Name: Russia & Ukraine: Three Years of War & Sanctions
Uploaded: 2025-02-27T16:30:10.461Z
Duration: 1 h 56 s
Description: Russia & Ukraine: Three Years of War & Sanctions

Transcript for "Russia & Ukraine: Three Years of War & Sanctions": Hi. Good morning, everyone. Welcome to our webinar to discuss three years of Russia's full scale war against Ukraine and three years of sanctions and other restrictions to help stop Russia. We just marked the third anniversary of Russia's full scale attack, and the EU, the UK, Canada, and other global powers have imposed some of the most stringent sanctions against Russia to date, many of them focusing on facilitators as well as Russia's shadow fleet. As some of you may remember, we did this two year anniversary edition of this webinar, and that was last year right around this time. And we have so many questions, we ran long. I was honestly hoping not to have to do this again this year, but here we are. So this year, we decided to focus on you and your questions and your concerns as the sanctions environment gets more complex and more challenging. Just a couple of notes. First, this webinar is being recorded. We'll share the link with you after the event ends. Please do share it with colleagues or revisit if you'd like. Also, as I mentioned, this event is about you and about your questions and about your concerns. So you'll see a q and a tab on your screen on the right hand side. Feel free to comment or submit questions after the webinar ends. In addition to the link to the recording, you'll receive other information that may be useful. So sit back and let's do this. My name is Nikki Kenyon. I'm an associate managing director at the Institute for Financial Integrity focused on training and supporting financial integrity professionals in efforts to protect the global financial system, from abuse. Right? I'm also a former US Treasury intelligence officer, and sanctions, AML, and other types of risk are my white whales. So I'm kind of a nerd. Joining me once again this year is Pavel Verkhnadsky from the due diligence firm Khosa. Pavel founded Khosa twenty fourteen with the goal of providing clients with in-depth understanding of risk that's related to their business activities and focusing on the government business relations, on anti corruption, on sanctions, AML, and other issues. Before fine founding COSA, Pavel worked as a risk analyst, building knowledge of country risks in Eastern Ukraine or Eastern Europe, Russia, Central Asia, and The Caucasus, and helped conduct sophisticated due diligence research on financial and industrial groups in the region. So if you need the deep expertise on due diligence research and jurisdictional, linguistic, and cultural knowledge in the region, which are really critical to effective compliance, go to Podhill. Don't go to me. I'm kidding. Alright. So, the agenda is actually going to be relatively short this year. A lot has happened. So first, what I'm gonna do is just quickly review a timeline of sanctions and other restrictions against Russia. Things got a bit more complicated. So the first thing I'm going to tell you without even getting into the details, number one, keep an eye on the latest developments. Number two, reexamine your risk assessments and your vulnerabilities often. Three, engage with your legal teams and other sanctions experts often. And we'll go into some significant developments and what they mean, and then we'll get to your questions because, really, that's what we're here to do. That's what this webinar is really about. So having said all that, here we go. So first of all, like I said, a lot happened. Since Russia's full scale invasion of Ukraine began in 2022, global powers including The United States, The UK, Canada, EU, France, Switzerland, and when you tick off Switzerland, you know you've really messed up, and others imposed more than 21,000 designations on Russia. This is from data from Castellum AI, and it includes individuals, companies, vessels, and aircraft. More than 5,600 individual designations alone in 2024 from all of these world powers. Significant designations including included, Russian diamond mining company, Alrosa, and its CEO, US targeting of Russian metals and mining sectors, future Russian energy production, military sector, and financial sector. So that alone is significant. But, wait, there's more. Global partners also started sanctioning Russian propaganda, Russian sanctions evasion, cooperation with North Korea and Iran, and Russia's so called shadow fleet, which is being used to get around the $60 per barrel price cap. As you can see, last May was a big month. Hundreds of individuals and entities were sanctioned by The United States, including facilitators of sanctions evasion. The EU targeted Iran for its support to Russia's war that included missile and unmanned aerial systems or UAS transfers. June was also kind of a big deal since The United States expanded its definition of Russia's military industrial include any entity sanctioned under executive order one four zero two four, which means secondary sanctions risk. I'll address this in a bit more detail in just a few. The UK and EU also targeted individuals, entities, and vessels in Russia's shadow fleet, and the EU, which must renew sanctions every six months, extended its Russia sanctions until this past January. So as you may have heard, there were concerns about whether Hungary and Viktor Orban in particular were would just stand in the way of extending those sanctions. But everything worked out in the end, so we're good. Also extended were EU sanctions against Russia for its illegal annexation of