December 17, 2024 • 39 mins
Sanctions enforcement is at the forefront of modern economic statecraft and the challenges are escalating. As governments confront increasingly-sophisticated evasion tactics and geopolitical challenges, the need for robust collaboration with the private sector has never been greater. Whether focusing on the latest sanctions targeting Russian financial institutions and tracing their impact on global financial networks, or examining how Russia’s sanctions-evasion strategies are interconnected with the tactics of China, Iran, and North Korea, creating a web of illicit activity that tests the limits of enforcement, understanding these complex threats is paramount.
Cari Stinebower, is a Partner and Chair of the International Trade Practice at Winston and Strawn, with over 25 years of experience in both government and the private sector. Cari recently spoke with Coercive Capital host Elaine Dezenski and helped to break down and examine the tools, strategies, and partnerships necessary to strengthen enforcement and safeguard the integrity of international commerce.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Today's program is supported by K two Integrity. K two
is the premier global risk advisory firm in an ever
changing world filled with uncertainties and risk. K two helps
its clients with better insights, better solutions, and better decisions.
K two Integrity believe in better for more. Visit K
two integrity dot com. I'm Malay Tzenski and this is
(00:32):
coercive capital. Sanctions enforcement is at the forefront of modern
economic statecraft, and the challenges are escalating. As governments confront
increasingly sophisticated evasion tactics and geopolitical challenges. The need for
robust collaboration with the private sector has never been greater.
Krrie Steinbauer is a partner and chair of the International
(00:55):
Trade Practice at Winston and Strawn. With twenty five years
of experience in both government and the private sector. Kerry
is a leading authority on economic sanctions, export controls, and
anti money laundering. She previously advised on sanctions and anti
terrorism legislation, drafted un Security Council resolutions, and shaped executive
orders during her time at the US Department of Treasury's
(01:17):
Office of Foreign Assets Control. I recently spoke with Carrie
where she helped to break down and examine the tools, strategies,
and partnerships necessary to strengthen enforcement and safeguard the integrity
of international commerce. I wanted to start with some recent
news and kind of launched from there, and it's the
Biden administration's announcement on November twenty first on new sanctions
(01:42):
against Russia, including the designation of Gazprombank. That's a biggie,
along with more than fifty internationally connected Russian banks, forty
Russian security registrars, fifteen Russian financial officials, and an alert
from OPHAK, the Office of Foreign Asset Control related to
Russia System for Transfer of Financial Messages or SPFS, which
(02:05):
is used as a sanctions evasion tool. So so let's
start with how significant you think this measure is potentially
affecting the Russian economy, having a real impact in terms
of cutting off financial flows in a way that frankly,
(02:26):
we haven't done up to this point. Gas Prom has
always been that sort of that that that big target,
and even though it's been part of the G seven
conversation about sanctions measures and other countries have gone to
sanctioning gas Brombank, this is this is a big move
by the US.
Speaker 2 (02:47):
Sure, yeah, no, it's it's a huge move.
Speaker 3 (02:49):
I think it's one that a lot of the U, S,
EU financial institutions have been anticipating, and we'd seen over
the last well since twenty twenty two, we've seen a
lot of movement away from the Russian Federation, and so
for those businesses that are still engaged in permissible legal
(03:10):
transactions with the Federation, of course, it becomes harder and
harder to find appropriate financing mechanisms or financial institutions that
are willing to process legal transactions that also are consistent
with US foreign policy objectives. So to your question, is
it a significant action. Absolutely, it means that it's more
(03:32):
difficult for a lot of the illicit actors to find
ways to bring money into the traditional financial system. It
means that it's difficult for those engaged in humanitarian transactions
or permissible transactions to find banking channels, because, of course,
the global financial system is actively de risking anything with
(03:55):
a federation touch point these days. But what I also
think is interesting sting, is that we've seen over the
last two years an evolution away from the money laundering
channels that the Iranian Revolutionary Guard Court it being using
for their oil and gas trade toward the illicit Russian
(04:19):
price cap busting transactions. And so what we've actually seen
is a very robust development of financial institutions or financing
mechanisms outside of the traditional financial system.
Speaker 2 (04:33):
And as a.
Speaker 3 (04:34):
Result, when you when you ask some of the Russian
bankers like Kosten, who's the head of VTV, which one
of the largest Russian financial institutions, what the impacts of
the gas PROMP designation are on the Russian economy, his
reaction is initially, yeah, there's there's a dip and the
ruble lost some power against the US dollars would be expected.
(04:58):
But in the long term, because these illicit channels are
already well established and are flourishing for the illicit activity,
it will continue. And largely that's because the global economy
is tied together, but it's not unified in its approach
to the Federation and the invasions from February of twenty
(05:20):
twenty two. So as long as there's a way around sanctions,
there's going to be parties that are going to profiteer
off of sanctions of Asian avoidance.
Speaker 2 (05:29):
It's become a very lucrative business, and we see.
Speaker 3 (05:32):
That in the long term the Federation will be exploiting
those loopholes.
Speaker 2 (05:38):
Yeah, I want.
Speaker 1 (05:41):
To talk a bit about two designations that I think
are interesting and maybe not top of the conversation around
the impact, but two financial institutions one in Shanghai and
in India related to these gas prompt designations and why
those might be important and interesting connection points.
Speaker 3 (06:05):
Yes, and I think that's the gets to the heart
of the evasion avoidance point, which is what we've seen
and this mechanism, this illicit financing mechanism used robustly by
the Iranians over the last decade but now increasingly by
the Russian busters is access through financial institutions in China,
(06:26):
other jurisdictions, India, Malaysia. You know, there's the everyone seems
to know who the bad actors are. And so what
we've heard from the financial institutions in China over the
last couple of years is you know, when is Treasury,
when is the State Department going to start focusing on
the Chinese financial institutions? Are any going to get sanctioned
(06:47):
and designated? You know what's going to happen. And so
when you start to see designations in China of Chinese
entities or India for Indian entities. What we're actually seeing
is that we're starting to see the focus on closing
the sanctions of vasion avoidance loopholes, and so those two
designations I think are far more significant as a as
(07:11):
a signaling mechanism than potentially the gas prom designation.
Speaker 1 (07:16):
Yeah, yeah, I agree with that, because we're really getting
in now to the network connectivity and as you said,
you know the evasion networks and systemic challenges right that
we've encountered over the last few years in terms of
trying to have impact around this broader range of sanctions.
(07:38):
Just switching a bit to the economic impact, because I
also think this is interesting.
Speaker 2 (07:44):
So we've observed a bit of a.
Speaker 1 (07:45):
Decline in the rules value, rising inflation in Russia. To
what extent are these economic indicators directly connected to the
latest round of sanctions and what does that imply for
Russia's financial stability?
Speaker 3 (08:00):
So for sure, there's an impact, but I think when
you're looking at the Federation's economy, rising inflation, devaluation to
a certain degree of the ruple, what you're also seeing
is the impact of the war on the Federation and
it's limited resources, and you see that to a certain
degree in what's playing out in Syria as well. The
(08:20):
Syrian rebels have come in and they've made great advances
into some of the significant Syrian cities over the last
couple of days, including significant in roads yesterday. And so
the call from the Asad regime for support from Iran
and Russia largely flags for everyone the significance of the
(08:41):
global economy. The Federation is so focused on allocating resources
for its war war fighting in the Ukraine that it
opens up other areas, like see what we're seeing in Syria.
