20 hours Ago By William Thompson
The first recorded use of sanctions was in 432 BC, and while they’ve only been commonly used in their current form for several decades, the fundamentals of how they’re applied haven’t changed. Yet technological advances have reshaped the world around us, opening new cross-border, largely anonymous ways to move money. As a result, governments are applying—and financial institutions are enforcing—a 20th-century solution to a problem that has taken on a new form in the 21st century.
The impact of this is a lose-lose situation for governments and businesses. Despite years of sanctions on Russia’s economy, the country is , according to the Atlantic Council, which says it uses a “shadow fleet” of 1,000 tankers to ship it. Russia has also continued to import many sanctioned Western goods, accessing them through third countries, including Georgia, Belarus, and Kazakhstan.
The International Monetary Fund estimates Russia’s economy grew by 2.2 percent in 2023 and 1.1 percent in 2024 – figures some Western economies would be very happy with.
To see the impact on the private sector, look no further than Murad, a California-based cosmetics company acquired by Unilever. Before the acquisition, Murad was, , engaged in “an apparent eight-year conspiracy that resulted in the export of services and more than $11 million in goods to Iran on at least 62 occasions.” An executive at the company worked through this time with distributors in the Middle East who exported products to Iran.
The company was fined $3.3m, and the executive who facilitated the deal agreed to pay $175,000. How did this go undetected for so long? In addition to the complicity of a senior executive, “another contributing factor was the lack of a sanctions compliance program.
” Specifically, OFAC found that: A mitigating factor of the penalties OFAC applied was the company’s remedial actions, including “developing sanctions and export control policies and procedures, conducting sanctions and export control training for senior management and key personnel, and implementing screening for all parties involved in its international transactions.” Murad’s 2023 settlement was just the tip of the iceberg. That year was a record for US sanctions enforcement, with OFAC issuing $1.
5bn in penalties. Given how much firms invest in their sanctions programs, would any CEO look at those numbers and believe they’re getting a good return on their investment? With so much geopolitical instability, solving this challenge has become more urgent. By funding terrorist groups and rogue states, continued sanctions evasion on the scale we are seeing today will only further undermine the international order.
It will also harm economic growth, as businesses sink more money into ineffective programs, only to shell out more on fines—and still more in reputational damage—at the other end. At ComplyAdvantage, we believe a new approach is needed to the way sanctions are issued and enforced. Reimagining both requires a network view of risk that considers the full scope of a person’s business, financial, and personal relationships.
The good news is that, from a technology perspective, a network view of a sanctioned entity’s risk profile is closer than ever. Delivering this 360-degree view of true risk has been a core goal of ComplyAdvantage since I founded the company a decade ago. What we need now is an honest, hard look from policymakers at the efficacy of the sanctions programs they invest so much time and money building – and a recognition that they could achieve much more by reworking them for the world we live in today – not the one we lived through in the last century.
(If you’d like to learn more about the first use of sanctions in 432 BC, .).
