U.S. Department of Justice and Partners Increasing Enforcement of Sanctions and Export Controls (March 6, 2023)
New Revelations in Ukraine Lead to Tightening Global Sanctions (April 8, 2022)
Western Companies Starting to Feel Impact of Russian Sanctions (March 24, 2022)
FinCEN Encourages “Increased Vigilance” and Highlights Red Flags for Evasion of Russian Sanctions including Use of Virtual Currency (March 16, 2022)
Last week, the U.S. Department of Justice (DOJ) announced the launch of an aggressive interagency law enforcement task force, Task Force KleptoCapture. The Task Force represents another U.S. enforcement initiative in response to the Russian invasion of Ukraine in which DOJ plans to target Russian officials and “government-aligned elites” for violations of law related to economic sanctions and corruption. In an address to the American Bar Association on Friday, Attorney General Merrick Garland described the task force as a “force multiplier” and stated: “Together with our federal and international partners, we will leave no stone unturned in our efforts to investigate, arrest and prosecute those whose criminal acts enable the Russian government to continue its unjust war against Ukraine.”
Task Force KleptoCapture follows President Biden’s participation in a Joint Statement with other world leaders in late February condemning the Russian invasion and pledging transatlantic cooperation in the imposition and enforcement of financial sanctions. The Task Force will include six federal law enforcement agencies and dedicated prosecutors from DOJ’s Criminal, National Security, Civil and Tax Divisions, as well as U.S. Attorney’s Offices across the country. The Task Force will rely heavily on DOJ’s ability to seize and forfeit assets as a means of frustrating Russian support of the invasion through civil asset forfeiture. In addition to sanctions enforcement and evasion, the Task Force will focus on foreign corruption by oligarchs with ties to the Putin government. The announcement identified four distinct objectives for the Task force:
- Investigating and prosecuting violations of all recently imposed sanctions, as well as violations of previously existing sanctions against Russia for other acts of aggression and corruption;
- Pursuing those who seek to undermine restrictions against Russian financial institutions, including through prosecution of individuals who attempt to circumvent Know Your Customer (KYC) and reporting requirements applicable to U.S. financial institutions;
- Targeting the use of cryptocurrency as a means to evade U.S. sanctions or launder proceeds of foreign corruption; and
- Using civil and criminal asset forfeiture tools to seize assets belonging to sanctioned individuals or otherwise identified as the proceeds of criminal activity.
To achieve the stated objectives, DOJ will utilize data analytics, crypto tracing and intelligence derived from financial reporting and foreign government counterparts. Although the primary focus is on the individuals and entities subject to sanctions, the announcement includes a clear commitment of resources to target any individual or company that attempts to circumvent the sanctions by engaging in prohibited transactions. The announcement references a spectrum of criminal violations at the Task Force’s disposal including making false statements to financial institutions. The mandate further includes the prosecution of conduct that undermines the mission of the Task Force including criminal violations for “interfering in and obstructing lawful government functions.”
An important takeaway from the announcement is that DOJ will not limit its enforcement efforts to sanctions violations. Proactive targeting of corruption by Russian oligarchs may well have implications for U.S. individuals and entities who engage in commercial transactions if DOJ can trace funds to corruption overseas. U.S. money laundering laws allow DOJ to civilly seize and forfeit assets traceable to criminal activity without initiating criminal charges. Companies with financial ties to Russian interests should continue to proceed with caution and consider additional diligence measures in order to adequately assess risk associated with ongoing commercial activity.
Financial institutions should be particularly mindful of their reporting obligations with respect to financial transfers that may have links to Russian wealth, including taking account of the signals sent by the receipt of grand jury subpoenas. The targeted effort by DOJ and utilization of financial intelligence will likely result in increased regulatory scrutiny of financial institutions in terms of compliance with reporting obligations under the Bank Secrecy Act.
A detailed overview of U.S. sanctions imposed against Russia and Belarus is the subject of a previous posting.
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