Austria’s Banking Sector Under Scrutiny as Financial Sanctions Evasion Techniques Revealed

US Treasury Slaps Sanctions on Russian Individual and Companies for Alleged Sanctions Evasion

The US Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on one Russian individual, Dmitrii Aleksandrovich Beloglazov, and three companies - OOO Titul, AO Iliadis, and MKAO Rasperia Trading Limited - for attempting to evade financial sanctions connected to Russian tycoon Oleg Deripaska. The scheme involves a failed bid by Austria’s Raiffeisen Bank International (RBI) to buy a EUR 1.5 billion stake in the Vienna-based construction group Strabag.

Complex Ownership Structures and Financial Services Firms Used to Disguise Connections to Sanctioned Assets

According to OFAC, Beloglazov and his companies worked together to sell Deripaska’s frozen shares in a European company using complex ownership structures and financial services firms. This scheme has raised concerns over the use of such techniques to disguise connections to sanctioned assets.

REPO Task Force Identifies Typologies of Sanctions Evasion Tactics

The multilateral REPO Task Force, launched by Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Commission, has identified several typologies of sanctions evasion tactics. These include:

• Use of Family Members and Close Associates: Maintaining control and access to wealth through family members and close associates
• Complex Ownership Structures: Creating complex ownership structures to obscure ownership or source of funds
• Engagement of Enablers: Using lawyers, accountants, and other professionals to facilitate sanctions evasion

Financial Crimes Enforcement Network Warns of Red Flag Indicators

The Financial Crimes Enforcement Network (FinCEN) issued an Alert in March 2022 warning financial institutions to be vigilant against attempts to evade sanctions related to Russia’s further invasion of Ukraine. The alert outlined various red flag indicators, including:

• Use of Corporate Vehicles: Using corporate vehicles to obscure ownership or source of funds
• Shell Companies: Conducting international wire transfers through shell companies
• Third Parties: Shielding the identity of sanctioned persons through third parties

Austrian Banking Sector Under Scrutiny as Financial Institutions Urged to Increase Vigilance

The failed bid by RBI to buy a stake in Strabag has raised concerns over the use of complex ownership structures and financial services firms to disguise connections to sanctioned assets. As the global financial community continues to monitor illicit finance risks related to Russia, Austria’s banking sector is under pressure to ensure compliance with international sanctions regulations.

Recommendations for Regulated Entities

The REPO Task Force recommends that regulated entities take several actions to mitigate the risk of exposure to continued sanctions evasion, including:

• Compliance with National Rules: Compliance with national rules and regulations related to sanctions
• Implementation of Robust Compliance Programs: Implementing robust compliance programs to detect and prevent sanctions evasion
• Participation in Public-Private Partnerships: Participating in public-private partnerships to share information and best practices on sanctions evasion
• Updating Risk Assessments: Updating risk assessments to identify potential sanctions evasion risks and take appropriate measures