There's cracks now in the coalition supporting a side regime. So,
(09:02):
you know, I think that sanctions definitely have an impact
on the Federation. They are finding ways to work around it.
There's been a lot of discussion about bricks and setting
up alternative currencies for that particular trade block, but ultimately
there are always going to be ways to get around
(09:23):
the sanctions that I think the longer pressures on the
Federation have to do with the sustainability of the war
efforts on multiple fronts for the Federation. You know, how
long can the Russians continue to be involved in Syria
and Ukraine.
Speaker 2 (09:38):
What other proxy wars are big going.
Speaker 3 (09:41):
To be involved in with Where are they going to
reallocate their resources?
Speaker 1 (09:44):
Yeah, so there's a growing a conversation and interest in
this emerging access of aggressors, access of authoritarian regimes Russia, China, uh, Venezuela,
North Korea. And to what extent do you think that, uh,
(10:09):
the ability of Russia to evade Western sanctions is linked
in to this, uh, this emerging access do you do
you see it as uh, you know, sort of an
emerging challenge around how we think about the connectivity between
Russia and some of these other authoritarian regimes. And you've
(10:32):
touched on it in terms of bricks, that's a slightly
different angle. But the idea that these states, you know,
most of whom we'd consider to be foreign adversaries of
the US are creating these connection points, whether it's through
alternative mechanisms for payments, uh, barter, uh, you know, other
(10:52):
ways to sort of get what they need and find workarounds.
Do we need to start focusing more on this access
when we think about the imposition of sanctions and other
economic warfare tools.
Speaker 3 (11:07):
Yeah, I mean, I think we do, and I think
that the connections between China, Russia and Venezuela, for example,
have go back at least to twenty eighteen or to
twenty fourteen if you look at the original conflicts with
the Crimea in the sense that we saw that there
was a lot of support from the Russian oil and
(11:27):
gas sector in Venezuela, and the trading has were already
well established by the time twenty twenty two rolled around,
and you see that from some of the on the
US side mirrored on some of the criminal cases. Where
Alex Sab was picked up. I think it was in
the Canary Islands. He was flying a private jet from
(11:48):
Venezuela through with gold. There was a connection to the
Iranian regime, to the Russian regime and to Venezuela right there,
and of course, as part of the negotiations, Alex Sab
event we found himself in jail and then part of
a prisoner swap under the Biden administration.
Speaker 2 (12:04):
So he's from what.
Speaker 3 (12:05):
We can see, back to doing what he was doing
in the oil and gas sector of Venezuela, which obviously
implies that the connections between Venezuela and Russia and Iran
are deep and true and continue.
Speaker 2 (12:17):
And so I think if.
Speaker 3 (12:19):
If for any administration, when you're looking at sanctions policy,
whether it's focused on the Federation and the war in
the Ukraine or it's Venezuela and the human rights of
uses under Maduro, there is a connectivity. So you can't
look at it myopically. It's it really has to be
from the global scale, because the oil and gas trade
(12:41):
is one where it provides energy, and energy is very
is obviously a very hot commodity. But what we're seeing
is that oil has become not as much a target
for providing energy to regions that need a supply, it's
also become its own currency. And so what we're seeing,
(13:03):
as we saw, you know, in the nineteen nineties with
the narcotics cartels, is this evolution into trade based money laundering.
And I think in some of your prior shows you've
talked about the especos Mechicanos, right, the Mexican mirror systems
where and we're seeing that not only with the cartels,
(13:24):
but we're also seeing it in the oil and gastrates.
So you're seeing that in China and Russia, you're seeing
it in Venezuela, Essentially there is this connectivity in and
amongst the hostile jurisdictions.
Speaker 1 (13:35):
Yeah. Yeah, So that's a great segue actually into the
oil price cap and what's happening with that. It's effectiveness,
whether it's actually that price cap is impacting the diminishing
balance of Russia's National Wealth Fund, What is the impact
(13:59):
on the sustain of Russia's fiscal policies. How do you
think the oil price cap is working today? And should
we be doing more there? And you know, what would
that mean in terms of how we might go after
some of these broader connection points to access players.
Speaker 3 (14:18):
Sure, so, I think if you look at Treasury's blog
posts from I think it was either twenty twenty two
or twenty twenty three, they specifically focused on the wealth
fund and their analysis was that the price caps are
working and there is it's a useful pressure point. But
I think if you're looking at the broader effectiveness and
(14:39):
you're talk to oil and gas traders globally, or you
talk to US parties who are trying to diligently comply
with the price cap restrictions, what everyone is saying is
look to China. China is still making a lot of
money off of price cap violations, and we see it
in the maritime sector. You know, the shadow fleet that
(15:01):
had been very active under the Iran regime supporting the
COODS force is now very active and shipments are still
going to China, and you're starting to see really interesting
things like shadow fleets, vessels that are twenty two to
twenty three, twenty four years old. Usually they're taken out
of commission when they're you know, twelve to fifteen years old.
(15:23):
You're seeing really creative things like Franken standing vessels at
Chinese shipyards where you'll take one vessel, chop it in
half and re sort of jigger it so that it
may end up actually with technically with two iMOS, which
is the unique identifier for each of these vessels. So
I think for the price cap coalition to truly work,
(15:44):
you would need to you would need to engage parties
like India and China into the system to comply, and
I think it's just too lucrative for them not to
comply at this point.
Speaker 1 (15:55):
Yeah.
Speaker 2 (15:55):
Yeah.
Speaker 1 (15:56):
By focusing on institutions that are facilitating energy experts or
it's like gasprom bank, do you think that sanctions that
are more likely to disrupt Russia's revenue streams and how
critical is that in terms of increasing economic pressure.
Speaker 3 (16:13):
So it definitely does disrupt. The challenge though, is that
there's so much money to be made. You have to
look at not only putting pressure on the Russian economy,
but also on the Chinese economy, on the Indian refiners,
on the Malaysians who have a certain role as well.
(16:34):
Omanan always pops up. The Emirates have started to tighten
up some of their financial institution focus on price cap compliance.
But it's one of those things where in order for sanctions,
price cap coalition style sanctions.
Speaker 2 (16:51):
To work, it really truly needs to.
Speaker 3 (16:53):
Be multilateral and as long as there are their loopholes,
it will work, but it will not be as effective
as it could be if there was a global consensus.
Speaker 1 (17:03):
Yeah, if you were going back a couple of years
and thinking about how to implement this price cap more effectively,
any thoughts on how we should have done it to
have greater impact at the outset, or was this sort
of escalatory approach that we've taken necessary to kind of
(17:24):
blunt the potential impact the negative impact on Europe on us,
or could we have maybe come out of it stronger
around that cap and putting more pressure on Russia initially.
Speaker 3 (17:39):
Yeah, I mean, I think it's the key question, which
is how do you structure a comprehensive foreign policy approach
to a new global threat without damaging allies, the energy system,
and frankly the people of the Russian Federation themselves, who
are largely unintended consequences of the sanctions policy. And I
(18:03):
think that what I've seen over the last you know,
twenty five thirty years in the sanctions world is that
the sanctions will work when they're targeted and this based
and they're looking at specific individuals with a touch point
to the United States. Where they start looking more jurisdictional
(18:25):
in nature, which is what we're evolving to in the
Russian Federation case, then you end up with this sort
of endless loop of new sanctions where you're getting quick
press releases and you're getting publicity, but you're not necessarily
getting a return on your investment. But I think what
(18:46):
we're starting to see under the Trump administration with this
transition team is that they're acknowledging that what we continue
to do, and this has been something that's been discussed
in September eleventh, when there was this concern that this
wrath of new sanctions would eventually drive people the oil
and gas sector and other financial institutions away from the
(19:07):
primacy of the US dollars, that there would be these
alternative currencies. And so if you look to where we
are now, we've seen, as you mentioned this potential for
an alternative bricks currency. You've seen a rise of cryptocurrencies.
