Russian oligarchs have been sanctioned like Osama bin Laden was, and they're using similar tactics to avoid them, an expert said

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  • Sanctions against oligarchs are no different than those against Osama bin Laden, an expert said.

  • Shane Riedel, an expert on moving money, said authorities are using a similar legal framework.

  • He believes oligarchs are using the same kind of informal system to move money as bin Laden did.

The Western sanctions against Russian oligarchs are no different than those against Osama bin Laden, one expert said, and he has seen the same sort of informal, secretive network of asset transfers develop among the oligarchs.

The sanctions were imposed on oligarchs with close ties to Vladimir Putin in response to his invasion of Ukraine, in a bid to put pressure on the Russian president.

Russian oligarchs — some of the world's wealthiest people — have had their assets frozen, from superyachts, artworks, and properties to private jets. Experts on moving money, though, have noted an increase in asset transfers a few months before Russia's invasion of Ukraine.

Shane Riedel, a financial-crimes expert and CEO of Elucidate, which analyzes patterns in money movement, said: "How is an oligarch being sanctioned any different than how Osama bin Laden was? This is the exact same tool, the exact same legal framework that is used."

"If we look at how transactions are moving and the reallocation of resources and assets, and the increase in new offshore companies, what we take away from that it is an absolutely fast-track mechanism for creating alternative payment platforms," Riedel said.

These alternative money-moving networks, called hawalas, take place outside of traditional banking systems. No documentation is required, so no records of the transactions exist, making it an ideal method of financing terrorism.

"Hawalas took thousands of years to develop. Now they're saying, 'we're going to put in place as a tactical mechanism to allow us to bypass sanctions', which is the same as for proxy entities — different objectives, different people," Reidel said.

In a hearing on hawalas and underground terrorist-financing mechanisms in the US Senate on November 14, 2001, Indiana senator, Evan Bayh, said that bin Laden used this system to avoid efforts to shut down his money flow.

"One system which bin Laden and his terrorist cells use to covertly move funds around the world is through hawalas, an ancient and formerly widely unknown system of transferring money," Bayh said.

Bayh also said that the US recognized the danger of unregulated hawalas, and Congress had moved to "regulate their activities in 1994, with the passage of a law requiring check-cashing businesses and informal financial enterprises like hawalas to register with the government." The law had little effect on hawalas.

Maryland senator, Paul Sarbanes, said at the hearing that "in the aftermath of September 11, we have learned that Osama bin Laden's terrorist network not only exploited vulnerabilities in the regulatory and enforcement procedures in the formal financial system, but also used the informal system to move significant amounts of cash around the world, without leaving an electronic fingerprint or paper."

"The system's relative anonymity and lack of legal record-keeping makes it an attractive mechanism for drug traffickers, weapons brokers, tax evaders, corrupt officials, and terrorists seeking to move money surreptitiously," Sarbanes said.

Sanctions against Osama bin Laden

Sanctions were aimed at terrorists, including bin Laden and members of Al Qaeda, for attempting to draw the US into a large-scale war in the Muslim world that would overthrow the existing world order and establish a single Islamic state.

US intelligence and law-enforcement agencies had been monitoring bin Laden and Al Qaeda during the 1990s, warning senior government officials of an increasing threat.

In 1996, bin Laden declared a jihad, a religiously sanctioned war, against the US, leading to violent attacks on American interests overseas. Bin Laden believed a strike on the US would convince the government to withdraw from the Muslim world.

Riedel said that the only difference between the sanctions on oligarchs and those on bin Laden is the reasons why they were sanctioned in the first place.

"It is the exact same agency in government that issues both of those controls — it's OFAC, it's HMT," Riedel said, referring to the Office of Foreign Assets Control in the US and the HM Treasury in the UK.

"If I knew that there was a legal regime that was going to prevent me from transacting, and I knew that there was an informal regime that would allow me to bypass that ...  you don't need to be a complete genius – why would you not do what's worked before?"

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