US Firms Need to ‘Step Up’ Russia Sanctions Compliance, Treasury Official Says

A top Treasury Department official this week called on U.S. companies and banks to bolster their trade compliance efforts, saying they need to do more to prevent their customers and counterparties from buying and shipping sensitive items for Russia’s military.

Deputy Treasury Secretary Wally Adeyemo said Moscow has asked its intelligence service to find creative ways to evade Western sanctions and continue to buy goods from U.S. manufacturers of electronics and machine tools. Treasury wants those firms to “step up their compliance efforts, but also to make sure that freight forwarders and their distributors do the same,” Adeyemo said June 4 during a CEO summit hosted by CNBC.

Adeyemo also said U.S. financial institutions with “big correspondent banking relationships” need to do more due diligence on small and medium-sized banks in the “countries of concern” that may be shipping goods to Russia. “We know the Kremlin is not using big banks anymore, they're trying to use the small and medium-sized financial institutions,” Adeyemo said.

Asked whether he thinks U.S. businesses and banks are looking for loopholes to continue to sell goods to Russia or process Russia-related transactions, Adeyemo said he thinks “the opposite is true.” Each time he speaks with a “major” CEO, “they ask me what more can they do,” he said.

Adeyemo acknowledged that trade compliance can be challenging, particularly because Russia has gotten “very good at trying to evade our sanctions.” But he said U.S. companies “need to do more.”

“To all the CEOs across our coalition, what we need you to do is to pay more attention to supply chains, and also to the banks that you're working with,” he said.

Adeyemo also said the “vast majority” of dual use goods being sent to Russia’s military, such as machine tools and engine parts, are coming from China. The U.S. has asked Beijing to stop its companies from selling a select group of sensitive items to Russia, he said.

“Without China, Russia's military industrial complex would grind to a halt,” Adeyemo said. “If the Chinese said they would stop” selling to Russia, it “wouldn't be able to build weapons they want for the war they're fighting in Ukraine.”