The National Economic Crime Centre and the Office of Financial Sanctions Implementation, which is part of HM Treasury, issued a "red alert" on Tuesday, setting out the methods used by blacklisted individuals to evade the measures imposed on them by governments around the world.
The agencies have issued the red alert in conjunction with the Joint Money Laundering Intelligence Taskforce, which boosts collaboration in the war against the flow of dirty money.
The alert, a 15-page document, warned that designated persons and entities — individuals subject to sanctions, or DPs — will seek to move assets and funds to places where sanctions are not in place, such as the United Arab Emirates, China and India.
"Doing so on the behalf of a DP will involve the use of multiple laundering methods, including use of secrecy jurisdictions or citing Russian legal protection from sharing information," it added.
It also likely that DPs will explore alternative payment methods such as crypto-assets as they seek to shift money and circumvent sanctions, according to the alert.
"Russian money launderers have increasingly been observed in U.K. intelligence and operational activity providing cash to crypto-asset services, with the ability to move significant volumes of funds," the report cautioned.
Western governments have rolled out sanctions targeting Russia after it invaded Ukraine in February. The U.K. has frozen the assets of Russia's largest banks and imposed sanctions on commodities such as precious metals. The government also told insurers in March to stop providing aviation and aerospace cover to Russian clients.
The agency alert notes that jurisdictions such as Britain, the EU and U.S. are targeting the elites who control Russia's economic interests and enable Moscow's aggression in Ukraine with unprecedented sanctions.
Sanctions authorities — including the U.S. Office of Foreign Asset Control and, in Britain, the Office of Financial Sanctions Implementation — have cooperated. But differing speeds among jurisdictions in designating individuals has created opportunities for DPs to arrange the movement of money or assets, the alert said.
The alert sets out recommendations for regulated companies including financial services, legal and accounting firms in Britain. It says that arms-length transactions should be documented and should not be taken at face value. Finance firms and other businesses should carefully assess complex corporate structures when they carry out enhanced due diligence for high-risk clients.
The alert also recommends that finance firms conduct enhanced due diligence when they are presented with paperwork purporting to represent a change in ownership by a company linked to a designated person. They should also consult the sanctions authority to establish whether it is reasonable to believe that ownership has not been transferred appropriately.
Giles Thompson, director at the Office of Financial Sanctions Implementation, said the "latest collaboration outlines the significant exposure that many sections of industry have to sanctions evasion and — given the nature of the risks identified — is something we will all need to be increasingly vigilant to."
Aziz Rahman, senior partner at law firm Rahman Ravelli, said the red alert is a clear sign that the regulators are on high alert when it comes to the techniques that could be used by those looking to evade the effects of sanctions.
"In such a fast-moving, rapidly-changing environment, the relevant agencies are showing that they recognize the potential for chicanery by those looking to bypass the effect of sanctions. The agencies, it seems, are eager to prevent such maneuvering," Rahman added.
--Additional reporting by Martin Croucher and Joel Poultney. Editing by Ed Harris.
For a reprint of this article, please contact reprints@law360.com.