You've seen things like trade based money laundering which continue.
(19:27):
And so I think when you're looking at imposing a
foreign policy strategy to try to discourage actors like the
Federation from invading jurisdictions like Ukraine, it really has to
be a holistic approach. And I think the Trump administration
is saying that they're worried about the primacy of the
(19:48):
US dollar. They're looking at alternatives like threatening tariffs. Whether
they actually oppose them or not remains to be seen.
They're talking about reshoring, French shoring, onshoring, which are topics
that you talk of out all the time.
Speaker 2 (20:02):
You know, what does it mean when we.
Speaker 3 (20:04):
Now have an AI and cryptos are who's going to
be based in the White House? With this new coalition
style approach to encourage investment in the United States and
these industries. And I think to a certain degree, from
a national security perspective, having control over key manufacturing capacities,
(20:24):
whether it's AI or crypto or something like the silicon
chip manufacturing brought back into the United States or brought
back into friendly or jurisdictions, it does become a more
important tool, perhaps than sanctions in securing national security objectives
in the long term.
Speaker 1 (20:44):
Yeah, thanks for that, because I believe, and I think
you'd agree that sometimes we fall into this space of
applying sanctions tools, for example, narrowly in in some ways
isolated manner. But we operate in a global system that
(21:06):
is highly interdependent. And you know, if we're looking towards
where we might be going with China and whether Russia
like sanctions would apply if we were, uh, you know,
imposing conditions on China, you know, I think I think
there's there's the potential that they those sanctions won't for
(21:29):
a lot of reasons, or one because China is learning
from Russia, but number two, because we have even more
as you've alluded to, integrated supply chains and engagement, so
that the costs to us are going to be potentially
even higher, right than what we've experienced with Russia, where
we have pretty limited exposure to the Russian economy in
(21:52):
the US. So what might in your view, what might
a grand strategy for sanctions policy or maybe even this
larger framework of economic security, economics straightcraft, what might that
look like? I mean, if you were giving advice to
the new administration, what might be important to target in
(22:14):
this broader frame?
Speaker 2 (22:15):
Yeah, yeah, no, I mean I think that's the key question.
Speaker 3 (22:18):
And so we are getting a lot of questions from
both US and non US manufacturers, from financial institutions talking
about what their policy should be in the longer term.
Speaker 2 (22:30):
And the advice that I'm.
Speaker 3 (22:33):
Giving everyone, so whether it's private sector or the government sector,
is that there needs to be an active and open
dialogue between the government and the private sector on things
like near shoring or French shoring. Because the Chinese threat
to the US economy is apparent. When the president of
the elect Trump is talking about new tariffs, the Chinese
(22:55):
respond by cutting off, as they did earlier this week,
exports of certain rare minerals to the US necessary for defense,
but also for our tech industry.
Speaker 2 (23:06):
And so the implication is.
Speaker 3 (23:08):
That relying on soul sourcing is just in the long term,
very dangerous strategy, and so we do need to look
for alternative service sources. And it's been happening, but perhaps
not as quickly as it should for industries that are
tech oriented or that really do soul source from China.
I think that that engagement with the administration, whether it's
(23:32):
Treasury or State, or the White House or for the
EPA or any other parties, is super important. But as
a key component, what I've seen under the last couple
of years is that the private sector is doing its best,
sometimes in a vacuum because it's been hard to get
the administration to engage. And when I say engage, what
(23:54):
I'm talking about, for example, would be in the maritime space,
where you have this focus on the price cap colie compliance,
you have it on the Iranian shadow fleet, so lots
of the same issues, and Treasury is quickly rapidly.
Speaker 2 (24:07):
Putting out all of these alerts on compliance in the
maritimes sector.
Speaker 3 (24:10):
But what we're seeing is still missing is this active
role where all of the parties to the maritime sector,
so the insurance reinsures, the ship builders, the charter parties,
the ship owners, the port terminal operators. You know, all
of these parties need to have a seat at the
table because that's where the expertise lies. But in doing that,
(24:33):
I think what would also be helpful is to set
up a structure where there's a safe harbor so that
when these parties come to the table and they're facing
State Treasury and law enforcement and they're saying this is
where we're seeing the holes or the gaps, they're not
serving themselves up on a sober platter for the Department
of Justices enforcement matters. And so I think for going
(24:55):
forward with a sort of a global approach to addressing
soul sourcing or diversification of supply chain, especially in rare earths,
one of the important components is going to be this
concept of a safe harbor for US and for non
US manufacturers. But I think that it also would have
to be on the environmental front.
Speaker 2 (25:17):
One of the reasons why.
Speaker 3 (25:20):
China has been so successful in mining across Africa, as
you well know, is because they don't necessarily care about
things like child labor, or sustainability or environmental protections. And
so I think when people are critical of the Trump
administrations of approach to environmental protection. The key component here
(25:43):
is that rather than just criticizing, it's important to have
that dialogue because there is a balance between just saying
the United States is going to have the most rigorous
environmental controls in the world and ceding the rest of
the world to Chinese mining. So I think that the discussings,
discussions on national security and foreign policy really have to
(26:05):
be holistic. There has to be a role for a
private sector engagement, and there has to be a safe
harbor built in until the evolution can be comprehensive and complete.
Speaker 1 (26:17):
Today's program is supported by K two Integrity, the premier
global risk advisory firm. In today's world. Threats can arise anywhere,
at any time, threats to your organization's operations, financial stability,
or reputation. K two offers a better way to counter
the threats facing your organization. K two provides critical intelligence
(26:39):
and actionable strategies to uncover the truth, make decisions, and
reduce risk. K two helps you face critical challenges with
an experienced team and the ability to navigate the most
complex issues to arrive at better outcomes. That's why clients
partner with K two to help them thrive in an
ever changing world filled with uncertainties and risk by providing
(27:01):
better insights, better solutions, and better decisions. K two Integrity
believe in better for more. Visit K two integrity dot com.
Part of the concern that I've heard from the private
sector around how to get a handle on this emerging
space of economic security and how to respond to that
and play an effective role in that is, where do
(27:23):
they connect within the US government across Commerce and State
Department and Treasury and Homeland Security and others who have
a piece of this puzzle, whether we're talking about how
to deal with you know, port related infrastructure and vulnerabilities,
trade based money laundering as you've mentioned, shadow fleets, and
(27:47):
many other connection points to these concerns. And so it
just takes this conversation into entirely an entirely different space
beyond the traditional regulatory frame that companies would think about
their their their business operations. I mean effectively what you know,
(28:08):
I think what we're talking about is recognizing that companies
in UH critical supply chains operating in international jurisdictions are
now part of a broader economic and national security framework
that may require different engagement with the government and will
(28:31):
probably change their risk equation. Right. That's something we've talked
about on this show, Uh, including the last episode with
Isaac Stonefish, where you know, we can win into what
are the risks to US companies operating in China, So
you know, getting getting a handle on that is challenging.
Speaker 3 (28:50):
Uh.