Crimea, and that's until June. Another huge tranche of designations against Russia came in August when the United States treasury targeted almost 400 individuals and entities for helping Russia sustain its war effort and invade sanctions. In addition, a US ban on import of Russian uranium went into effect. In September and October of last year, Western partners continued to impose sanctions on facilitators and ship out fleet vessels. These are a big deal because these ships are old. Many times, they're not worthy, and they enable Russia to continue shipping oil above the price cap imposed in 2022, as well as they also endanger the environment and cause accidents at sea. Another big effort in Europe was focused on Russian propaganda and hybrid operations efforts. The EU used those new sanctions authorities for the first time to target Russian hybrid threats in December. So that was a big deal. As you can see, October was also a pretty big month for sanctions against Russia. Supporters and suppliers of Russia's war against Ukraine were designated by The United States. OFAC in November slapped sanctions onto Gazprombank, the biggest bank in Russia that hadn't yet been blocked. So why was this a big deal? Well, first, the bank is used by the Kremlin to pay its soldiers, and that includes combat bonuses and compensations for the families of those killed in Ukraine. Second, those who are purchasing Russian gas were doing so through Gazprombank. In 2022, Putin forced buyers to open special accounts at Gazprombank to pay for Russian gas in rubles. Designations forced Putin to rescind that order, allowing foreign buyers to use other financial institutions to pay for Russian gas. But the additional designations are just the tip of the iceberg. I said this was gonna be complicated. So Russia was the top sanctions target last year. International partners added more than 4,000 designations against Russia last year, and The United States alone issued more than 2,000 of those. In addition, about a third of the designations issued against Russia were actually located outside Russia. So Iran, China, Central Asian countries, and others. So what does that tell you? It tells you that your due diligence efforts need to include jurisdictions that are known locations for Russian sanctions evasion. They're higher risk. So while location in and of itself doesn't indicate wrongdoing, you should understand the risks of the transacting there and know that the risk is definitely higher. I did promise to talk about secondary sanctions, so let's get to that. They're a favorite topic of mine. So this good friend of mine hates the term secondary sanctions. He says they're just regular sanctions with more extra jurisdictional oomph. Jurisdictional oomph. He says that with a French accent. I'll call them secondary sanctions because it's just easier. Alright. Do you remember executive order one four one one four that president Biden signed in late December twenty twenty three authorizing sanctions against any foreign financial institution that conducts significant and continued transactions with Russia's military industrial sector. This is regardless of whether a US nexus is present. Basically, that means that even if transactions don't involve US persons or The US financial system, these foreign financial institutions can still be designated by The United States, banning US persons from transacting with these banks. So we can't tell the foreign banks what to do if their actions don't involve US jurisdiction, but we can tell US persons they're no longer allowed to transact with them. So pretend you're a parent, and you're telling your child that they can't play with the neighbor's kid who was caught doing something bad that didn't exactly involve your family. You still don't want your child to play with that particular kid. So that's your quick primer on secondary sanctions. Those of you who are parents totally understand that. So back to last year, in June, the United States assessed that Russia had fully pivoted to a wartime economy. Therefore, all the entities and individuals sanctioned pursuant to the Russia harmful foreign activities executive order, that's one four zero two four, were now to be considered part of Russia's military industrial sector, and therefore present a secondary sanctions risk. That's thousands of entities and individuals that if you transact with them, you could be sanctioned. So that's a big deal. Right? Hopefully, y'all get the whole secondary sanctions thing. And don't worry, we'll get to your questions in just a few. I got just a couple of more things. So I'll say this, although our European partners have never been fans of secondary sanctions because of their so called extra jurisdictional nature, they have expanded their designation authority somewhat last year to target entities outside their jurisdictions. So The UK last year tightened sanctions against Russia, creating new designation criteria targeting individuals who own, control, or serve as directors or managers of sanctioned entities, as well as those providing services or resources to sanctioned entities. The change is basically intended to allow the UK government to designate foreign financial institutions that facilitate transactions on or on behalf of or in support of a broad range of specified sectors of strategic significance to the Russian government, even if those institutions and sectors are outside The UK jurisdiction. How does how familiar does that sound? Right? Sound like e o one four one one four language about secondary sanctions? Yep. The EU in March began requiring all exporters to insert a no reexport to Russia