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Empty threats: why Russia does not control the execution of its sanctions
Material posted : Administrator Publication date: 12-04-2019

Unlike the US, where enforcement is monitored in real time, and provided for their violation of strict punishment, the Russian authorities have imposed sanctions, for example against Ukraine, which so far is not respected.

The Russian Central Bank has asked banks report what measures they have applied to customers from the sanctions list on Ukraine. Russia is trying not only to impose economic sanctions, but also to control their execution. This is a good occasion to look at how the Russian system of special economic measures (SEM), or sanctions.

Link to nowhere

The strength of the U.S. sanctions are based on the capabilities of the US economy and the presence of a specialized body that oversees their execution since 1940. The office of foreign assets by the US Treasury (OFAC) unavailable to searches, confiscations and "masks-show". However, its tools include the inclusion of company or individuals on the sanctions list. The consequences of this are well articulated in the lawsuit filed by Oleg Deripaska in the Federal court of the district of Columbia — the complete destruction of the reputation and economic well-being. The Department of justice or the U.S. attorney's office for willful violation or attempted violation of the sanctions regulations can be prosecuted with fines of up to $1 million and imprisonment for up to 20 years.

The Russian Federal law "On special economic measures" № 281-FZ (further — law of SAM) was adopted on 30 December 2006, almost 30 years after its American prototype, and after 14.5 years after the canadian analogue. Their implementation is mandatory under Russian jurisdiction of organizations and individuals (part 3 of article 3 of the law), but the responsibility for the failure of the legislation of SAM is not provided. Part 4 of article 3 of the law on the SAM contains a reference norm that the responsibility of officials by Federal laws. But this rule will not send. Judicial practice on this part either. And again unlike North American counterparts separate Chapter "terms and definitions" our law does not contain. Even impossible to understand, who should be considered official — by the standards of legislative practice 2006, when adopting the law, they include only representatives of public authorities, and not, for example, the General Directors of the Russian company.

Sanctions against Ukraine

Ukraine since spring of 2014 include Russian individuals and entities to their sanctions lists. Our country has decided to recognize these actions as "unfriendly and contrary to international law" only after four years. Decree No. 592 by the President of Russia introduced safeguard measures in respect of certain individuals and legal entities of Ukraine. Pursuant to the decree, the government adopted resolution No. 1300, according to which the Ukrainian citizens and the regulated companies were planned to make the following types of SAM:

  • a) blocking (freezing) of non-cash, book-entry securities and property on the territory of the Russian Federation;
  • b) prohibition on transfer of funds (withdrawal of capital) outside the territory of the Russian Federation.

The resolution was supplemented with two annexes relating to fall under the sanctions of natural and legal persons. In the current version of the application 567 of Ukrainian citizens and legal entities 75. However, after five months it became clear that the Russian participants of the business turnover in no hurry to fulfil regulations and sanctions in respect of Ukraine can be performed only on request.

Performance without punishment

The government decision also did not contain provisions on responsibility for violation of the sanctions regime, it is only sent to the presidential decree, which cited three Federal laws, and of these, only the law on the SAM contains the send to anywhere normal.

However, in September 2018 in the Russian Ministry of Finance was created a specialized Department of monitoring of external constraints. Judging by the title, he needs to have control over observance of sanctions against the Ukrainian business. However, such functions had not.

But according to part 4 of article 4 of the law on SAM Central Bank within its competence ensures the implementation of the sanctions measures. From this we can draw the simple conclusion that the subject composition of the controlled entities in relation to compliance with the "anti-sanctions" restricted Russian banks; the only controller of the Central Bank; the times, at the request of the regulator, and the nature of the potential liability is undefined.

For comparison: the us sanctions law contains provisions on compulsory informing OFAC of committed action for the performance of duties in relation to sanctioned countries, regimes and their residents. The U.S. regulator won't send letters, he has access in real time to the SWIFT system, and transfers through correspondent accounts in American banks. The banks themselves and international companies fill the office of Stephen Mnuchin reports, as they block the funds, assets and property rights of the sanctioned entities.

Working sanctions

On the basis of the American experience, it is possible to highlight three key to the success of the sanctions mechanism of a particular country:

  • its high share in world economy;
  • the presence of a standing body, administrative sanctions and regulatory compliance;
  • the real fear of being brought to justice. And should not scare criminal liability or draconian fine by themselves, and the danger of disconnection from the economy and financial system of the country.

It is obvious that Russia none of the above can not boast. But to move in this direction. The Central Bank already has a permanent communication channel with Russian banks in the form of a system of transmission of financial messages. Reporting of the business on the execution of Russian sanctions acts can enter the government. A mechanism to work, you need to enter the relevant sanctions law and the criminal code an article about the responsibility each and every one who circumvents, violates or assists another in the violation of sanctions regulations. And this can apply not only to Russian companies. Russia is not a global economic power, however, in the framework of the EAEU, for example, her voice is crucial.


Sergey Gladilin


Source: https://www.rbc.ru/opinions/politics/12/04/2019/5caef5fd9a7947bbd40057dc?from=newsfeed

Tags: economy , finances


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