Russia’s invasion of Ukraine and the subsequent sanctions that the U.S., European Union (EU) and other countries imposed against Russia in the wake of this act of aggression have been the focus of worldwide media attention since February 2022. In this installment of our Four Questions column, ACAMS Today speaks to George Voloshin, CAMS, CGSS, ACAMS’ global subject-matter expert (SME) on anti-financial crime (AFC), about potential scenarios for the Russian war. Voloshin, who specializes in sanctions, also discusses such topics as the effectiveness of the sanctions imposed against Russia, Russia’s complicated relationship with China and developments AFC professionals should look for over the next year.
ACAMS Today (AT): Based on your years of experience studying Russia, how do you see Russia’s war on Ukraine unfolding in the coming months?
George Voloshin (GV): It is notoriously difficult to predict the evolution of highly dynamic conflicts such as this one. Many early forecasts were upended as the Russian army underperformed, the Ukrainian armed forces beat all expectations, and the West responded with unprecedented sanctions and military support for Kyiv. Ukraine’s ongoing counteroffensive is meeting relatively strong resistance, but as the recently failed coup d’état by the Wagner Group demonstrated, Vladimir Putin’s regime turned out to be weaker than almost everyone used to think. If this is any indication of the regime’s accelerating degradation by means of elite infighting, creeping societal polarization and eventually developing centrifugal forces in the regions, Ukraine stands every chance of gaining and amplifying momentum with a view to inflicting a strategic defeat on Russia. In this war, almost everything on the Russian side hinges on the length of time that Putin will remain in power—but I wouldn’t venture a forecast!
AT: In your opinion, are the sanctions imposed against Russia having their intended effect?
GV: The effectiveness of economic sanctions has been hotly debated for decades by both academics and policymakers. To the extent that the main purpose of most sanctions programs is to change behaviors— for example, to compel a rogue regime to abandon its efforts to develop weapons of mass destruction or to withdraw troops from illegally occupied land—few such programs can achieve their goals in a short period of time. On the contrary, sanctions often result—at least at the beginning—in a “rallying around the flag” effect, consolidating elite and/or popular support for the ruling class, in addition to dealing a blow to the welfare of the average citizen.
Russia is no exception. However, Russia’s case clearly stands out, compared with the likes of Iran, Venezuela or North Korea. Since February 2022, Russia has been waging an aggressive war against its neighbor Ukraine, which has by now caused massive destruction and the loss of many lives. By applying sanctions pressure on the Russian state and its economy—in particular its war machine, for instance—through increasingly stringent export controls, Western governments are hoping that Russia will deplete its resource base more quickly than without the sanctions and will be forced to end the invasion.
Regarding short-term effectiveness, it is quite difficult to dissociate the impact of sanctions from the interplay of other important factors, such as Western military and financial aid to Ukraine, Ukraine’s own remarkable resilience, the surprisingly poor state of the Russian military (due in large part to endemic corruption), and weaknesses inherent in Vladimir Putin’s highly centralized, rigid and error-prone vertical of power. Yet, it is undeniable that the unprecedented sanctions imposed since 2022 have significantly complicated the Putin regime’s ability to procure foreign-made weapons, cut its access to substantial financial reserves held overseas and reduced its oil export earnings.
AT: What is your view of Russia’s much-discussed relationship with China, which is currently Russia’s leading energy customer? Will it have long-term impacts on the rest of the world?
GV: Russia’s reliance on China since the invasion of Ukraine last February has increased dramatically as Russia had to divert the export of its many commodities from West to East, seek urgent replacements for Western-made consumer and dual-use goods, and mitigate the growing isolation of its banking sector. Several weeks before Russia invaded Ukraine, President Putin and President Xi had proclaimed a “no-limits” partnership during the Russian leader’s visit to Beijing. This has prompted renewed speculation about the two countries’ expanding strategic relationship and how deeper and wider it could go. At present, Moscow and Beijing need each other: The former for the abovementioned reasons, and the latter needing Russia as a source of cheap commodities as well as in the context of China’s geopolitical rivalry with the U.S.
I have always seen and still see the China-Russia relationship, however close at the moment, as a marriage of convenience rather than a partnership of equals bound by common goals and values and a common understanding of their roles in history. Relations between Russia and China have been complicated for centuries. Moscow’s diminished global standing and growing dependency on Beijing’s benevolence will only stoke more suspicions among the Russian elites and population vis-à-vis Xi Jinping’s increasingly assertive China.
AT: Within the AFC sector, what developments or trends should we be looking for in the coming year?
GV: Staying with sanctions, evasion or, in other words, circumvention is and will remain a key vector of regulatory enforcement and a critical element of effective sanctions compliance for financial institutions and corporations alike. They are currently expected to do much more than just matching customer records against sanctions lists, for example, when it comes to identifying, evaluating and acting upon complex behavioral patterns and emerging evasion typologies.
On the anti-money laundering (AML) front, the U.S., EU and U.K. are all in the process of implementing wide-ranging reforms, which will have long-term implications for financial crime compliance not only within these jurisdictions but also globally. At the same time, a stronger AML-sanctions nexus will result in increasingly complex sanctions regulations, as hinted above.
Finally, I would be remiss not to mention the need to harness new technology-driven financial crime threats, such as those stemming from generative artificial intelligence, with its high potential for elaborate scams, among other adverse impacts to mitigate.
To submit topic ideas or comments, email email@example.com.
Interviewed by: ACAMS Today editorial, ACAMS, USA