clause into their contracts for restricted products such as aircraft and arms and other common high priority items. The clause must prohibit reexport of the relevant goods. So, you know, like technologies, items, anything like that for use in Russia, and that contain consequences in the event of violations. Another biggie was the change in definition of ownership in the EU last year. Now ownership means being in possession of 50% or more of the proprietary rights of the entity. That didn't used to be like that. It used to be it used to be more than 50% before this update, but now it matches OFAC's fifty percent rule. So I'm not gonna go through all the developments because we do wanna get to your questions. Suffice it to say that the sanctions against Russia in 2024 have become more vast and more complex. So with that introduction, we're gonna get into some questions. We had a lot of questions coming out of time, and it would be great to address at least some of them. But we also have questions pouring in from the audience live, so we want to make sure that we make the session as useful and engaging as possible for those of you attending and address your questions and interests. So, Pavel, I'm gonna I'm gonna start off with a first question to you now that you've listened to me talk for fifteen minutes. So in the past year, with all of these developments and your company, COSA, working closely on due diligence research, what kind of questions, changes, requests, etcetera have you been receiving from clients? Are they aware of these developments? How are those developments impacting your work? Thanks, thanks, Nikki. And, well, the the main, the main question that is now included into nearly every task, every report by default is whether there is any connection of the, subject entity with, Russia or Belarus. So that that counts by default now and, that that might sound simple, like, whether there's a connection or not, but, actually, that means a lot of, a lot of research into the actual ownership, ultimate beneficial owners. That that that involves a lot of understanding of the related and affiliated entities of a subject company. And, this also varies depending on where, well, where the companies we're working with, operate. So it it it it's really it is really a geographic matter now since some of the Middle East or or Central Asian, counterparties of our clients are now in a higher risk kind of zone since these jurisdictions have been involved and are still involved in sanctions, circumvention mechanisms. And, you know, you can see how imports of certain critically needed goods for Russia. Rye is in countries like, Armenia, Georgia, Kyrgyzstan, Turkey, and obviously, companies operating in these regions want to understand whether their partners, their distributors, you know, their representatives, their counterparts do not do not work with the Russians or do not help them circumvent any kind of, sanctions. Not to say about actually Russian individuals in the ownership of companies. Obviously, a Russian, just by matter of nationality, doesn't mean, a huge kind of problem. However, this requires, some additional research and, understanding of his or her, connections in, side Russia. Since we clearly understand that many many of the entities evolving around the world are not always purely business since the Russian intelligence is working quite broadly and, you know, they're building those networks, in including for sanctions of Asian quite, quite quickly. Yeah. On yeah. No. I've I've I'm, you know, I'm assuming that there's just a whole lot of kind of concern and churn. So you're almost kind of doing this research by default in addition to all the other questions that that your your customers are asking? Well, yes. This this has been, in place for all these years. So the the moment where the full scale invasion kind of, started, clients started asking this this question in nearly every report. I I'll I will not open a big secret saying that even since 2014, as a company headquartered in Ukraine and understanding the Russian threat very well, we've included this, risk into into reports before. But now, companies keep on keep on asking that with a kind of a more serious approach, I would say. You know, just not just tick the box exercise, but rather in-depth understanding of the affiliations and, UBOs. Yep. More more research into they they they kind of require more, even more human intelligence, in in this regard, which in which wasn't always, the matter because it is it is through the human intelligence when you can actually, reveal certain facts that are, you know, unseen in the in the public domain. Okay. I'm gonna follow this question up, with another one. So given your expertise in due diligence, and you have quite a few, you know, due diligence, corporate intelligence, etcetera, What are some of the most creative or concerning, ways that Russia has tried to evade sanctions over the past three years? And how effective have law enforcement measures been in countering these efforts? I know we have a question coming in, you know, about about these complex and diverse entities, individuals, and assets. How do law enforcement companies or law enforcement agencies deal? Well, the yeah. Enforcement is a is a huge issue, frankly speaking. But I'll start with the kind of creative, creative approach to evading sanctions. Unfortunately, unfortunately, the main reason for the Russians to be able to evade sanctions is the willingness of many companies in many different countries to actually close their eyes on, these intervention attempts. And this is not a secret that many of the sanctions