56 The Economist May 28th 2022
International
EnforcingsanctionsSpies like us
N
ever beforehave Western economic
sanctions proliferated in such num
bers. More have been slapped on entities
connected to Russia since its invasion of
Ukraine on February 24th than had been
applied to entities worldwide in the previ
ous decade, says Paul Feldberg, a partner in
the London branch of Jenner & Block, a law
firm. Big money is at stake. In 2014 America
fined bnp Paribas, a bank, nearly $9bn for
violating sanctions on Cuba, Iran and Su
dan. But governments out to enforce the
sanctions, and companies trying to stay on
the right side of them, are finding the work
devilishly hard. Many of the Russian enti
ties subject to sanctions are much bigger,
more complex and more deeply embedded
in global business networks than previous
targets in, say, Iran, Myanmar, North Ko
rea, Syria or Venezuela.
Another challenge is that America and
its allies have issued numerous “narrative”
or “implicit” sanctions, which apply not
just to cited entities but also to thickets of
unspecified ones connected in shadowy
ways. Labyrinthine business structures
must therefore be carefully mapped, saysChristopher Stringham, a lawyer in Vienna
with Refinitiv, a data firm that does just
such mapping to help clients avoid steep
fines. He tells the story of a Londonbased
company his team identified as part of a
sanctionshit Russian energy firm. Search
es in government registries had run “into
the sand”. Eventually, however, the team
found, on page nine of a Russianlanguage
prospectus not searchable in databases, an
oblique reference to certain debt instru
ments issued by the London firm on behalf
of the Russian company. That was enough
for the British company to qualify as a sub
sidiary subject to sanctions.
Mr Stringham reckons that with a bit
more effort the subsidiary could have
ducked “completely under the radar”. Rus
sia’s government seems keen to help firms
and oligarchs do so. For years Russian au
thorities have tolerated corporate filings
with falsehoods meant to sidestep Western
sanctions, he says. In recent weeks Russia
has also sharply restricted access to cor
porate registries and cut back on publish
ing data on energy production and trade.
Rather than struggling with the trustworthiness of information, Mr Stringham
says, “now we just don’t have access at all.”
Relevant information is disappearing
in other ways, too. Many Russian compa
nies and tycoons have hastily sold or trans
ferred assets like ships and stocks to enti
ties unlikely to be hit with sanctions.
Those deals can look legit. In many cases,
however, legal documents have also been
prepared to preserve the original owner’s
control. And, says Alexander Dmitrenko,
an expert on Russia and Ukraine in the To
kyo offices of Ashurst, a law firm, “that pa
perwork isn’t visible.”
Given the opportunities for deceit, the
deck might seem stacked in favour of those
seeking to evade sanctions. But investiga
tors trying to detect sanctionscheaters—
for government agencies, pressure groups,
or insurers and other businesses—are en
countering a surge of help from an unex
pected quarter. Russia’s attacks on Ukrai
nian civilians have stoked widespread out
rage, in no small part because of the flood
of shocking imagery on social media. As a
result, people with visibility into business
dealings involving Russia have begun to
disclose, on the sly, details of transactions
they suspect are improper.
It takes time for enforcement actions to
play out, and these are early days. But con
sider the experience of Bellingcat, a muck
raking outfit in Amsterdam. Christo Gro
zev, Bellingcat’s lead investigative journal
ist for affairs linked to Russia, says the hor
ror of the Kremlin’s war is leading people
to reach out with tips about RussianOutraged by Russia’s war, anonymous tipsters are helping detect sanction-busters