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| Kevin Carroll |
This raises the question: Will the U.S. Department of State designate Russia a state sponsor of terrorism, or its mercenary Wagner Group a foreign terrorist organization, in response? If so, what are the legal ramifications for American businesses?
Compliance professionals should already know that careful diligence is required to comply with strict sanctions and export control programs when transactions could potentially involve Russian entities.[1]
If the State Department gives Russia or the Wagner Group a terror designation, this would implicate additional statutes and could expose any company that indirectly or unintentionally contributes to the war effort to further liability.
Bottom line upfront: U.S. banks and companies would be well advised to tighten their compliance programs to avoid providing communications, financial, lodging or transportation services to anyone aiding Russian President Vladimir Putin's war.
Since at least April 2022, Ukrainian President Volodymyr Zelenskyy has called for Russia's designation as a sponsor of terrorism.[2]
Last summer, Sens. Richard Blumenthal, D-Conn., and Lindsay Graham, R-S.C., offered a resolution calling for Russia's designation as a terror sponsor, and it passed unanimously in July.[3] Similar resolutions were introduced in the U.S. House of Representatives but did not move beyond the foreign affairs committee.[4]
The resolution accuses Russia of terrorism due to Moscow's indiscriminate use of force against, and extrajudicial killings of, civilians during the current Ukraine conflict, the Second Chechen War in 1999-2000, the invasion of Georgia in 2008, the annexation of Crimea and the Donbas in 2014, and Syria's civil war since 2015.
It mentions Wagner Group activities in Ukraine, Syria, Sudan and Libya; the downing of a Malaysian airliner over Ukraine in 2014; and Russian attempts to assassinate Zelenskyy in Kyiv in 2022 and defector Sergei Skripal's family in the U.K. in 2018.[5]
The Biden administration considered designating the Wagner Group a foreign terrorist organization, or FTO, as recently as November.[6] And just last week, the White House announced it would designate the Wagner Group a Transnational Criminal Organization, perhaps as a precursor to designating it an FTO.
The Wagner Group is a motley collection of Russian former service members, soldiers of fortune and paroled criminals serving as Putin's plausibly deniable, and quite commercial, covert direct action force.
As of December, the administration reportedly asked Democratic congressional allies to intervene in ongoing Capitol Hill discussions about Russia's potential designation as a sponsor of terrorism, suggesting that Moscow instead be declared an aggressor state, which would have no legal impact.
Secretary of State Antony Blinken explained that a terror designation would pose unspecified "unintended consequences" complicating diplomacy with Putin.[7]
Since 1979, the State Department's decisions to designate a state as a sponsor of terrorism have regrettably been quite arbitrary. Four countries are currently designated as terrorism sponsors: Iran, Syria, North Korea and Cuba.[8]
Iran is designated based on its support of FTOs such as Hamas and Hezbollah, as well as its own Islamic Revolutionary Guard Corps-Qods Force.[9] Iran also harbors senior al-Qaeda leaders.[10]
Syria is similarly designated based on its support for Hezbollah and Iraqi Shia militant groups, partnership with the Qods Force, and formerly permissive attitude toward al-Qaeda.[11]
North Korea is designated based on its assassinations, kidnappings of Japanese civilians, and harboring of four Japanese Red Army members who hijacked an airliner in 1970.[12] The State Department removed North Korea when the George W. Bush administration sought an arms control deal with Pyongyang in 2008.[13] The Trump administration added it back following the country's intercontinental ballistic missiles tests in 2017.[14]
Cuba is designated based on its close ties with Iran and North Korea, and its harboring of 10 Colombian National Liberation Army leaders and several U.S. fugitives. The American fugitives include aircraft hijackers, bank robbers, cop killers, and members of homegrown terror groups such as the Black Liberation Army, Venezuelan Armed Forces of National Liberation, the Boricua Popular Army and May 19th Communist Organization.[15]
The State Department earlier removed Cuba when the Obama administration reestablished diplomatic relations with Havana in 2015. The Trump administration added it back, for domestic political reasons related to Cuban exiles, in 2021.[16]
In contrast, Afghanistan was never designated during the Taliban's 1996-2001 reign, despite its symbiotic relationship with al-Qaeda, only because the U.S. did not diplomatically recognize it as a legitimate government.[17]
Afghanistan is still not designated, despite the Taliban's return to power in 2021 and ongoing relationship with al-Qaeda, because the U.S. does not recognize the Taliban.[18]
Pakistan supported anti-Indian terrorist groups such as Lashkar-e-Taiba;[19] far from being designated, Islamabad annually received billions of dollars in aid from the U.S. because of worries over the security of its nuclear arsenal.