coalition states and companies from sanctions coalition states, well, mainly Western countries, at times simply don't care too much where their products go, while they're selling them through intermediaries, in, in countries around, Russia. And we've seen, we've seen goods going, you know, very critically needed goods for the Russian military industry, for example, which should be clearly, a a red flag, I mean, when you're selling some types of metals or, you know, some critical raw materials, to to Russia and there is an entity purchasing these, goods, say, in Estonia and then, reexporting it to to the Russian Federation, making kind of, an impression it is selling to some civil firm. It's it's it's really up to the seller to to understand that that is actually a sanctions or convention mechanism, involving just an intermediary state, an intermediary company, and then and then a fake recipient in in in in Russia, when you're selling something that is clearly used in the military, industry. But, you know, if in in in documents that seem okay, many don't care too much. And that is actually the the the main cause of, of circumvention in in in in what we see from, research. I'll give you some interesting, data. According to the, Economic Security Council of Ukraine, it's an NGO working on, sanctions aspects, and, we cooperate on certain things with them. According to their research, around 10,000 CNC machines used for arms production were sold to, Russia, from the, companies in in the EU. So, CNC machines produced by companies from the EU are directed to the Russian, jurisdiction and very likely used in the military, industry. Another 12,000 come from China. And obviously, all of this goes through some kind of, intermediaries. You can see machines coming from Germany, from Italy, the Baltic States, Czech Republic. And some of them are going through intermediaries in Turkey. Some of them are going are reexported through, China. You can see Japanese machines going through China, actually. So it's, it's a matter of how companies conduct their research into where their product goes. So identifying the end user is, is critically important for the producer, for the seller. It there is also an issue when subsidiaries of these, well known European companies, in, Turkey or China, produce machines in these countries and sell them directly to to to Russia. It's hard to believe that the, headquarters don't know about this. Hard to believe. So it's it's it's, it's it's all it's, all about a responsible approach to to exports, but it's also a responsible approach, obviously, to due diligence on your third parties, but it's also a matter of how it's being enforced. And we can say that, in Europe, it looks like the commission is taking this seriously because, the list of products, kind of high priority products, high priority goods, was, extended, last year. And, mostly mostly, with the CNC machines and components to them because there is a clear understanding that these machines are used by Russia to produce, weapons. Can you imagine around 22,000 machines in just one, just one year and and something, several months? So it's, it's huge amount. You can also see how they, you know, they need to be maintained. Right? And, you can see how, Russians build, these, well, not just the Russians, but actually their suppliers from Europe, establish maintaining centers somewhere outside Russia, say in, Kazakhstan. But when you, well, when you talk to these, representative offices, somewhere in in in Central Asia, you you can clearly understand they're they're working for the, Russian jurisdiction as well, just being located outside. So, can we call this creative? I don't know. I don't know. I think a lot of I I think a lot of them, you know, it's what works best. Right? So a lot of these evasion techniques are standard. They're old. They're common. But, you know, if they still work, why would things change? Right? And then to answer David's question in the q and a, I mean, there are enforcement mechanisms that are used. So for instance, you mentioned, CNC machines. Haas Automation was, was just fined, you know, several million dollars because they they ship these CNC machines and their codes to Russian customers. First, it was through the, through a Russian holding company called Avnet, then it was through some Chinese shell company. So these things work best. I will say, you know, to David's question, you know, the biggest thing that enforcement agencies can do, I think, is number one, do their research and also share information. They need to share information. Banks, financial institutions, other kinds of import export terms, they all hold a lot of information that can be helpful in investigations. So I would also add to that in answer to David's question is definitely, you know, engage in these public private partnerships that will help enforcement agencies do a better job of investigating and punishing these violations. And, Nikki, just to add to to to this as well, on the enforcement side, you know, exchanging information is absolutely critical, but it also requires, you know, hard steps, kind of, really serious, serious steps such as, such as the Europeans, did in regard to Estonian ports that were banned from accepting or selling or transporting, so to say, certain critical materials critical materials that were heading towards Russia. So they were banned from, sending these materials from its ports, to, to Russia, which significantly, significantly increased the, route, for this specific, critical material, from, one of the African countries to to Russia. So and which in as a result, made it slower, which