Since Russia’s invasion of Ukraine in early 2022 and the collective response from western nations, there has been much debate about the success of sanctions.
To be expected, Kremlin-leaning representatives and politicians believe restrictions have had little impact and only serve to stifle Europeans.
In their mind, the very fact the war continues is more than enough proof.
However, Russia’s economy tells a far different story; now deep in recession with high inflation, reduced industrial production and collapsed retail trade.
As western allies continue to galvanise and the EU gets set to stop importing Russian oil, petrol and diesel, the challenges are very real for Putin’s war machine as it heads further into winter.
The billionaire black hole
In my view, a real measure of the success of Russian sanctions can be seen in Bloomberg’s latest billionaires index.
The data reveals Russia’s wealthiest oligarchs have lost more than $300m per day since the country’s invasion of Ukraine.
The total for the more than 20 Russian business people featured on the list is an eyewatering black hole of $95bn.
One of the biggest and most high-profile individuals in the past year was Roman Abramovich, the former owner of Premier League football team Chelsea.
In 2022 alone, his personal wealth fell by 57 percent (£10.2bn) to $7.8bn.
Just behind Abramovich is Gennady Timchenko, the founder of Volga Group, an investment firm with interests in energy, transportation and construction. The close friend of Putin has seen his wealth reduce by 48 percent to $11.8bn.
Suleiman Kerimov, another presidential ally, has lost 41 percent or $6.2bn.
No time for complacency
In recent months, the UK government has confirmed it has frozen more than £18bn of assets held by Russian individuals.
It has also restricted more than £940bn of total global assets across 120 entities and 19 Russian banks.
While there’s certainly more the government can do, this is a clear indication of the success of sanctions.
But while this is certainly positive, it’s by no means a reason to take the foot off the gas, especially for those regulated firms who serve as the “gatekeepers” to the UK’s financial system.
Robust sanction screening and detailed know your customer (KYC) checks remain absolutely essential to eliminate any opportunities to evade financial restrictions.
In truth, with so much Russian money in the system and with existing customers now potentially under the microscope, it’s a further reminder to all regulated firms to increase and modernise checks to avoid becoming enablers.
Back in August at the height of the invasion, the Joint Money Laundering Taskforce issued an urgent red alert which identified legal, finance and property as key professions to facilitate evasion.
In particular, it highlighted barristers and solicitors, financial advisers, estate agents and intermediaries.
Playing our part
A contributing factor in their assessment may be an overreliance among these sectors on flawed manual checks.
Add in annual reviews and regulated firms just cannot stay alert to changes or potential red flags quick enough.
Using digital compliance platforms such as SmartSearch and tools like electronic verification (EV) and real-time monitoring is an important way to minimise the risk of non-compliance and breaching sanctions regulations.
From verifying the identity of clients at onboarding to sanction list checking and monitoring – even retrospectively, EV is the best way for regulated firms to conduct their due diligence and weed out those facing restrictions.
So, while we must celebrate the success of sanctions in limiting the funds available to Putin’s war machine, we must also be aware of the work still to do.
Not just to stay on the right side of regulators and avoid fines, time-consuming investigations and even criminal prosecutions, but to support our friends in Ukraine.
Martin Cheek is managing director of SmartSearch