The Soviet Union sponsored left-wing terror groups in Western Europe in the 1970s and 80s — yet the USSR was never designated.
The State Department's most recent terrorism report, issued in 2021, noted that Russia fights terror groups in the North Caucasus, and has cooperated with the U.S. against the Islamic State, but supports neo-Nazis and white supremacists in Europe.[20]
Do Russian war crimes in Ukraine merit Moscow's designation as a terrorism sponsor? The United Nations conducted a thorough study of Russian war crimes in that country. The details of the U.N.'s report, covering only the first seven weeks of that war in just four provinces, are harrowing.
The study accuses Russia of:
- Subjecting Ukrainian cities to heavy and indiscriminate air and artillery strikes, destroying hospitals and schools;
- Preventing civilians from either evacuating, or obtaining access to food, water, heating and medical care;
- Launching daytime attacks with heavy weapons on fleeing civilians;
- Using civilians as cover;
- Conducting forced deportations;
- Conducting operations in and around nuclear plants;
- Unlawfullly detaining civilians in inhumane conditions;
- Gang raping girls as young as four and women as old as 80, sometimes in the presence of their families; and
- Committing summary executions of victims found bound, visibly tortured and buried in mass graves.[21]
Thousands of Ukrainian civilians have now been killed, and millions displaced. Does this amount to terrorism?
Unfortunately, the U.S. government cannot agree with itself upon a definition of terrorism. Several statutes, Executive Order No. 13224 on blocking the assets of terrorist support networks, the FBI and the U.S. Department of Defense all define terrorism differently.[22]
The State Department cites to Executive Order No. 13224 in reference to the state sponsor designation process, as well as Title 8 of the U.S. Code, Section 1182, and Title 22 of the U.S. Code, Section 2656f, in reference to the FTO designation process.
A rough synthesis of the definitions of terror in that order and those statutes is: violence perpetrated against noncombatants to influence government policy, including by means of assassination, hijacking, hostage-taking, sabotage or use of weapons of mass destruction.
The industrial-scale pattern and practice of war crimes described in the U.N. report illustrate how ongoing Russian activities in Ukraine satisfy any of the U.S. government's several statutory definitions of terrorism.
In fact, the U.S. has found states to be sponsors of terror for conduct that, although reprehensible and deserving of the designation, was less systematic or wide-reaching.
For example, North Korea and Cuba were designated as state sponsors of terror for harboring 22 fugitives from the 1970s. Those fugitives' crimes were horrific and serious, but North Korea and Cuba did not directly participate in those crimes, other than by providing shelter after the fact.
If a state harboring a fugitive, essentially acting as an accessory after the fact, is a sufficient basis for a state to be designated a state sponsor of terrorism, then the terror inflicted by Russia on Ukrainians more than meets the standard.
The State Department thus has ample basis for designating Russia as a sponsor of terrorism. However, the U.S. has considerable incentives to refrain from taking that step. For example, the withholding of this sanction may provide some leverage to deter Moscow from the use of weapons of mass destruction.
If Russia were to be designated, what are the consequences for Moscow? Designees are subject to sanctions including bans on U.S. foreign assistance and support for international financial assistance, strict export controls and financial restrictions.
Thousands of businesses and individuals associated with the four designated countries are subject to economic sanctions in their corporate or personal capacities. Sanctions against Russian entities have multiplied since February's invasion.[23]
It is more likely that the State Department will designate the Wagner Group as an FTO, rather than designate Russia itself. A foreign organization may be designated simply based on engaging in terrorism, as defined in Sections 1182 or 2656f, that threatens the U.S.