we we actually slowed down the Russian production of, armored for armor for vehicles. So it's you know, it always has a it always has a it has to to have a consequence. Right? And we shouldn't forget that why these, sanctions have been imposed and are being imposed, in the first place. It's it's intended to, prevent Russia from, waging this war. So it's the economic aspect, just, trying to slow down Russian, economy and revenues. That's mostly on the oil side. But also, prevent Russia from getting what they need for their military, industry, which is, in my opinion, could be even more, important. Actually, it has to work, together, but it it's critically important to shut down these intermediary companies in, you know, in around Europe, clearly used you can see the trade data. You when you analyze the trade data, which was still available in 2023, now it's much harder to find the relevant trade data in '20 that was, well, for for data for 2024. But when you looked at 2023 data, you can clearly see, companies in European countries, in Western European countries, run by people with, definitely Russian names, but European country citizenships, and used for for or used as intermediaries for buying and then reselling certain critical goods from Europe and other countries into, into Russia. And it's hard to believe that the sellers wouldn't understand where it's going. Either they had no due diligence in place at all, or they simply closed their eyes on it, pretending they don't understand where their critical goods used in defense industry, in the Russian case, offense industry, where it's heading, where it's going through, you know, through through an entity run by, Russians and by all me by all, criteria, not fitting into a credible, you know, kind of international trader, but rush or but rather a Russian vessel for sanctions regulation. Yeah. So, Lyle, I know you have a question for me. But before I do wanna address this question in the, q and a. Where can I find the classifications of the critical items related to e o one four zero two four? So one four zero two four is the Russia harmful foreign activities executive order. So if you want to know who is sanctioned pursuant to one four one four zero two four, go to the OFAC website and do a search. You know, there's there's a list search. You can do the search by name. It'll tell you, you know, what possible name matches there are. So that's the 14024. And any individual or entity sanctioned under 14024 is going to be a secondary sanctions risk. So I hope that helps. Alright. So I know you had a question for me. So It's it's actually related to the to the to the previous comment. When when Western companies, companies from countries of the sanctions coalition, you know, establish relationships with, either Russian companies or individuals or European companies, but companies run by Russian individuals. How how normal is that? Or, how safe do they feel doing this, and how safe it is in reality? Okay. So first of all, I I will say upfront, everything depends on your risk appetite. Right? So any entity sanctioned under e o one four zero two four is now considered part of Russia's military industrial base and carries with it a secondary sanctions risk. Right? So that's not exactly safe. That's pretty risky. Then we have the fact that Russia is now able to confiscate the assets that it considers unfriendly, and they have a list. Yes. They do. So now like, until recently, Russia was only able to freeze those assets or take temporary control of them. Now they can confiscate. Is your company considered unfriendly? Well, if you withdrew from Russia after the full scale invasion, probably. If you're trying to withdraw now, you're likely unfriendly, and your assets can be confiscated. Are you located in an unfriendly jurisdiction? Then, you know, you need to consider all of your risks. Do you consider this safe? Do you consider yourself and your assets safe in Russia knowing that they can be confiscated? Look. I'm I'm not here to tell you what to do. Right? If I were an officer or a company owner, I would definitely think twice. Can I add here? Sorry? Can I add here? Yeah. Of course. You you you know, adding to what you said, I I just recalled, the war and sanctions portal we have here in Ukraine. It was previously run by the National Agency on Corruption Prevention, now it's run by the Defense Intelligence. So there's a public website basically, that identifies or indicates companies from around the world, still working in Russia, meaning cooperating with the, Russian market. And, you know, either paying large amounts of taxes in, Russia or supporting Russian occupation forces in one way or another, you know, with, with, more liberal kind of interest rates if it's a bank or providing them with some products, or or or or something else. So in despite the fact, there is no there's there's no specific ban on doing business in, in Russia. This shaming kind of method probably also gives a clear understanding of how wrong it is to keep on doing business as if nothing happened, in that in that jurisdiction. And that, and companies are quite concerned about being on that on that, portal. So it's a reputational, aspect beyond just, the, regulatory regulatory, aspect. But, you know, speaking of, speaking of, evasion, Nikki, we we've been, you know, talking a lot about traditional kind of, traditional ways, traditional means. But there's also an issue such as, you know, payment systems and specifically, the use of cryptocurrencies. And the question is how extensively are these cryptocurrencies being used to, evade sanctions and anti money laundering, efforts