This article first appeared in La Tercera on April 1, 2022.
Russia’s invasion of Ukraine can be analyzed from different points of view, the most important of which is certainly the humanitarian one, the invasion of a territory and its degradation. However, we can also mention global economic consequences, the restructuring of a new international system, and a lot of uncertainty.
The deployment of soft power by Western countries to punish Russia economically will have important consequences in the field of corruption, and it is important to make the risks visible, as it will be necessary to strengthen controls.
The drastic sanctions translated into the exclusion of most Russian banks from the Swift international payment system, freezing half of the Bank of Russia’s reserves, closing airspace to commercial aviation, limiting exports, closing large companies, blocking the media and social networks, and punishing Russian oligarchs -used to laundering money in Western countries-, will bring new developments in terms of corruption. Even more so if we consider that the ruble has lost value, that there is a limit for cash withdrawals or the problems to pay by a card or through app systems. Some experts already anticipate a double-digit economic downturn this year and, faced with this, the Russians, cornered, will look for ways to get ahead.
These sanctions have proven to be a good response from the international community to the Russian invasion, but it is the citizens who will suffer more directly their effects through unscrupulous people who will make the best business out of necessity.
In this way, the lack of democracy and the economic crisis will allow or endorse practices that will seem acceptable to get ahead, bypassing controls or taking advantage of the situation to generate profits. Even the oligarchs themselves may be part of illicit tactics to maintain their wealth in the global financial system, increasing the possibility of crimes such as money laundering, which could go unnoticed by both traditional financial institutions and companies worldwide.
On the other hand, and remember that technology is also a powerful weapon, we must keep in mind how the war also moves to the digital and, in this, Russia has talent. In the blink of an eye, Russian hackers can deploy their skills and harm their enemies, through ransomware or malware, which should be of particular concern to companies, banks, and governments. In fact, a few days ago, the automotive company Toyota was attacked by malware to disable and stop its car production, which happened hours after adhering to the economic sanctions against Russia.
Likewise, concerns are growing about cryptocurrencies as a way to avoid Russian sanctions. Given this, the UK’s National Crime Agency wants to regulate digital currency protocols, as this could make it easier to hide the money trail.
The consequences can be significant for companies if they do not take care of these risks, and we must analyze to what extent Latin America can facilitate the entry of resources of dubious origin into Russia.
For this reason, it is essential to carry out due diligence to identify possible transactions related to final beneficiaries in that country and avoid that in a few more years we find ourselves with Panama Papers, but with Russian companies. In fact, knowing the beneficial owners not only makes it possible to know who controls the companies but also stops the abusive use of individuals and legal structures. In this period, especially, it will be important to know the scope in which the new legal figures that will appear will operate, which can be complex, making access to transparency difficult.
Likewise, it will be essential to control digital money; to be guided by legal regulations, but above all, to have policies and procedures to prevent and detect irregularities. Controls must be exaggerated.
And going beyond companies, while it is important to be aware of the imminent – and additional – risks that arise in times of crisis, it is also important to socialize it with our close circles, because no one is immune from falling into corruption.
Finally, I would like to reinforce the value of democracy as a basis for the functioning of society. Russia’s aggression against Ukraine demonstrates precisely that weak democracies, or rather autocracies, open the door to corruption and undermine aspirations for development, transparency, and trust.
By: Susana Sierra