Working Group Calls for Broader Russia Sanctions, Due Diligence Rules for Lawyers

The U.S. and other countries imposing sanctions and export controls on Russia need a more “aggressive” plan to cripple Moscow’s war effort, a group of researchers and economists said, including through tighter financial restrictions, new bans on Russian commodities and broader export controls. They also said American lawyers should have to follow strict due diligence and reporting rules when taking on clients with ties to Russia, and said the price cap on Russian oil should be lowered.

A new report published this month by The International Working Group on Russian Sanctions, a group of sanctions experts and researchers created with support from the Ukrainian government, said the U.S. and its allies need a “new big bang” of sanctions against Russia. The country’s economy has “outperformed many predictions even under the current sanctions regime,” the report said, adding that the “sanctions coalition needs to develop a more aggressive, comprehensive plan to help end Russia’s invasion of Ukraine rather than just serving as a tactical reaction to the latest Russian atrocity.”

“This means more must be done.”

The 48-page report -- authored by academics, economists and national security experts from Harvard University, the Kyiv School of Economics, the Atlantic Council and elsewhere -- offers a range of options to strengthen trade and financial restrictions against Russia, including by seizing frozen Russian assets and using that money to help Ukraine; additional sanctions on Russian oil, gas and metals; and a more sweeping set of technology export controls.

The researchers said “too many critical technologies are flowing” into Russia, specifically calling on countries to tighten restrictions on exports of microelectronics, computer numerical control machines, software, navigation and radio equipment, chemicals for explosives, and parts commonly used in the defense sector. They also said there are too many “significant inconsistencies” across different countries’ export control regimes, “which hinder effective enforcement and allow for circumvention.”

The same issues plague export enforcement, the report said, saying enforcement agencies, including in the U.S., aren’t “adequately equipped.” The EU “lacks unified enforcement structures altogether,” the report said.

The researchers suggested reinstating the Coordinating Committee for Multilateral Export Controls, or CoCom, the regime created during the Cold War to stop the Soviet Union from importing sensitive goods. “CoCom produced positive results, in part because the organization was international, which helped prevent systematic evasion through loopholes,” the report said. A new CoCom could be based at the Organisation for Economic Co-operation and Development.

“While CoCom was not perfect,” the report said, “the model is the right one for limiting the transfer of military and dual-use technologies to Russia.”

Countries can also tighten financial sanctions by requiring all Western banks to withdraw from the Russian market and putting in place full blocking sanctions on all Russian banks. They can also sanction banks and other financial institutions in nations that are “facilitating” Russian trade, drawing on an executive order the Biden administration released in December that gave the U.S. broader authority to sanction foreign financial institutions involved in shipping goods to Russia (see 2405230043, 2401120051 and 2312220023).

The report specifically said countries could sanction banks in the United Arab Emirates, China, Turkey and elsewhere that “have been found to facilitate export control violations involving any companies or individuals from coalition countries.”

The researchers also called on Congress to reintroduce and pass the Enablers Act, a bill that could impose stronger financial due diligence requirements on lawyers, public relations firms, investment advisers, accountants and others (see 2111190038).

The U.S. should require lawyers to conduct “basic due diligence” on their clients and report suspicious activity to the U.S. government, the researchers said, similar to the rules banks have to follow under the Bank Secrecy Act. The requirements would specifically target lawyers working on corporate and financial transactions with the “highest risk of illicit activity.”

The report said many countries have “stronger client due diligence requirements for lawyers than the United States,” and new rules are “necessary to strengthen trust in the legal profession” and can be “implemented with due respect for lawyers’ ethical duties.” New diligence and reporting requirements “on these transactions will close a key blind spot in sanctions enforcement.”

The researchers also recommended tightening the Russian oil price cap, but they also acknowledged that the cap can only be lowered after “enforcement actions have secured greater compliance with the existing price caps.” Experts have said the price cap so far hasn’t done enough to limit Russian energy revenue, partly because Russia is selling to India, China, Turkey and other nations that aren’t part of the price cap coalition (see 2405150025).

The report suggested that the Group of 7 countries, the EU and Australia may see better price cap enforcement next year, but it didn’t explain why.

The crude oil price cap should be lowered from $60/barrel to $50/barrel “once credible compliance with the price caps has been established, likely at the beginning of 2025,” the report said.

The U.S. and its allies can also take new measures to shrink the “shadow fleet,” older ships usually sailing under false registrations to transport sanctioned goods, including to and from Russia (see 2310240068). Instead of enforcing a “shadow-free zone” in the Baltic through “litigation and/or interdiction at sea,” the report said, countries should create a list of shadow tankers that aren’t, for example, providing disclosures on mandatory spill insurance in line with International Maritime Organization guidelines.

If those ships continue to sail in the Baltic, they should be subject to blocking “orders” from the Office of Foreign Assets Control and other agencies, the report said. “Given how effective blocking orders have been, it is expected that shadow tankers will comply.”

Countries, especially in the EU, can also place more restrictions on Russian commodity exports. The report said EU tariffs on Russian agricultural products, which “are about 50%,” should be applied to all Russian exports. “It would no longer be necessary to sanction each kind of commodity separately,” the report said.