in the context of our today's conversation? Well, I guess it would depend on your definition of extensive. So last year, Russia did this bit of a one eighty on cryptocurrencies, kinda showing an evolution in the Kremlin's attitude and perception of digital assets. A law legalizing crypto mining took took effect in, November of last year, and Russia now allows cross border payments with crypto, authorizing approved Russian businesses and entities to use digital assets for international trade. Russia in December then also imposed a six year ban on crypto mining in about 10 regions because of energy concerns. So they're kind of back and forth. We wrote last year, that Russian use of digital assets for sanctions evasion is on the rise. Okay? Is it pervasive? No. But it is increasing. OFAC, about a year ago, designated 13 firms and two individuals operating in the blockchain based services that facilitated virtual currency payments for the Russian financial sector. These included, bcrypto, Lighthouse, and Moscow based fintech company, Atamais. Russia has used the stable coin Tether to finance weapons purchases and components for weapons system. The designated exchange guarantax, according to press reports last year, as much as 20,000,000,000 in crypto could have passed through that exchange. Is it all Russian? Probably not. But it is sanctioned, so a lot of it is going to be kind of, you know, illicit transactions. We also sanctioned a facilitator. Her name was Yekateriyonosh Danova in late twenty twenty three for moving funds using digital assets for Russian elites. Was it massive? No. But still. So is it happening? Yeah. Increasingly so. But there's also liquidity challenges, and an economy of Russia's size is going to need more liquidity, which is why they were considering legalizing these decentralized financial organizations, which use blockchain technology and smart contracts to manage financial transactions without relying on financial intermediaries to move money. This, theoretically, could enable Russia to evade sanctions. I haven't heard anything about it since the initial reporting in September 2023. Pavel, have you? Nope? Nope. Yeah. So, I mean, are they using it? Yes. On a huge, large, massive scale, at least not yet. Okay. So let's see what other questions we have. So, Pavel, after three years, which Russia related designations have proven to be the most significant and that require the most urgent attention by financial institutions? You know, it's it's, actually hard to indicate the most significant ones. Why? It's because sanctions should work in a complex, way. It's a multifaceted kind of tool. So, when you designate, an individual or 15,000 individuals, and then you impose sanctions on, you know, defense companies, and then you impose sanctions on banks. You want this to work all together. Right? When you when you introduce a price cap for oil, you also want to make sure that the vessels Russians use are also under kind of, under control. So you want all of this to work as a single, system. You want to block their propaganda through sanctioning individuals. You want to block their, revenues from, oil because they they use it to to wage the war. You want to shut down their or slow down their, military industry. So it it's really it should work all together. So the banks and financial institutions should basically follow all these, rules, but I stick to my, initial thought that the most important thing is the is what they get for their, defense industry or offense industry, and how they get that technology, materials, etcetera. And often you can see you can see, the companies located in Europe, in Central Asia, Middle East, and obviously, all of them are are, served by certain banks. So, when any kind of global currency such as the USD or euro or, the pound are used, that's pretty clear that the correspondent bank can, you know, raise a certain alert and, identify the, the the transaction, the red flag transaction. But when the Russians use other currencies with their partner states of the modern axis of evil, that is much harder to to indicate and this is where secondary sanctions probably should take place. But all but again, how would you identify that, that violation. Right? By means of intelligence, by means of, technical intelligence, you you know, human intelligence, probably probably, and, well, that works. It works. But, you can clearly see the, the banks, in Kyrgyzstan, for example. They've they've been, increasing their kind of activity in this in this regard and letting Russians buy whatever they need and access, provide access to, international kind of technology, foreign technology for their for their needs through the through the Kyrgyz banks. How would you trace that? That's a big that's a big question. But whenever there is a global currency involved, it's it's all about the due diligence and how deep you conduct it. So not just the basic tick the box thing. And whenever there is a risky, jurisdiction involved, you obviously increase the, you increase the scope of, your research on the on the on on these on these entities. Yep. And that actually speaks directly to Eka's question in the q and a box talking about what do you do to curb payments and complicity of the banking sector and the financial systems broadly. So, you know, I will add to what Pavel said. Number one, you know, you have to invest resources into due diligence. I always say that it's a lot less expensive to actually have a robust compliance program and to understand and to train than it is to pay fines on the other side. Right? Especially if you don't have a a good compliance