To: 07/20/2022 6:00 p.m.
Above all, the exclusion of Russian banks from the SWIFT payment system aims to weaken Putin’s regime economically. So far, however, there have been no massive consequences. search by WDR and SZ show how the system is circumvented.
Hitting the Russian economy where it hurts – that was the stated goal of the US, EU and Britain’s Western sanctions plans, which were enacted against Russia’s super-rich, banks and even the central bank after the invasion of Ukraine.
In particular, the exclusion of Russian banks from the SWIFT cross-border payment system should deal a severe blow to the Putin regime. But SWIFT sanctions in particular are easy to circumvent. Too many accomplices offer to transfer or hide money from Russian companies, banks and customers.
How German Lawyers Help Russian Clients
Experts have been pointing to the role of so-called “enabling” industry for decades. These are usually lawyers, but also auditors or so-called wealth managers who make a lot of money by transferring and hiding suspicious assets.
These activities are often only revealed by international leaks such as the Panama Papers or the Pandora Papers. German law firms are now at the center of attention: according to a study by WDR and SZ collected the first information on how dodgy German lawyers help wealthy Russians keep their money safe.
Lawyers are well paid
The easiest way: you place it on attorney escrow clients where the attorneys act as account holders, not Russian clients. Customers, such as sanctioned persons, can transfer the money there, often without investigators being aware of the trail.
The problem of SWIFT sanctions against Russian banks can also be avoided in this way, because lawyers use Western banks and money can thus easily migrate through the SWIFT system. The Russian money is initially safe in the lawyers’ trust accounts. Lawyers like to invoke their duty of confidentiality when investigators want to investigate.
“It was almost to be expected that the sanctions would mean that something like this would be used more intensively,” says Christoph Trautvetter, an expert with the Tax Justice Network: “Money flows from many different sources to these tax accounts. lawyers, and it goes to many different recipients – so there are hardly any investigators to figure out where the money came from and whether sanctions were violated.”
According to the authorities, this is a method that law firms have already used successfully during the sanctions against Iran and for which lawyers are well paid: “Such constructions with intermediary lawyer accounts are expensive – only when large sums are moved.” says Christoph Trautvetter.
How dependence on energy supplies helps Gazprombank
A second shortcoming hampers the sanctions: the fact that one of Russia’s largest banks, Gazprombank, can still operate largely unrestricted. “As long as Russia’s Gazprombank remains in the SWIFT system and is not subject to severe sanctions, the sanctions package against the Russian economy will have only a limited effect,” said Carnegie program expert Robert Greene. “Endowment for International Peace’s Technology and International Affairs”.
So far, Gazprombank has been spared so that Russia’s energy supplies to the West can continue to be paid for. But it is increasingly one of the verses of Achilles in the package of sanctions. Due to energy supplies and payments to Gazprom, payments in euros and dollars can continue to flow through Russian channels and support the country’s economy, which the West actually wanted to significantly weaken with the sanctions.
Countries like China are developing alternatives to Swift
A third gateway are Chinese banks. “Chinese banks, which now have their own branches in Russia, manage trade between Russia and China in a simple way,” Greene explains. This has increased considerably since the beginning of the war. This is why there are also growing concerns in the West. that the disconnection of Russian banks from the Western payment system how SWIFT could in fact only accelerate China’s efforts to offer alternatives to Russia.
VTB, which is expected to be hit hard by the sanctions, is already a member of the Chinese payment system CNAPS, which is increasingly developing as an alternative. “This means VTB can easily avoid SWIFT when processing payments between Russia and China,” Greene said. Russia itself has in recent years established its own SPFS payment system, to which banks in many neighboring countries are also connected.
In total, experts observe an increasing number of methods for circumventing sanctions against the Russian banking system, so their effect often fades. The “nuclear catastrophe” that the SWIFT ban was supposed to be has yet to materialize.
At the same time, the German authorities are still struggling to freeze assets falling under sanctions, as required by European regulations. Federal Finance Minister Christian Lindner estimates the frozen assets of sanctioned Russians and companies in Germany at 4.5 billion euros. According to Gerhard Schick, leader of the citizens’ movement Finanzwende, much more is to be expected: “If you put this amount in relation to the more than 200 billion euros that have flowed from Russia alone to the Western world via Danske Bank , you realize: Germany hasn’t done much.”