Russia killed U.S. citizens in Ukraine over the past year, and the U.S. Department of Justice is pursuing war crimes investigations.[24] In December, the Justice for Victims of War Crimes Act amended Title 18 of the U.S. Code, Section 2441, to expand its jurisdiction over war crimes committed against Americans overseas, and offenders present in the U.S.[25]
There are 68 designated FTOs, a list heavily weighted toward Islamist groups.[26] Other than the Qods Force, few are the arm of a nation-state as is the Wagner Group.
Similar to the process for designating state sponsors, violent groups such as the Revolutionary Armed Forces of Colombia move on and off the FTO list — and back on again — depending upon the vicissitudes of U.S. foreign policy and domestic politics.
That said, the Wagner Group is taking an ever-larger role in Ukraine, while recruiting from prisons to replenish its ranks.[27] The Wagner Group now acts as an informal, unofficial unit of the Kremlin, for which casualities are not reported, and it provides plausible deniability for Russian operations around the globe.
Ukrainian authorities and European intelligence have accused the Wagner Group of murdering and torturing civilians in Ukraine, and the Wagner Group has also been accused of war crimes in other areas, including rapes and robberies.[28]
While a political attempt to straddle the legal and moral issue of Russian war crimes in Ukraine may ultimately satisfy no one, designating the Wagner Group as an FTO, but not designating Moscow as a sponsor of terrorism, would let the Biden administration give something to Kyiv and its many U.S. domestic supporters without upsetting diplomatic overtures to Moscow.
And the significant consequence of being designated as an FTO is that material support to such an organization is criminal under Section 2339A, "Providing material support to terrorists."
There would be numerous consequences for U.S. businesses if Russia or the Wagner Group are designated.
Section 2339A criminalizes the knowing provision of material support for enumerated acts of terrorism. Material support includes tangible or intangible property or services, including communications equipment, financial services, lodging or transportation.
Section 2333 provides that any U.S. national injured in his person or property by international terrorism may sue in U.S. district court to recover treble damages and fees from anyone "who aids and abets, by knowingly providing substantial assistance" to those who committed the act of terrorism.
While the Justice Against Sponsors of Terrorism Act[29] sought to make it easier for Americans to recover against countries, such as Saudi Arabia, that are not designated as terror-sponsors, these plaintiffs still face significant obstacles to recovery.
Designation of Russia would, as a practical matter, likely make it easier for U.S. victims to recover against Moscow — and its agents and instrumentalities — as victims of Libyan and Iranian terror have succeeded in securing settlements and judgments.
Between Sections 2339A and 2333, U.S. businesses knowingly providing banking, communications, lodging or transport to Russian entities involved in war crimes could face criminal liability from the U.S. government, and civil liability to Americans harmed in the conflict, based upon allegations of material support.
DOJ counterterrorism investigations would refocus, and export control investigations would tighten their focus, on Russian cases if Moscow was so designated.
And while few U.S. businesses had commercial ties with countries currently or formerly designated, such as North Korea or South Yemen, many American entities maintain financial ties with Russian counterparts.
The Wagner Group is already on the Office of Foreign Assets Control's list of Specially Designated Nationals and Blocked Persons, so transactions with them are already forbidden.[30]
If the Wagner Group is designated as an FTO, U.S. authorities may also prosecute transactions with the Wagner Group using the statutes discussed above.
While an FTO designation may not significantly alter the compliance requirements of avoiding transactions with the Wagner Group,[31] it should underscore the substantial risk of unintentionally dealing with this organization.
Unlike most FTOs, which are not well funded, the Wagner Group is owned by a billionaire oligarch, Yevgeny Prigozhin. The possibility of an American bank holding funds in which Prigozhin, his deputies or their agents hold an interest is substantial.
Moreover, beyond Ukraine, the Wagner Group has also been reported to operate in the Central African Republic, Libya, Mali, Mozambique, Sudan, Syria and Venezuela.[32]
Compliance professionals with operations in these countries, or anywhere that Russia seeks to exert its foreign influence, should be on notice of this considerable risk.
Most U.S. businesses active in international trade have wisely ramped up their sanctions compliance efforts since the U.S. Department of the Treasury increased the number of Russian entities sanctioned by OFAC, and enforcement of those sanctions, last year.
If Moscow is designated as a state sponsor of terrorism, or even if only the Wagner Group is designated as an FTO, American banks and companies should redouble those efforts, to avoid criminal or civil litigation exposure for material support of Russian war crimes in Ukraine.