program. You know, if you it the reputational risk that's involved in in transacting with sanctioned entities. So, you know, the big thing is, you know, get get due diligence research, get help, engage with your legal departments, engage with your compliance experts. You don't just toss a name out there and say, well, it's not on the list, so we're good to go. You know, that is that is the problem, is that people and financial institutions and other firms, they do the bare minimum. And right now, with everything that's going on, you have to do the bare maximum, so to speak. And and and, Nikki, just just again, one one point to add here. Fully agree with what you said, and the people involved in this due diligence should also, educate themselves in terms of critical things like, you know, components, for example, being sold from The United States, for example, from US companies through a set of distributors from larger to smaller, from The US all the way into, The Middle East and then into Russia to understand what's actually going on. And, these due diligence specialists need to understand what they're working with if they see an electronic component in a transaction while monitoring the transaction. They understand that the distributor selling this, component is involved in the industry of electronics, microelectronics. They look at the destination. They see a high risk, country in this context, obviously, not just a high risk country in general, but in this specific context. And they could dig deeper into, what's going on in this particular transaction because, seemingly, civil components, microchips, from very well known companies go through, you know, several links of intermediaries from The US all the way to, Russia through through Middle Eastern intermediaries and other intermediaries. And, they're used in missiles and drones, and Russia manages to ramp up their production of these means of, killing people and actually, attack attack, Ukrainian cities every every day due to this specific reason. So when you say, it's cheaper to invest into due diligence rather than pay fines, I would only want to highlight that it's not not only about the fines, which is obviously important, but it's about being a part of a killing machine. So it's, you probably don't wanna be a part of this, especially when it's not that hard to identify what's going on. You know? Request additional, additional information from the supplier. Get a better understanding of where it's heading. So, know your client's client, right, which has been in place for a while, but, mostly as a term, not fully as a as a as a, mechanism. So take action and get more information on what is used in, in the in the military industry in, in in Russia. What are the players? And when you have this understanding, you'll be it will be easier for you to identify them within your due diligence, mechanisms. And in this context, Nikki, again, the secondary sanctions risk regarding, Russian, military industry. How you how do you assess these, secondary sanctions risk in the in the military industry? Well, I mean, you know, it's one of those things where, like, you know it when you see it. Right? I explained what secondary sanctions are, but, you know, people seem to be a little baffled by them. So how do you assess the risks? Well, you know, given the definition I provided earlier, the basic steps you can take are check your clients, check your counterparties. Are they listed under e o one four zero two four? If they are, they're subject to secondary sanctions risk, which means your organization could be designated by The United States for conducting significant transactions with that entity. Now a lot of people are confused about what significant transactions are. Well, it's not a $100 transfer or what I call an oops. It's significant and continued transactions. So the US Treasury is not in the habit of designating a financial institution for accidentally allowing a small transaction with some shell company that's owned by a sanctioned Russian entity. However, Treasury will consider, like, the size, the number, and frequency of the transactions, the nature of the transactions, the level of awareness that your leadership and your management, about the transactions, and whether these transactions are a part of, like, a pattern of conduct. The nexus of the transactions to person sanctioned personal 214024. So, you know, if it's a shell company owned by Rostech, that's a little worse than, you know, some guy doing business through several shell companies to maybe a Russian defense contractor or something. But, you know, you need to research persons operating in Russia's military industrial base. Also, deceptive practices. So if you're found to be lying about stuff or trying to conceal stuff, chances are you're a lot more at risk. Right? And then also as far as secondary sanctions go, we have the impact of the transaction or transactions on US national security objectives. So, again, you know, there was an old I don't know if it's a legal joke or whether a judge actually said this. I can't define porn, but I know it when I see it. It's the same kind of thing. I think you'll know it when you see it. Right? I wanted to follow-up real quick. Ulrika had a follow-up to her question about the list of products. She said, you know, the list lacks the HS classifications of the listed items, and she'd like to know where she can find it. So I think, Ulrika, what you are talking about is, the common high priority list, which is on BIS's website, the Bureau of Industry and Security. And it also has a link to trade.gov, which has the harmonized system or