Speaker 1 (28:51):
And Uh, you know, I think that would if I
were thinking about, well, you know what would I kind
of tea up for the for the next administration. I
think it is this question about creating the framework to
have that conversation and to bring in these points of
view so that we have an effective risk assessment, but
also that we understand the costs of how we're applying
(29:13):
these tools, whether it's the impact of tariffs or export
controls or sanctions or investment review, and then balancing that
against what we're trying to achieve. Because from a national
and economic security perspective, I think one of the goals
is to help reindustrialize this country. Where we need that
(29:34):
to happen, and that may not be across the board,
but it might be in some of the critical industries
that we've been talking about, and there's a cost to that.
There's a huge cost actually, but maybe that's how we
want to spend our money versus other costs associated with
use of sanctions, but kind of staying on that pathway
(29:56):
versus thinking about some of the other things that we
could do. So let me switch the focus a bit
to how effective you think the coordination has been, particularly
on Russia, between the US, EU and other allies on
specific sanctions. In some ways, the Europeans have been ahead
(30:17):
of us sometimes you know, we're taking action, then they
catch up to But what kind of challenges exist in
maintaining that unified front, especially when we don't always have
the same economic interests.
Speaker 3 (30:30):
Yep, yeah, well I think that there the Price Cap
Coalition has surprisingly managed to stay together longer than I
think a lot of people had anticipated. The challenge is
that while the participants are all singularly focused on trying
to dissuade the Federation from actively evading and increasing its
(30:52):
war in the Ukraine, each system, whether it's member states
within the European Union, Canada, the United States, Australia, you know,
we all have slightly different sanctions mechanisms, and so whenever
there's a rollout of a price Cap Coalition, sanctions focus
or designation or guidance. The implementation is slightly different in
(31:13):
each jurisdiction, and there's also each jurisdiction has a different
mechanism for licensing or in some places it's called a derogation.
In some cases, there's no mechanism for enforcing the caps.
And so what you end up seeing is that if
you're a global multinational corporation, you're trying to comply with
(31:36):
the price cap requirements under multiple jurisdictions. You're trying to
find the most aggressive and then setting everything to that standard.
Because from a compliance perspective, it's really difficult to isolate
the price cap compliance jurisdiction by jurisdiction, and so it
is an exercise in frustration. We've heard a lot from
(31:58):
clients that are just saying, you know, well, we realize
that there's no jurisdiction for X country, but it's just
easier to act as if that country does have jurisdiction
because they're the most aggressive on price cap compliance. And
so what that means is that a lot of legitimate
transactions are either not happening because of this sort of
(32:22):
problem of de risking, or people just don't understand what's
permissionable and what isn't and they're walking away from transactions.
Speaker 2 (32:31):
So there's sort of this cracks in the system.
Speaker 3 (32:34):
So what's supposed to be permissible doesn't always happen. And
for some jurisdictions where there's no enforcement at all, the
bad actors are just taking advantage of the gap and
enforcement and moving in. So, I mean, I think it's
a remarkable thing that exists, and it's been going as
long as it has. But I think as you've you know,
(32:54):
as we've both talked about today, the way to make
it effective is to have it as heard of a
global strategy, not just as a soul solution.
Speaker 1 (33:03):
Yeah, and do you think we should be doing more
to engage non non aligned countries leveraging multilateral institutions. We
may be coming into to a period of time where
that becomes more difficult for many reasons, whether that's you know,
a strategy on the part of the new administration to
(33:24):
either reduce our engagement in multilateral venues or focusing very
heavily on the tariffs question, and that may drive a
lot of these other issues into more secondary lane, if
you will. So what do you think about that, you know,
are there strategies that we should be you know, considering
(33:47):
as low lying fruit to get more alignment, particularly with
non aligned countries.
Speaker 2 (33:54):
Yeah, I mean, I it's a it's an excellent point.
Speaker 3 (33:57):
I think we've heard a lot from the incoming Trump
transition team with respect to a focus, as you said,
on bilateral trade agreements, this focus on tariffs, on reshoring,
a lot of investment, whether it's AI chip manufacturing, focus
on cryptocurrency. So what I would expect is that the
(34:19):
price coalition will continue. Treasury often is allowed to continue
doing what it's doing, and the Department of Justice will
have free reign on to continue its enforcement actions, typically
under a new administration. But it's going to be the
engagement of these other components that will either make or
(34:41):
break the success of the price cap coalitions as well
the sort of the federation policy holistically. And what's interesting
is that the Trump administration is said that before inauguration,
certain things will happen, whether it's in Israel with respect
to the peace accords or you know, the cessation of hostilities,
(35:03):
or whether it's with respect to the Ukraine, and so
you know, it may be that there's active foreign policy
negotiations going on behind the scenes that hopefully would make
a lot of this moot going forward, and then we
can focus on other issues like in re engagement or
moving away from soul sourcing from China. So, you know,
(35:24):
I think that I think a lot will play out
pretty quickly before January twentieth, and then in the maybe
the first or second months after inauguration, and we'll have
a better idea of what this holistic approach to the
Federation is and to China and what it means for
engagement with some of these non aligned coalition members as well.
Speaker 1 (35:49):
Yeah, so final question for you, what advice would you
offer to compliance professionals, including our Illicit Edge subscriber base,
on navigating some of these complexities over the next few months,
particularly in high risk industries like finance and energy.
Speaker 3 (36:08):
Yeah, I mean, I think that's the key question, and
we're hearing that too. I think that the bottom line
is there's a lot of pressure on the compliance industry.
We saw that from the TD Bank case, and we've
seen it over the years, you know, going back as
far as twenty twelve with a money gram case where
there was liability for the individual compliance officers, And so
(36:33):
I think now is a time where the compliance profession
is responsible for not only navigating the web of sanctions,
export controls, anti corruption rules, but also driving the bottom
line for their corporations and finding creative solutions where potentially
(36:53):
they're not just a cost sector but also potentially you know,
a profit center as well. And I think the only
way that that works is if the compliance professionals continue
to work with each other through trade associations, engage where
they can through things like the Bank Secrecy Act Advisory Group,
and then just put out another notice opening up applications
(37:17):
for membership, whether it's DTAG, which is the same thing
on the export control side. You know, I think it's
this idea of engagement not only through trade associations, through
informal roundtables, but also actively with a government in order
to be able to participate in the rulemaking and understand
what's coming down the pipe, what's possible to implement, and
(37:39):
what's just impossible. So it's this dialogue. Nothing can happen
in a vacuum, and I think the siloed approach is
very dangerous. You know, you don't just have a sanctions
of Asian issue, so the compliance teams shouldn't just be
focused on sanctions. It's if there's sanctions of Asian then
there's also corruption. There's also lifely export controls violations, there's
(38:02):
also likely money laundering, you know, And it's this holistic
approach that I think we it's hard, right because you
can learn sanctions, but it's really hard to be an
expert in multiple areas. But I think it's this, you know,
don't be siloed and engage with the government as much
as possible, and engage with through trade associations if there's
(38:22):
a lot of anonymity and support that can come from
a trade association, if a corporation doesn't want to be
the one that breaks bad news to the government.
