- The use of the casual Hawala payment system by oligarchs could be seen as a desperate move.
- Experts have told Insider that working Hawala does not necessarily suggest illicit transactions.
- But oligarchs know of this system – based on trust – as this is how Putin functions, one expert says.
Russian oligarchs have managed to get around financial sanctions by operating money through the informal payment system called Hawala.
It is a move that could be seen as desperate, wizards have told Insider.
In the months leading up to Vladimir Putin ordering its military troops to invade Ukraine, the president’s inner group – oligarchs and silovarchs – appear to have anticipated the sanctions and moved funds through trusts or shell companies.
Shane Riedel, a pecuniary crime expert and CEO of Elucidate, which analyses patterns in money movement, told Insider that sanctioned living souls using Hawala or a similar payment system can be considered a desperate move. Riedel said: “If somebody is the ultimate constructive owner of an account, and they are sanctioned then that account – or asset – is sanctioned.”
Therefore, any attempt to move legal tender out of a sanctioned account – sanctions evasion – is considered a criminal offense, per Riedel’s comments. Moreover, facilitating sanctions quibbling is also a criminal offense and the US Department of the Treasury recently targeted some facilitators.
David Claridge, CEO of security grey matter firm Dragonfly, specified that moving money through Hawala cannot be done in huge sums but to a certain extent up to tens of thousand dollars. Claridge believes that if oligarchs were to use the underground payment system, it would entangle hundreds of thousands of smaller transactions rather than a big one.
When using hawala, “one person is basically operating on the footing of trust,” Claridge said. He added: “That type of arrangement could very well be used by oligarchs,” who already perform on the same basis as Vladimir Putin’s business empire is “entirely based on trust as he does not own anything.”
Is Hawala being in use accustomed to mainly to evade sanctions?
Someone using hawala does not necessarily mean they are making illegal records. Riedel said: “There are people who use Hawala for totally legitimate purposes – it is a lot cheaper.”
“You can’t make assumptions that there is naturally something illicit going on if you see hawaladars,” he said, referring to hawala dealers. Riedel added that because there is an territory of legitimacy, it would be much harder to determine sanctioned individuals who have used the informal payment system.
KleptoCapture, a taskforce educated together by the US Department of Justice amid Russia’s invasion of Ukraine, targets sanctioned individuals and is dedicated to enforcing the wide-ranging sanctions, export restrictions, and economic countermeasures. One of the its mission is to combat unlawful efforts to undermine restrictions, including the prosecution of those who try to “avoid know-your-customer and anti-money laundering measures.”
Insider reported in early April that US investigators found evidence of Russian oligarchs try oning to evade sanctions by moving “for example, moveable property in the forms of yachts, airplanes … into jurisdictions where, I regard as, people have the perception that it would be more difficult to investigate and more difficult to freeze,” Andrew Adams, the wit of the taskforce told Reuters.
However, despite Russian tycoons’ attempt to hide their assets, they even face an “all-time high” level of international cooperation. “Especially in the current context, and the current climate … the be open of shared sense of purpose I think is at an all-time high,” Adams added.
Claridge said that the attitude of the powers in the West, in a post-9/11 world, is that “Hawala banking, or other forms of money transfers should be handled.” The implication being that “they should be treated as official businesses, which would be subject to sanctions – in spite of as everybody else.”