HS codes. It explains what these high priority lit items are, why they're, you know, important, you know, are they of highest concern because they have a critical role in the production of advanced Russian weaponry, that kind of stuff. So what I will do is I will put that link to BIS, into the chat so you have access to it. I don't wanna leave this webinar without addressing the elephant in the room because there's an elephant. You know, what's gonna happen with the new administration? Right? How do you see the future of Russia sanctions programs, especially when The US might not be at the table? Somebody did notice that The United States did not issue a significant tranche of, sanctions on Monday for the, three year anniversary of the full scale war. So what are we expected in the near future? You know, it's a great question, and the answer really is we don't know. We just don't know. The new administration obviously is going to have these new priorities. But on the other hand, I've seen reporting today, which basically has high level officials, including state and others, saying that sanctions will not be lifted against Russia until they agree to a peace plan. Is that gonna happen? Maybe. You know, are we going to continue enforcing, you know, going after sanctions violators? I would I would assume so. I mean, you know, we are a nation of laws, so I would assume so. But, you know, there's a lot of uncertainty right now. We we've only had a new administration for literally, like, a month, little over a month, a month and a week. Right? So, you know, not a whole lot you can assess from kind of these first, you know, these first actions. We'll see. The the answer is we'll see. Pavel, are you seeing anything on your end that you wanna flag? Well, I would I would definitely, look at two big sectors that have not been sanctioned yet for a relatively understandable reason, and that's, the nuclear sector, and nuclear energy, obviously, and the titanium industry. Quite Yeah. Interesting segments where, at least our research shows that everybody's very concerned about sanctioning, Russian titanium industry because they've got they're they're used to the fact that, VSMPO Avisma company, is a big supplier of aviation titanium to to the West. And you can see that, according to trade data, it's still supplying, these products. And that is mostly due to the fact that the West has lagged behind the Russian and Chinese titanium industries. For some reason, both in terms of, stock of, sponge titanium as well as production of, titanium goods. And at the same time, if you look deeper into the industry, you can identify that the Russians have extended their titanium industry so hard that there's so many new enterprises around the country not exporting anything and working only for the defense industry of, the Russian Federation, and which are a perfect target for, sanctions. So we should, you know, forget about the myth that Avisma is the only company in, in in Russia, and it's hard to sanction it, etcetera, etcetera. Sim something similar with the nuclear industry. You can obviously, it's hard to, sanction Ross Atom in general for clearly for clear reasons. However, there are institutions around this, organization and this, system such as the, you know, joint institute for nuclear research, for example. And can you can see that that institute, for example, is not only involved in the nuclear energy, but also, nuclear weapons development and missile development. And why not, impose sanctions at least at these elements of, of the bigger system? So these big segments are definitely worth looking at. And lastly, probably, when you mentioned secondary sanctions in the military industry, and you, you know, I would say that is probably the elephant in the room. Because the latest IDEXX exhibition in Abu Dhabi had probably the largest Russian stand in the in the latest years. So it may you know, Rostec, Rostec, Rostec, with labels saying combat tested in Ukraine, cynically saying this out loud with people walking around and looking at that and that equipment. And obviously, someone paid for placing the stand, you know, sending the delegation, etcetera. So that's an elephant. I'll just keep you with that little thought, you know. Yeah. That's that's definitely and, you know, as much as, you know, we hear in the news, oh, you know, the this new administration is doing this, and they're negotiating Russia that. I mean, honestly, that is a weapon that they're keeping holstered right now because they don't wanna rock the diplomatic boat. But it's entirely possible that this could happen. So there are still different sectors and different companies that can be sanctioned. So, really, we're just gonna have to wait and see. So we are approaching the end of this conversation. I mean, this has been amazing. There are a ton of other questions. Obviously, feel free to approach us on LinkedIn, to email us, you know, at at, info@finintegrity.org so we can answer questions and so we can help you remain on the right side of the law. Pavel, I appreciate so much being able to discuss things with you every year. And I hope that, you know, even when the war ends, we'll still talk. Absolutely. I think sanctions should be should be a, a a guarantee of, a part of the guarantees for Ukraine security in the future. Yeah. Absolutely. So once again, thank you everyone for joining. I apologize. We still haven't gotten to all your questions even though we dedicated almost the entire webinar to them. But we we really appreciate engaging with you and connecting with you. So thank you so, so much. Thank you, Nikki. Thank you, the audience.