Speaker 1 (38:33):
As we head toward a transition of power and a
new administration, anyone wishing for greater understanding of the future
of sanctions enforcement and global security would be wise to
carefully consider Carrie Steinbauer's guidance, whether focusing on the latest
sanctions targeting Russian financial institutions and tracing their impact on
global financial networks, or examining how Russia's sanctions of Asians
(38:54):
strategies are interconnected with the tactics of China around in
North Korea, creating a web of illicit activity that tests
the limits of enforcement. Experts like Carrie are true thought
leaders and can help guide the way towards our collective
goal for a safer and more secure geopolitical landscape. I
thank Carrie for her time and the illuminating conversation. Thanks
(39:15):
for joining me. I'm Eline Dozinski and this is coercive
capital on the illicit Edge network.
Today's program is supported by K two Integrity. K two
is the premier global risk advisory firm in an ever
changing world filled with uncertainties and risk. K two helps
its clients with better insights, better solutions, and better decisions.
K two Integrity believe in better for more. Visit K
two integrity dot com. I'm Malay Tzenski and this is
(00:32):
coercive capital. Sanctions enforcement is at the forefront of modern
economic statecraft, and the challenges are escalating. As governments confront
increasingly sophisticated evasion tactics and geopolitical challenges. The need for
robust collaboration with the private sector has never been greater.
Krrie Steinbauer is a partner and chair of the International
(00:55):
Trade Practice at Winston and Strawn. With twenty five years
of experience in both government and the private sector. Kerry
is a leading authority on economic sanctions, export controls, and
anti money laundering. She previously advised on sanctions and anti
terrorism legislation, drafted un Security Council resolutions, and shaped executive
orders during her time at the US Department of Treasury's
(01:17):
Office of Foreign Assets Control. I recently spoke with Carrie
where she helped to break down and examine the tools, strategies,
and partnerships necessary to strengthen enforcement and safeguard the integrity
of international commerce. I wanted to start with some recent
news and kind of launched from there, and it's the
Biden administration's announcement on November twenty first on new sanctions
(01:42):
against Russia, including the designation of Gazprombank. That's a biggie,
along with more than fifty internationally connected Russian banks, forty
Russian security registrars, fifteen Russian financial officials, and an alert
from OPHAK, the Office of Foreign Asset Control related to
Russia System for Transfer of Financial Messages or SPFS, which
(02:05):
is used as a sanctions evasion tool. So so let's
start with how significant you think this measure is potentially
affecting the Russian economy, having a real impact in terms
of cutting off financial flows in a way that frankly,
(02:26):
we haven't done up to this point. Gas Prom has
always been that sort of that that that big target,
and even though it's been part of the G seven
conversation about sanctions measures and other countries have gone to
sanctioning gas Brombank, this is this is a big move
by the US.
Speaker 2 (02:47):
Sure, yeah, no, it's it's a huge move.
Speaker 3 (02:49):
I think it's one that a lot of the U, S,
EU financial institutions have been anticipating, and we'd seen over
the last well since twenty twenty two, we've seen a
lot of movement away from the Russian Federation, and so
for those businesses that are still engaged in permissible legal
(03:10):
transactions with the Federation, of course, it becomes harder and
harder to find appropriate financing mechanisms or financial institutions that
are willing to process legal transactions that also are consistent
with US foreign policy objectives. So to your question, is
it a significant action. Absolutely, it means that it's more
(03:32):
difficult for a lot of the illicit actors to find
ways to bring money into the traditional financial system. It
means that it's difficult for those engaged in humanitarian transactions
or permissible transactions to find banking channels, because, of course,
the global financial system is actively de risking anything with
(03:55):
a federation touch point these days. But what I also
think is interesting sting, is that we've seen over the
last two years an evolution away from the money laundering
channels that the Iranian Revolutionary Guard Court it being using
for their oil and gas trade toward the illicit Russian
(04:19):
price cap busting transactions. And so what we've actually seen
is a very robust development of financial institutions or financing
mechanisms outside of the traditional financial system.
Speaker 2 (04:33):
And as a.
Speaker 3 (04:34):
Result, when you when you ask some of the Russian
bankers like Kosten, who's the head of VTV, which one
of the largest Russian financial institutions, what the impacts of
the gas PROMP designation are on the Russian economy, his
reaction is initially, yeah, there's there's a dip and the
ruble lost some power against the US dollars would be expected.
(04:58):
But in the long term, because these illicit channels are
already well established and are flourishing for the illicit activity,
it will continue. And largely that's because the global economy
is tied together, but it's not unified in its approach
to the Federation and the invasions from February of twenty
(05:20):
twenty two. So as long as there's a way around sanctions,
there's going to be parties that are going to profiteer
off of sanctions of Asian avoidance.
Speaker 2 (05:29):
It's become a very lucrative business, and we see.
Speaker 3 (05:32):
That in the long term the Federation will be exploiting
those loopholes.
Speaker 2 (05:38):
Yeah, I want.
Speaker 1 (05:41):
To talk a bit about two designations that I think
are interesting and maybe not top of the conversation around
the impact, but two financial institutions one in Shanghai and
in India related to these gas prompt designations and why
those might be important and interesting connection points.
Speaker 3 (06:05):
Yes, and I think that's the gets to the heart
of the evasion avoidance point, which is what we've seen
and this mechanism, this illicit financing mechanism used robustly by
the Iranians over the last decade but now increasingly by
the Russian busters is access through financial institutions in China,
(06:26):
other jurisdictions, India, Malaysia. You know, there's the everyone seems
to know who the bad actors are. And so what
we've heard from the financial institutions in China over the
last couple of years is you know, when is Treasury,
when is the State Department going to start focusing on
the Chinese financial institutions? Are any going to get sanctioned
(06:47):
and designated? You know what's going to happen. And so
when you start to see designations in China of Chinese
entities or India for Indian entities. What we're actually seeing
is that we're starting to see the focus on closing
the sanctions of vasion avoidance loopholes, and so those two
designations I think are far more significant as a as
(07:11):
a signaling mechanism than potentially the gas prom designation.
Speaker 1 (07:16):
Yeah, yeah, I agree with that, because we're really getting
in now to the network connectivity and as you said,
you know the evasion networks and systemic challenges right that
we've encountered over the last few years in terms of
trying to have impact around this broader range of sanctions.
(07:38):
Just switching a bit to the economic impact, because I
also think this is interesting.
Speaker 2 (07:44):
So we've observed a bit of a.
Speaker 1 (07:45):
Decline in the rules value, rising inflation in Russia. To
what extent are these economic indicators directly connected to the
latest round of sanctions and what does that imply for
Russia's financial stability?
Speaker 3 (08:00):
So for sure, there's an impact, but I think when
you're looking at the Federation's economy, rising inflation, devaluation to
a certain degree of the ruple, what you're also seeing
is the impact of the war on the Federation and
it's limited resources, and you see that to a certain
degree in what's playing out in Syria as well. The
(08:20):
Syrian rebels have come in and they've made great advances
into some of the significant Syrian cities over the last
couple of days, including significant in roads yesterday. And so
the call from the Asad regime for support from Iran
and Russia largely flags for everyone the significance of the
(08:41):
global economy. The Federation is so focused on allocating resources
for its war war fighting in the Ukraine that it
opens up other areas, like see what we're seeing in Syria.
There's cracks now in the coalition supporting a side regime. So,
(09:02):
you know, I think that sanctions definitely have an impact
on the Federation. They are finding ways to work around it.
There's been a lot of discussion about bricks and setting
up alternative currencies for that particular trade block, but ultimately
there are always going to be ways to get around
(09:23):
the sanctions that I think the longer pressures on the
Federation have to do with the sustainability of the war
efforts on multiple fronts for the Federation. You know, how
long can the Russians continue to be involved in Syria
and Ukraine.
