SLS Report Analyzes How Lawyers Enable Sanctions Evasion—and How to Address the Problem

A new report from Stanford Law School’s (SLS) Law and Policy Lab calls on Congress to enact new anti-money laundering legislation that would regulate lawyers and strengthen the effectiveness of U.S. sanctions generally and on Russia specifically. The report, Regulating the Lawyer- Enablers of Russia’s War on Ukraine, highlights how Western lawyers are helping Russian oligarchs and other entities evade sanctions by hiding and transferring offshore wealth. 

SLS Report Analyzes How Lawyers Enable Sanctions Evasion—and How to Address the Problem

The report argues that entrenched legal norms around attorney-client privilege and confidentiality allow lawyers to facilitate financial transactions that evade sanctions, and ultimately contribute to Russian President Vladimir Putin’s war efforts in Ukraine. New regulations can be enacted, the report drafters urge, without damaging important legal norms or impacting justice equities. 

The International Working Group on Russian Sanctions requested the report from the SLS Policy Lab to better understand vulnerabilities in the U.S. sanctions framework and to suggest policy solutions to address them in the context of Russia’s war against Ukraine. 

“Sanctions are an important tool to hasten an end to the war in Ukraine, but, as the Policy Lab report comprehensively demonstrates, these sanctions are vulnerable to the confidentiality privileges afforded to U.S. lawyers,” said Michael McFaul, director of the Freeman Spogli Institute, a former ambassador to Russia, and the Ken Olivier and Angela Nomellini Professor in International Studies in the Department of Political Science at Stanford University. “The report lays out how lawyers can be a significant threat to the sanctions regime when they serve as the conduit for oligarchs to shift and hide their assets through anonymous shell companies, client trust accounts, and other methods. And it rightly stresses that lawyers have duties not only to their clients, but also to the rule of law.”

Recommendations with Broad Implications

Since the Ukraine war started, the report says, the liquid portion of Russia’s National Wealth Fund has been halved. Accordingly, the Russian government is increasingly turning to the country’s oligarchs to fund and support the war and other initiatives. And the oligarchs turn to Western lawyers to execute the complex, asset-moving transactions necessary to funnel money to Russia.

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Rule of Law Program Director Erik Jensen

Lawyers, unlike other professionals such as bankers, “are under no legal obligation to determine the true identity of their client or to report when a client is using their services for suspicious transactions,” according to SLS Rule of Law Program Director Erik Jensen who served as the instructor for the policy lab. While the report is focused on the implications for Russia’s war in Ukraine, Jensen said the report’s proposals for subjecting lawyers to new money laundering regulations would have broad benefits. “It is a foundational principle that lawyers should not help their clients break the law, whether that means funneling ill-gotten gains to a war effort or helping drug dealers hide assets,” Jensen said.

In the research for the report, SLS students documented numerous examples of U.S. lawyers hiding behind assertions of confidentiality. One recent example involved Russian oligarch Andrey Kostin, indicted by the Department of Justice, along with others, on five charges, including conspiracy to violate sanctions by selling a home in Aspen, Colorado. The indictment listed three unnamed co-conspirators, including “Lawyer-1,” manager of the shell company which sold the Aspen home.

“Attorney-client privilege and confidentiality rules are longstanding, treasured, and necessary aspects of law practice, yet they risk being abused, to the profession’s detriment,” said Sarah Manney, JD ’24, who served as a teaching assistant for the policy lab along with Ukraine native Kyrylo Korol, JD ’25. 

“The types of services we propose regulating can all be done by non-lawyers,” Korol said. “Lawyers simply provide an additional layer of secrecy that attracts bad actors. Our proposal would extend lawyers’ existing reporting obligations, for instance on large cash payments, to other financial activities typically subject to anti-money laundering rules.”

Balancing Duties

A bipartisan bill introduced in 2021, the ENABLERS Act, sought to address these concerns and would have imposed anti-money laundering compliance obligations on law firms, investment advisers, and other entities. However, the proposed law failed due, in part, to opposition from the American Bar Association (ABA), which voiced concerns that the bill would damage the principle of client confidentiality. Most of the 50 states’ ethical codes and laws governing lawyers are drawn from the ABA Model Rules of Professional Conduct.

The students in the policy lab took a deep dive into the ABA’s concerns. The group considered the duties of lawyers towards clients who are credibly linked to ongoing human rights abuses and war crimes. They assessed current ABA guidelines and analyzed constitutional due process guarantees and recent policy developments. They also reviewed how other countries balance the tensions as they regulate their own lawyers while attempting to further the goals of international sanctions. 

Among the countries the students surveyed, the U.S. is an outlier, they write in the report, noting that the UK, Canada, Germany, South Africa, Brazil, and the UAE all impose substantial client due diligence requirements on lawyers when those lawyers conduct financial transactions on their clients’ behalf. 

The report concludes by recommending that Congress should pass legislation similar to the previously defeated ENABLERS Act to regulate lawyers as potential enablers of sanctions evasion and fully fund the implementing agencies. The Financial Crimes Enforcement Network of the United States Department of the Treasury (FinCEN) should issue regulations clarifying lawyers’ obligations under the new legislation; and lawyers should be trained on their obligations. The report also recommends that policymakers explore new solutions to fully address the scope of the lawyers as enablers problem, including imposing unilateral secondary sanctions on recognized enablers and FCPA-style penalties on U.S. law firm branches abroad that misbehave.

Read the Full Report

About the Law and Policy Lab

Under the guidance of faculty advisers, Law and Policy Lab students counsel real-world clients in such areas as education, copyright and patent reform, governance and transparency in emerging economies, policing technologies, and energy and the environment. Policy labs address problems for real clients, using analytic approaches that supplement traditional legal analysis. The clients may be local, state, or federal public agencies or officials, or private non-profit entities such as NGOs and foundations. Typically, policy labs assist clients through empirical evidence that scopes a policy problem and assesses options and courses of action. The methods may include comparative case studies, population surveys, stakeholder interviews, experimental methods, program evaluation or big data science, and a mix of qualitative and quantitative analysis. Faculty and students may apply theoretical perspectives from cognitive and social psychology, decision theory, economics, organizational behavior, political science or other behavioral science disciplines.

About Stanford Law School

Stanford Law School is one of the nation’s leading institutions for legal scholarship and education. Its alumni are among the most influential decision makers in law, politics, business, and high technology. Faculty members argue before the Supreme Court, testify before Congress, produce outstanding legal scholarship and empirical analysis, and contribute regularly to the nation’s press as legal and policy experts. Stanford Law School has established a model for legal education that provides rigorous interdisciplinary training, hands-on experience, global perspective, and focus on public service, spearheading a movement for change.