Sanctions Evasion: Methods of Avoiding Restrictions – Case Studies

Russia, Iran, North Korea and China are reportedly notorious for flouting international sanctions, allowing them to sustain various economic, financial, social, or military operations.

How do they do it – here are some known methods of evasion:

1. Utilizing Third-Party Countries:
1. Russia leverages Turkey, the UAE, and Kazakhstan to channel restricted goods, while Iran employs Malaysia and Oman to camouflage oil exports.
2. Establishing Shell Companies:
1. Iran and Russia create front entities in Hong Kong and Dubai, concealing transactions under altered ownership structures.
3. Fabricating Documentation:
1. Russian oil masquerades as refined Indian or Chinese products, while Iran obscures tanker movements by turning off ship tracking systems.
4. Financial Manoeuvring:**
1. Russia opts for Chinese yuan transactions to lessen dependence on the U.S. dollar, and Iran utilises hawala networks for covert fund transfers.
5. Engaging in Smuggling & Black Markets:
1. Russia procures Western semiconductors and drones via Central Asian channels, while Iran dispatches weapons to Middle Eastern proxies through clandestine pathways.
6. Exploring Alternative Payments:
1. Iran initiates barter trades (oil for goods) with China and Venezuela, whereas Russia and China resort to gold and cryptocurrencies to evade financial constraints.

Implications:

1. Sanctions lose effectiveness –
1. Russia funds its war, Iran continues its nuclear program, and China strengthens economic ties with sanctioned allies.
2. Black markets thrive –
1. Illicit networks and corruption grow.
3. financial risks rise –
1. Banks unknowingly process hidden transactions.
4. Geopolitical tensions escalate –
1. The West imposes secondary sanctions on third-party facilitators.

There are two visuals from ACAMS pointing to Russian cases as follows and attached in full.

https://www.comsuregroup.com/media/hl1nx5is/acams-case-studies-sanctions-evasion.pdf