Speaker 2 (09:38):
What other proxy wars are big going.
Speaker 3 (09:41):
To be involved in with Where are they going to
reallocate their resources?
Speaker 1 (09:44):
Yeah, so there's a growing a conversation and interest in
this emerging access of aggressors, access of authoritarian regimes Russia, China, uh, Venezuela,
North Korea. And to what extent do you think that, uh,
(10:09):
the ability of Russia to evade Western sanctions is linked
in to this, uh, this emerging access do you do
you see it as uh, you know, sort of an
emerging challenge around how we think about the connectivity between
Russia and some of these other authoritarian regimes. And you've
(10:32):
touched on it in terms of bricks, that's a slightly
different angle. But the idea that these states, you know,
most of whom we'd consider to be foreign adversaries of
the US are creating these connection points, whether it's through
alternative mechanisms for payments, uh, barter, uh, you know, other
(10:52):
ways to sort of get what they need and find workarounds.
Do we need to start focusing more on this access
when we think about the imposition of sanctions and other
economic warfare tools.
Speaker 3 (11:07):
Yeah, I mean, I think we do, and I think
that the connections between China, Russia and Venezuela, for example,
have go back at least to twenty eighteen or to
twenty fourteen if you look at the original conflicts with
the Crimea in the sense that we saw that there
was a lot of support from the Russian oil and
(11:27):
gas sector in Venezuela, and the trading has were already
well established by the time twenty twenty two rolled around,
and you see that from some of the on the
US side mirrored on some of the criminal cases. Where
Alex Sab was picked up. I think it was in
the Canary Islands. He was flying a private jet from
(11:48):
Venezuela through with gold. There was a connection to the
Iranian regime, to the Russian regime and to Venezuela right there,
and of course, as part of the negotiations, Alex Sab
event we found himself in jail and then part of
a prisoner swap under the Biden administration.
Speaker 2 (12:04):
So he's from what.
Speaker 3 (12:05):
We can see, back to doing what he was doing
in the oil and gas sector of Venezuela, which obviously
implies that the connections between Venezuela and Russia and Iran
are deep and true and continue.
Speaker 2 (12:17):
And so I think if.
Speaker 3 (12:19):
If for any administration, when you're looking at sanctions policy,
whether it's focused on the Federation and the war in
the Ukraine or it's Venezuela and the human rights of
uses under Maduro, there is a connectivity. So you can't
look at it myopically. It's it really has to be
from the global scale, because the oil and gas trade
(12:41):
is one where it provides energy, and energy is very
is obviously a very hot commodity. But what we're seeing
is that oil has become not as much a target
for providing energy to regions that need a supply, it's
also become its own currency. And so what we're seeing,
(13:03):
as we saw, you know, in the nineteen nineties with
the narcotics cartels, is this evolution into trade based money laundering.
And I think in some of your prior shows you've
talked about the especos Mechicanos, right, the Mexican mirror systems
where and we're seeing that not only with the cartels,
(13:24):
but we're also seeing it in the oil and gastrates.
So you're seeing that in China and Russia, you're seeing
it in Venezuela, Essentially there is this connectivity in and
amongst the hostile jurisdictions.
Speaker 1 (13:35):
Yeah. Yeah, So that's a great segue actually into the
oil price cap and what's happening with that. It's effectiveness,
whether it's actually that price cap is impacting the diminishing
balance of Russia's National Wealth Fund, What is the impact
(13:59):
on the sustain of Russia's fiscal policies. How do you
think the oil price cap is working today? And should
we be doing more there? And you know, what would
that mean in terms of how we might go after
some of these broader connection points to access players.
Speaker 3 (14:18):
Sure, so, I think if you look at Treasury's blog
posts from I think it was either twenty twenty two
or twenty twenty three, they specifically focused on the wealth
fund and their analysis was that the price caps are
working and there is it's a useful pressure point. But
I think if you're looking at the broader effectiveness and
(14:39):
you're talk to oil and gas traders globally, or you
talk to US parties who are trying to diligently comply
with the price cap restrictions, what everyone is saying is
look to China. China is still making a lot of
money off of price cap violations, and we see it
in the maritime sector. You know, the shadow fleet that
(15:01):
had been very active under the Iran regime supporting the
COODS force is now very active and shipments are still
going to China, and you're starting to see really interesting
things like shadow fleets, vessels that are twenty two to
twenty three, twenty four years old. Usually they're taken out
of commission when they're you know, twelve to fifteen years old.
(15:23):
You're seeing really creative things like Franken standing vessels at
Chinese shipyards where you'll take one vessel, chop it in
half and re sort of jigger it so that it
may end up actually with technically with two iMOS, which
is the unique identifier for each of these vessels. So
I think for the price cap coalition to truly work,
(15:44):
you would need to you would need to engage parties
like India and China into the system to comply, and
I think it's just too lucrative for them not to
comply at this point.
Speaker 1 (15:55):
Yeah.
Speaker 2 (15:55):
Yeah.
Speaker 1 (15:56):
By focusing on institutions that are facilitating energy experts or
it's like gasprom bank, do you think that sanctions that
are more likely to disrupt Russia's revenue streams and how
critical is that in terms of increasing economic pressure.
Speaker 3 (16:13):
So it definitely does disrupt. The challenge though, is that
there's so much money to be made. You have to
look at not only putting pressure on the Russian economy,
but also on the Chinese economy, on the Indian refiners,
on the Malaysians who have a certain role as well.
(16:34):
Omanan always pops up. The Emirates have started to tighten
up some of their financial institution focus on price cap compliance.
But it's one of those things where in order for sanctions,
price cap coalition style sanctions.
Speaker 2 (16:51):
To work, it really truly needs to.
Speaker 3 (16:53):
Be multilateral and as long as there are their loopholes,
it will work, but it will not be as effective
as it could be if there was a global consensus.
Speaker 1 (17:03):
Yeah, if you were going back a couple of years
and thinking about how to implement this price cap more effectively,
any thoughts on how we should have done it to
have greater impact at the outset, or was this sort
of escalatory approach that we've taken necessary to kind of
(17:24):
blunt the potential impact the negative impact on Europe on us,
or could we have maybe come out of it stronger
around that cap and putting more pressure on Russia initially.
Speaker 3 (17:39):
Yeah, I mean, I think it's the key question, which
is how do you structure a comprehensive foreign policy approach
to a new global threat without damaging allies, the energy system,
and frankly the people of the Russian Federation themselves, who
are largely unintended consequences of the sanctions policy. And I
(18:03):
think that what I've seen over the last you know,
twenty five thirty years in the sanctions world is that
the sanctions will work when they're targeted and this based
and they're looking at specific individuals with a touch point
to the United States. Where they start looking more jurisdictional
(18:25):
in nature, which is what we're evolving to in the
Russian Federation case, then you end up with this sort
of endless loop of new sanctions where you're getting quick
press releases and you're getting publicity, but you're not necessarily
getting a return on your investment. But I think what
(18:46):
we're starting to see under the Trump administration with this
transition team is that they're acknowledging that what we continue
to do, and this has been something that's been discussed
in September eleventh, when there was this concern that this
wrath of new sanctions would eventually drive people the oil
and gas sector and other financial institutions away from the
(19:07):
primacy of the US dollars, that there would be these
alternative currencies. And so if you look to where we
are now, we've seen, as you mentioned this potential for
an alternative bricks currency. You've seen a rise of cryptocurrencies.
