Incentivizing Whistleblowers to Combat Sanctions Evasion
Earlier this year, a small drone flew over a Belarusian airfield, perched atop a Russian warplane, and blew up. The attack put out of action one of Russia’s last few A-50 radar aircraft, which helped hurl ballistic missiles towards Ukraine. Now Russia seems unable to replace the aircraft, because foreign suppliers don’t want to deal with the Kremlin. Sanctions are to be thanked for that.
The harder that sanctions bite Russia, the more it tries to dodge them. The Kremlin’s evasion networks now span the globe, evading the long arm of American law. Faced with widespread evasion, Washington ought to admit that government enforcement can pierce only so far into the shadowy world of Russian sanctions-dodging. Instead of relying solely on traditional enforcement tools, it should leverage the power of whistleblowers. Thankfully, there is an easy way forward: Expand Rewards for Justice, a long-standing State Department program that gives cash for tip-offs.
American Sanctions on Russia
The United States has imposed more than 2,700 sanctions on pro-Russian entities, ships, planes, and people. These measures have halted assembly lines at key defense plants, slashed Russia’s oil profits, and tanked its financial sector. Yet a global industry of sanctions-busters threatens to put these successes at risk. The Commerce, Justice, and Treasury Departments have responded by pushing the bounds of public-private cooperation to implement unprecedented sanctions and export controls against a large economy. But sanctions enforcement cannot rest on government guidance, prosecutions, and moral suasion alone. The U.S. government and its allies do not have the resources or policy interest to prosecute every sanctions violation. To combat these shadowy networks, Washington should also encourage whistleblowers to improve sanctions targeting and deter further sanctions evasion.
At least three American laws already reward whistleblowing on Russian illegality. The Neutrality Act of 1794 allows anyone who informs on the arming of vessels against a friendly country, such as Ukraine, to take half of any resulting forfeiture. A recent amendment to the Anti-Money Laundering Act of 2020 rewards whistleblowers whose information leads to enforcement action under various sanctions laws, including the International Emergency Economic Powers Act. And Kleptocracy Asset Recovery Rewards Act of 2021 promises to pay those who help the government target assets linked to Russian government corruption.
Although these laws are useful tools, none goes far enough. The Neutrality Act applies only to actions within the United States and ships, so it almost never matters. The Anti-Money Laundering Act rewards whistleblowing that results in fines of at least $1 million but does not guarantee rewards for information that leads to criminal charges or sanctions designations. Rather, it tackles U.S. financial institutions’ misconduct through enforcement actions that can take years to complete. What’s more, Congress assigned the task to Treasury’s money-laundering regulator, not its sanctions arm, the Office of Foreign Assets Control. Lastly, the Kleptocracy Asset Recovery Rewards Act, though an important tool, is also too small in scope. It covers oligarchs’ corruptly obtained assets but spares Russia’s broader military-industrial complex. More prohibitively, it requires a U.S. nexus to assets.
A Sharper Enforcement Tool
There is a better way of encouraging whistleblowing, especially for sanctions evasion taking place overseas: the State Department’s Rewards for Justice Program. This scheme offers money for information about international terrorists, transnational criminals, foreign election interferers, and the like. Its worldwide presence has paid off in spades. Since its start in 1984, Rewards for Justice has paid out over $125 million to over 80 informants on terrorism, nabbing the mastermind of the 1993 World Trade Center bombing and Saddam Hussein’s sons.
Rewards for Justice’s global reach explains some of its success. America’s sprawling diplomatic network allows the program to advertise rewards in local-language social media, posters, and even matchbooks. Nowadays this approach could get results in sanctions-evasion hotspots like Cyprus, Georgia, and the United Arab Emirates.
Rewards for Justice is also unusually flexible as far as whistleblowing programs go. The secretary of state can offer eyewatering rewards, regularly promising $10 million payouts. Because denouncing powerful criminals and despots can be risky business, Rewards for Justice offers relocation on a case-by-case basis for sources and their families. The program also recognizes that it is not always realistic to arrest international criminals, so it rewards informants who help to identify offenders or disrupt financial schemes. Better yet, unlike the Anti-Money Laundering Act, Rewards for Justice can reward whistleblowers without waiting on the outcome of a lengthy enforcement or criminal action.
Sanctions designations can often be a cat-and-mouse game, especially with a sophisticated, well-resourced, and highly motivated adversary like Russia. Deputy Treasury Secretary Wally Adeyemo recently confirmed that “one of the ways we know our sanctions are working is the Kremlin has tasked its intelligence services, such as the [Federal Security Service] and [Main Directorate of the General Staff of the Armed Forces], to find ways to get around them.” The Treasury Department’s Office of Foreign Assets Control would have to pick up the pace to sanction not just Russian targets but also sanctions-evasion enablers of all nationalities.
Already, the Treasury has put in place over 100 sanctions for evasion, including in partner countries like Israel and Singapore. Rewards for Justice could help to find more offenders and accelerate the sanctions targeting cycle. Although misguided patriotism drives many Russian intelligence officers to support President Vladimir Putin’s war machine, money can persuade sanctions-evasion enablers — especially lower-level conduits outside Russia — to do the right thing. Expanding Rewards for Justice would also support the goals of sanctions compliance by creating a deterrent effect. Sanctions evaders may think twice before engaging in illicit activities if they know that a colleague or counterparty may have reason to cooperate with the United States.
To be sure, expanding Rewards for Justice will require more cash from Congress. Appropriations would equip the State Department to run the program, buy ads, and pay prizes. The program that has so far paid 125 whistleblowers has just six full-time employees, according to the most recent information available. That is a sign that it would be money well spent. Moreover, the complexities of expanding Rewards for Justice to sanctions are largely resolved: A 2017 law expanded the program to counter North Korean sanctions violations.
The hard work of setting up Rewards for Justice is done. For four decades, the program has successfully hunted stealthy international criminals. Now Congress simply needs to equip the State Department to chase Russian sanctions evaders too. Rewards for Justice already covers Russians who interfered in elections, so there is no cause for giving Russian sanctions dodgers a pass. By contrast, there is every reason to keep A-50s from rolling off the assembly lines.
Alex Zerden is the founder of Capitol Peak, a boutique risk-advisory firm, and an adjunct senior fellow at the Center for a New American Security. Previously, he worked in the U.S. Treasury Department, White House National Economic Council, and Congress.
Arshan Barzani is an officer in the U.S. Army Reserve and a student at Yale Law School, where he is an editor of the Yale Law Journal. His book, Chronicles of Caesar’s Wars, is the first English edition of Napoleon’s history of Julius Caesar. The views expressed are those of the authors, not the official policy or position of the Department of Defense.