A recent Kremlin-linked campaign to help arm Russian troops fighting in Ukraine demonstrates the importance of conducting thorough due diligence research on clients, business partners, and other counterparties. Even in instances in which a transaction is technically legal, associated ethical issues could lead to adverse media coverage and reputational risk. We assess that entities providing financial services, NGOs, and humanitarian groups are particularly vulnerable to abuse by illicit actors and sanctioned entities.
The МыВместе (We Are Together) campaign, conducted by Russian President Vladimir Putin’s political party, United Russia, provides material and financial support for mobilized Russian soldiers. To this end, the campaign collects donations and military materiel through its Putin-led Все для победы (All For Victory) fundraisers.
All For Victory fundraisers and materiel collections are, in some cases, run by sanctioned individuals such as EU- and UK-designated Vladimir Soloviev and EU-designated Vladimir Mashkov, presenting an opportunity for these sanctioned individuals to circumvent Western sanctions by funneling money through supposed charitable campaigns.
These fundraisers also support military units in embargoed regions, including Luhansk in Ukraine. Some campaigns are marked as complete and are in the process of purchasing military equipment, which if true, represents prohibited, or at the very least risky activities.
Donations to We Are Together and All For Victory can be made directly on the campaigns’ websites through third-party payment processors (TPPPs), which are controlled by sanctioned parties, including Promsbyazbank PJSC and Sberbank; the transactions are subject to western sanctions but accept both Visa and Mastercard payments, according to their websites. Visa and Mastercard probably have obtained licenses from OFAC to legally process these transactions, but association with campaigns supporting Russia’s military, controlled by sanctioned individuals who could divert funds either into their own pockets or to support Russia’s war in Ukraine, presents major reputational risks.
We have reached out to both Visa and Mastercard for more information but received no replies.
Visa and Mastercard in March both suspended operations in Russia so that only in-country issued cards would work within Russia as they are processed through Russia’s National Payment Card System, but both cards continue to work in Crimea, despite both companies having suspended Russian operations in March.
Russian Red Cross
An investigation into the Russian Red Cross (RRC) shows the importance of enhanced due diligence, because despite its humanitarian image, the RRC participates in the We Are Together campaign. The organization is collecting payments to support families affected by the mobilization, leading the Ukrainian government to call for the RRC’s expulsion from the International Committee of the Red Cross (ICRC).
The affected families of mobilized individuals largely have had to provide them military equipment and supplies, resulting in RRC donations, albeit indirectly, supporting these families’ efforts to equip the Russian troops. Despite claims of political neutrality by the ICRC and RRC, its participation in a mobilization fundraising campaign linked to Putin presents significant reputational risks for western companies supporting and transacting with them. In addition, the RRC is providing shelter and supplies for Ukrainians who have been relocated to Russia, which could help legitimize the Kremlin’s forcible relocation of the Ukrainian people.
Enhanced due diligence and transaction monitoring by firms and financial institutions that still are working with Russian entities and organizations is critical to mitigating the associated reputational risks and reducing the chances of running afoul of western sanctions. FiveBy can help provide additional insights into possible clients and other counterparties to better inform business decisions and reduce risk.
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FiveBy is a specialized risk intelligence consultancy with unique expertise in risk and fraud management. Companies and organizations contact FiveBy when they see risks related to fraud, abuse or compliance that could affect their reputation, their ability to support customers, their intellectual property, or their bottom line. FiveBy provides unique insight and experience to transform these risks into opportunities. Our tech and business savvy, and our proven track record, means you can rely on us to address those risks enabling you to focus on your day-to-day business. Whether you work with FiveBy on an assessment, to address a one-off incident, or to create robust processes to address future risks – we’ll always be in your corner. We stay ahead of the game, so you don’t have to.
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