You've seen things like trade based money laundering which continue.
(19:27):
And so I think when you're looking at imposing a
foreign policy strategy to try to discourage actors like the
Federation from invading jurisdictions like Ukraine, it really has to
be a holistic approach. And I think the Trump administration
is saying that they're worried about the primacy of the
(19:48):
US dollar. They're looking at alternatives like threatening tariffs. Whether
they actually oppose them or not remains to be seen.
They're talking about reshoring, French shoring, onshoring, which are topics
that you talk of out all the time.
Speaker 2 (20:02):
You know, what does it mean when we.
Speaker 3 (20:04):
Now have an AI and cryptos are who's going to
be based in the White House? With this new coalition
style approach to encourage investment in the United States and
these industries. And I think to a certain degree, from
a national security perspective, having control over key manufacturing capacities,
(20:24):
whether it's AI or crypto or something like the silicon
chip manufacturing brought back into the United States or brought
back into friendly or jurisdictions, it does become a more
important tool, perhaps than sanctions in securing national security objectives
in the long term.
Speaker 1 (20:44):
Yeah, thanks for that, because I believe, and I think
you'd agree that sometimes we fall into this space of
applying sanctions tools, for example, narrowly in in some ways
isolated manner. But we operate in a global system that
(21:06):
is highly interdependent. And you know, if we're looking towards
where we might be going with China and whether Russia
like sanctions would apply if we were, uh, you know,
imposing conditions on China, you know, I think I think
there's there's the potential that they those sanctions won't for
(21:29):
a lot of reasons, or one because China is learning
from Russia, but number two, because we have even more
as you've alluded to, integrated supply chains and engagement, so
that the costs to us are going to be potentially
even higher, right than what we've experienced with Russia, where
we have pretty limited exposure to the Russian economy in
(21:52):
the US. So what might in your view, what might
a grand strategy for sanctions policy or maybe even this
larger framework of economic security, economics straightcraft, what might that
look like? I mean, if you were giving advice to
the new administration, what might be important to target in
(22:14):
this broader frame?
Speaker 2 (22:15):
Yeah, yeah, no, I mean I think that's the key question.
Speaker 3 (22:18):
And so we are getting a lot of questions from
both US and non US manufacturers, from financial institutions talking
about what their policy should be in the longer term.
Speaker 2 (22:30):
And the advice that I'm.
Speaker 3 (22:33):
Giving everyone, so whether it's private sector or the government sector,
is that there needs to be an active and open
dialogue between the government and the private sector on things
like near shoring or French shoring. Because the Chinese threat
to the US economy is apparent. When the president of
the elect Trump is talking about new tariffs, the Chinese
(22:55):
respond by cutting off, as they did earlier this week,
exports of certain rare minerals to the US necessary for defense,
but also for our tech industry.
Speaker 2 (23:06):
And so the implication is.
Speaker 3 (23:08):
That relying on soul sourcing is just in the long term,
very dangerous strategy, and so we do need to look
for alternative service sources. And it's been happening, but perhaps
not as quickly as it should for industries that are
tech oriented or that really do soul source from China.
I think that that engagement with the administration, whether it's
(23:32):
Treasury or State, or the White House or for the
EPA or any other parties, is super important. But as
a key component, what I've seen under the last couple
of years is that the private sector is doing its best,
sometimes in a vacuum because it's been hard to get
the administration to engage. And when I say engage, what
(23:54):
I'm talking about, for example, would be in the maritime space,
where you have this focus on the price cap colie compliance,
you have it on the Iranian shadow fleet, so lots
of the same issues, and Treasury is quickly rapidly.
Speaker 2 (24:07):
Putting out all of these alerts on compliance in the
maritimes sector.
Speaker 3 (24:10):
But what we're seeing is still missing is this active
role where all of the parties to the maritime sector,
so the insurance reinsures, the ship builders, the charter parties,
the ship owners, the port terminal operators. You know, all
of these parties need to have a seat at the
table because that's where the expertise lies. But in doing that,
(24:33):
I think what would also be helpful is to set
up a structure where there's a safe harbor so that
when these parties come to the table and they're facing
State Treasury and law enforcement and they're saying this is
where we're seeing the holes or the gaps, they're not
serving themselves up on a sober platter for the Department
of Justices enforcement matters. And so I think for going
(24:55):
forward with a sort of a global approach to addressing
soul sourcing or diversification of supply chain, especially in rare earths,
one of the important components is going to be this
concept of a safe harbor for US and for non
US manufacturers. But I think that it also would have
to be on the environmental front.
Speaker 2 (25:17):
One of the reasons why.
Speaker 3 (25:20):
China has been so successful in mining across Africa, as
you well know, is because they don't necessarily care about
things like child labor, or sustainability or environmental protections. And
so I think when people are critical of the Trump
administrations of approach to environmental protection. The key component here
(25:43):
is that rather than just criticizing, it's important to have
that dialogue because there is a balance between just saying
the United States is going to have the most rigorous
environmental controls in the world and ceding the rest of
the world to Chinese mining. So I think that the discussings,
discussions on national security and foreign policy really have to
(26:05):
be holistic. There has to be a role for a
private sector engagement, and there has to be a safe
harbor built in until the evolution can be comprehensive and complete.
Speaker 1 (26:17):
Today's program is supported by K two Integrity, the premier
global risk advisory firm. In today's world. Threats can arise anywhere,
at any time, threats to your organization's operations, financial stability,
or reputation. K two offers a better way to counter
the threats facing your organization. K two provides critical intelligence
(26:39):
and actionable strategies to uncover the truth, make decisions, and
reduce risk. K two helps you face critical challenges with
an experienced team and the ability to navigate the most
complex issues to arrive at better outcomes. That's why clients
partner with K two to help them thrive in an
ever changing world filled with uncertainties and risk by providing
(27:01):
better insights, better solutions, and better decisions. K two Integrity
believe in better for more. Visit K two integrity dot com.
Part of the concern that I've heard from the private
sector around how to get a handle on this emerging
space of economic security and how to respond to that
and play an effective role in that is, where do
(27:23):
they connect within the US government across Commerce and State
Department and Treasury and Homeland Security and others who have
a piece of this puzzle, whether we're talking about how
to deal with you know, port related infrastructure and vulnerabilities,
trade based money laundering as you've mentioned, shadow fleets, and
(27:47):
many other connection points to these concerns. And so it
just takes this conversation into entirely an entirely different space
beyond the traditional regulatory frame that companies would think about
their their their business operations. I mean effectively what you know,
(28:08):
I think what we're talking about is recognizing that companies
in UH critical supply chains operating in international jurisdictions are
now part of a broader economic and national security framework
that may require different engagement with the government and will
(28:31):
probably change their risk equation. Right. That's something we've talked
about on this show, Uh, including the last episode with
Isaac Stonefish, where you know, we can win into what
are the risks to US companies operating in China, So
you know, getting getting a handle on that is challenging.
Speaker 3 (28:50):
Uh.
Speaker 1 (28:51):
And Uh, you know, I think that would if I
were thinking about, well, you know what would I kind
of tea up for the for the next administration. I
think it is this question about creating the framework to
have that conversation and to bring in these points of
view so that we have an effective risk assessment, but
also that we understand the costs of how we're applying
(29:13):
these tools, whether it's the impact of tariffs or export
controls or sanctions or investment review, and then balancing that
against what we're trying to achieve. Because from a national
and economic security perspective, I think one of the goals
is to help reindustrialize this country. Where we need that
(29:34):
to happen, and that may not be across the board,
but it might be in some of the critical industries
that we've been talking about, and there's a cost to that.
