high-profile designations against nationals from Angola, El Salvador, Guatemala, Liberia, South Sudan, and Ukraine. On the same day, the State Department—pursuant to its Section 7031(c) visa restriction authority—designated nine individuals over similar corruption charges. Amongst State’s designees were Isabel dos Santos, daughter of former Angolan dictator José Eduardo dos Santos and formerly the richest woman in Africa, and Oleksandr Tupytskyi, the former Chairman of the Constitutional Court of Ukraine. 

In recognition of the annual global Human Rights Day, OFAC designated fifteen individuals and ten entities from Bangladesh, China, Myanmar, North Korea, and Russia over their involvement in widespread human rights abuses. Notably, these designations included two officials linked to the Xinjiang Public Security Bureau—the entity responsible for facilitating the ongoing genocide in China’s westernmost province. OFAC released Global Magnitsky sanctions every single day last week, underscoring that financial corruption erodes the validity of democratic governance and civil society.

Focus Africa

As the crisis in Tigray worsened in September, President Biden issued Executive Order 14046, authorizing sanctions on those responsible for the ongoing humanitarian crisis. Last month, OFAC sanctioned four entities and two individuals for undermining the stability and integrity of the Ethiopian state, including the Eritrean Defense Force and Eritrea’s ruling political party—the People’s Front for Democracy and Justice. The EU’s foreign policy chief, Josep Borrell, criticized EU member states for not following suit. But the EU did introduce a new Mali sanctioning authority as French troops withdrew from the region after eight years, implicitly replacing military involvement with the spectre of financial remediation.

The EU has also sanctioned eight individuals and three entities linked to the Russian private military contractor, Wagner Group (including a sanction against the group itself). The organization, led by Vladimir Putin’s close associate Yevgeny Prigozhin, recently expanded its operations to conflict zones in Sudan, Libya, Mozambique and the Central African Republic. According to EU officials, three of the Wagner mercenaries sanctioned were designated for their activities in Russia’s illegal annexation of Crimea in 2014. These sanctions were welcomed by Washington, where Wagner and its affiliated individuals have been sanctioned since 2017. But it was the Group’s expansion into Africa that in the end triggered the EU designation. 

Sanctions on African state or semi-state actors can be very impactful because many countries maintain limited access to Western financing, particularly through correspondent banking relationships. Sanctions by the US and Europe can sever financial systems overnight, but they also risk exacerbating humanitarian crises and incentivize banks to de-risk from countries or entire regions because they see greater liability than profit. Our projection map shows a complicated web of sanctions by a wide array of global actors. 

Belarus

After flying in over 8,000 migrants in an effort to force them into the Schengen area through Poland, the US, EU, and UK took coordinated action against those responsible in Minsk. In a remarkably quick response, the EU also agreed to impose sanctions on Belavia, the airline primarily responsible for flying the migrants in from the Middle East. OFAC joined its European partners with sanctions against 20 individuals, 12 entities, and three aircraft. After over a decade of Western sanctions and pause in IMF assistance, the US has relatively little leverage over Belarus and must decide carefully when to pull the levers it does have. US prohibitions on debt and equity in secondary markets and on the potash sector shows that a fabricated migration crisis was reason enough.

More Crypto Sanctions… 

In coordination with both Latvian and Estonian authorities, Treasury designated another virtual currency exchange. The designation against the Latvia-based Chatex follows an inaugural round against Russia-based Suex. According to Treasury, the two exchanges have direct ties with each other, and Chatex has been “using Suex’s function as a nested exchange to conduct transactions.” Both exchanges have been used to launder the proceeds of ransomware by cyber criminals. 

These actions are part of the Biden administration’s broader efforts to counter a number of recent ransomware attacks. As part of this package, OFAC also designated Ukrainian national Yaroslav Vasinskyi and Russian national Yevgeniy Polyanin, both of whom perpetuated recent ransomware attacks carried out by REvil—the group responsible for the attack against the IT firm Kaseya Limited in July of this year. These actions are further examples of sanctions used as tools of law enforcement. 

On the radar

As fears swell regarding a second possible incursion by Russian military forces in Ukraine, the United States and its partners are finalizing a slate of punitive measures they hope will deter the Kremlin from following through. Much analysis has been written over the past weeks that many of our readers are surely following. The most impactful is likely to be potential restrictions on Russian debt on the secondary market, which would inhibit the ability to clear dollar-denominated transactions. As touched upon previously in our Dashboard, sanctions against Russian oligarchs are also an untapped resource given their ties to Russian state assets. The US and EU partners are projecting a more decisive response now than in 2014– but escalation options are tricky to work out if the Kremlin doesn’t choose war, but something in between. And none of these options come without repercussions. Western investors see a downside risk now that they have re-entered Russian markets. As the US ramped up pressure on Iran, Venezuela and China over the past five years, investors came to view Russia as a relatively stable emerging market. In fact, US markets may be even more exposed to financial market restrictions than they were before little green men touched the Donbas the first time. 

Global Sanctions Dashboard

The Global Sanctions Dashboard provides a global overview of various sanctions regimes and lists. Each month you will find an update on the most recent listings and delistings and insights into the motivations behind them.

GeoEconomics Center

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

Related Experts: Julia Friedlander and Maia Nikoladze