There's a huge cost actually, but maybe that's how we
want to spend our money versus other costs associated with
use of sanctions, but kind of staying on that pathway
(29:56):
versus thinking about some of the other things that we
could do. So let me switch the focus a bit
to how effective you think the coordination has been, particularly
on Russia, between the US, EU and other allies on
specific sanctions. In some ways, the Europeans have been ahead
(30:17):
of us sometimes you know, we're taking action, then they
catch up to But what kind of challenges exist in
maintaining that unified front, especially when we don't always have
the same economic interests.
Speaker 3 (30:30):
Yep, yeah, well I think that there the Price Cap
Coalition has surprisingly managed to stay together longer than I
think a lot of people had anticipated. The challenge is
that while the participants are all singularly focused on trying
to dissuade the Federation from actively evading and increasing its
(30:52):
war in the Ukraine, each system, whether it's member states
within the European Union, Canada, the United States, Australia, you know,
we all have slightly different sanctions mechanisms, and so whenever
there's a rollout of a price Cap Coalition, sanctions focus
or designation or guidance. The implementation is slightly different in
(31:13):
each jurisdiction, and there's also each jurisdiction has a different
mechanism for licensing or in some places it's called a derogation.
In some cases, there's no mechanism for enforcing the caps.
And so what you end up seeing is that if
you're a global multinational corporation, you're trying to comply with
(31:36):
the price cap requirements under multiple jurisdictions. You're trying to
find the most aggressive and then setting everything to that standard.
Because from a compliance perspective, it's really difficult to isolate
the price cap compliance jurisdiction by jurisdiction, and so it
is an exercise in frustration. We've heard a lot from
(31:58):
clients that are just saying, you know, well, we realize
that there's no jurisdiction for X country, but it's just
easier to act as if that country does have jurisdiction
because they're the most aggressive on price cap compliance. And
so what that means is that a lot of legitimate
transactions are either not happening because of this sort of
(32:22):
problem of de risking, or people just don't understand what's
permissionable and what isn't and they're walking away from transactions.
Speaker 2 (32:31):
So there's sort of this cracks in the system.
Speaker 3 (32:34):
So what's supposed to be permissible doesn't always happen. And
for some jurisdictions where there's no enforcement at all, the
bad actors are just taking advantage of the gap and
enforcement and moving in. So, I mean, I think it's
a remarkable thing that exists, and it's been going as
long as it has. But I think as you've you know,
(32:54):
as we've both talked about today, the way to make
it effective is to have it as heard of a
global strategy, not just as a soul solution.
Speaker 1 (33:03):
Yeah, and do you think we should be doing more
to engage non non aligned countries leveraging multilateral institutions. We
may be coming into to a period of time where
that becomes more difficult for many reasons, whether that's you know,
a strategy on the part of the new administration to
(33:24):
either reduce our engagement in multilateral venues or focusing very
heavily on the tariffs question, and that may drive a
lot of these other issues into more secondary lane, if
you will. So what do you think about that, you know,
are there strategies that we should be you know, considering
(33:47):
as low lying fruit to get more alignment, particularly with
non aligned countries.
Speaker 2 (33:54):
Yeah, I mean, I it's a it's an excellent point.
Speaker 3 (33:57):
I think we've heard a lot from the incoming Trump
transition team with respect to a focus, as you said,
on bilateral trade agreements, this focus on tariffs, on reshoring,
a lot of investment, whether it's AI chip manufacturing, focus
on cryptocurrency. So what I would expect is that the
(34:19):
price coalition will continue. Treasury often is allowed to continue
doing what it's doing, and the Department of Justice will
have free reign on to continue its enforcement actions, typically
under a new administration. But it's going to be the
engagement of these other components that will either make or
(34:41):
break the success of the price cap coalitions as well
the sort of the federation policy holistically. And what's interesting
is that the Trump administration is said that before inauguration,
certain things will happen, whether it's in Israel with respect
to the peace accords or you know, the cessation of hostilities,
(35:03):
or whether it's with respect to the Ukraine, and so
you know, it may be that there's active foreign policy
negotiations going on behind the scenes that hopefully would make
a lot of this moot going forward, and then we
can focus on other issues like in re engagement or
moving away from soul sourcing from China. So, you know,
(35:24):
I think that I think a lot will play out
pretty quickly before January twentieth, and then in the maybe
the first or second months after inauguration, and we'll have
a better idea of what this holistic approach to the
Federation is and to China and what it means for
engagement with some of these non aligned coalition members as well.
Speaker 1 (35:49):
Yeah, so final question for you, what advice would you
offer to compliance professionals, including our Illicit Edge subscriber base,
on navigating some of these complexities over the next few months,
particularly in high risk industries like finance and energy.
Speaker 3 (36:08):
Yeah, I mean, I think that's the key question, and
we're hearing that too. I think that the bottom line
is there's a lot of pressure on the compliance industry.
We saw that from the TD Bank case, and we've
seen it over the years, you know, going back as
far as twenty twelve with a money gram case where
there was liability for the individual compliance officers, And so
(36:33):
I think now is a time where the compliance profession
is responsible for not only navigating the web of sanctions,
export controls, anti corruption rules, but also driving the bottom
line for their corporations and finding creative solutions where potentially
(36:53):
they're not just a cost sector but also potentially you know,
a profit center as well. And I think the only
way that that works is if the compliance professionals continue
to work with each other through trade associations, engage where
they can through things like the Bank Secrecy Act Advisory Group,
and then just put out another notice opening up applications
(37:17):
for membership, whether it's DTAG, which is the same thing
on the export control side. You know, I think it's
this idea of engagement not only through trade associations, through
informal roundtables, but also actively with a government in order
to be able to participate in the rulemaking and understand
what's coming down the pipe, what's possible to implement, and
(37:39):
what's just impossible. So it's this dialogue. Nothing can happen
in a vacuum, and I think the siloed approach is
very dangerous. You know, you don't just have a sanctions
of Asian issue, so the compliance teams shouldn't just be
focused on sanctions. It's if there's sanctions of Asian then
there's also corruption. There's also lifely export controls violations, there's
(38:02):
also likely money laundering, you know, And it's this holistic
approach that I think we it's hard, right because you
can learn sanctions, but it's really hard to be an
expert in multiple areas. But I think it's this, you know,
don't be siloed and engage with the government as much
as possible, and engage with through trade associations if there's
(38:22):
a lot of anonymity and support that can come from
a trade association, if a corporation doesn't want to be
the one that breaks bad news to the government.
Speaker 1 (38:33):
As we head toward a transition of power and a
new administration, anyone wishing for greater understanding of the future
of sanctions enforcement and global security would be wise to
carefully consider Carrie Steinbauer's guidance, whether focusing on the latest
sanctions targeting Russian financial institutions and tracing their impact on
global financial networks, or examining how Russia's sanctions of Asians
(38:54):
strategies are interconnected with the tactics of China around in
North Korea, creating a web of illicit activity that tests
the limits of enforcement. Experts like Carrie are true thought
leaders and can help guide the way towards our collective
goal for a safer and more secure geopolitical landscape. I
thank Carrie for her time and the illuminating conversation. Thanks
(39:15):
for joining me. I'm Eline Dozinski and this is coercive
capital on the illicit Edge network.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!