Kevin Carroll is a partner at Hughes Hubbard & Reed LLP. He previously served as senior counselor to the secretary of homeland security, senior counsel to the House homeland security committee, and a CIA and U.S. Army officer.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] See Ryan Fayhee et al., U.S. and EU Announce Subsequent Rounds of Sanctions in Response to Russia's Ongoing Aggression Against Ukraine, Hughes Hubbard & Reed (Apr. 5, 2022), https://www.hugheshubbard.com/news/u-s-and-eu-announce-subsequent-rounds-of-sanctions-in-response-to-russias-ongoing-aggression-against-ukraine.
[2] John Hudson & Jeff Stein, Zelensky Asks Biden to Name Russia a State Sponsor of Terrorism, Washington Post (Apr. 15, 2022), https://www.washingtonpost.com/national-security/2022/04/15/zelensky-biden-russia-terrorism/.
[3] See S. Res. 623, 117th Cong. (2022).
[4] See H.R. 8568, Russia is a state sponsor of terrorism act; and H.R. 1113, Calling on the Secretary of State to designate the Russian Federation as a state sponsor of terrorism, 117th Congress (2021-2022).
[5] See id.
[6] See Kylie Atwood, US Considering Designating Russian Mercenary Group as a Foreign Terrorist Organization, CNN (Nov. 30, 2022), https://www.cnn.com/2022/11/30/politics/us-wagner-group-mercenaries-terrorists/index.html.
[7] See Laura Kelly, Congress Aims to Label Russia 'Aggressor State' Instead of State Sponsor of Terrorism, The Hill (Dec. 20, 2022, 8:20 PM), https://thehill.com/policy/international/3782940-congress-aims-to-label-russia-aggressor-state-instead-of-state-sponsor-of-terrorism/.
[8] State Sponsors of Terrorism, U.S. Dep't of State, https://www.state.gov/state-sponsors-of-terrorism/ (last visited Jan. 9, 2023).
[9] U.S. Dep't of State, Country Reports on Terrorism 2020 199-200 (2021), https://www.state.gov/wp-content/uploads/2021/07/Country_Reports_on_Terrorism_2020.pdf.
[10] Id. at 200.
[11] Id. at 201.
[12] Id. at 199. The Japanese Red Army is no longer a designated foreign terrorist organization.
[13] Daniel Byman, Putting the North Korea Terrorism Designation in Context, The Brookings Institution (Nov. 21, 2017), https://www.brookings.edu/blog/order-from-chaos/2017/11/21/putting-the-north-korea-terrorism-designation-in-context/.
[14] See Dan Merica et al., Trump Names North Korea a State Sponsor of Terrorism, CNN (Nov. 21, 2017, 3:46 AM), https://www.cnn.com/2017/11/20/politics/president-donald-trump-north-korea-terrorism/index.html; see also Country Reports on Terrorism, supra note 8, at 200.
[15] U.S. Dep't of State, Country Reports on Terrorism 2020 at 212.
[16] See U.S. Announces Designation of Cuba as a State Sponsor of Terrorism, U.S. Embassy in Cuba (Jan. 11, 2021), https://cu.usembassy.gov/u-s-announces-designation-of-cuba-as-a-state-sponsor-of-terrorism/. The State Department removed the state sponsor of terrorism designation from South Yemen in 1990, when it ceased to be an independent country; Libya in 2006, after Muamar Qaddafi renounced terrorism and agreed to pay $2.3 billion to survivors of the victims of the 1988 bombing of Pan Am 103; and Sudan in 2020 after the overthrow of Omar al-Bashir's regime, and the payment of $335 million to survivors of the victims of the 1998 bombings of U.S. embassies in East Africa. See Paul Pillar, terrorism and U.S. foreign policy 169-70 (2004); see also John O'Neil, U.S. Restores Diplomatic Ties to Libya, new york times (May 15, 2006), https://www.nytimes.com/2006/05/15/world/middleeast/15cnd-libya.html; and Trump Set to Remove Sudan from State Sponsors of Terrorism List, bbc news (Oct. 20, 2020), https://www.bbc.com/news/world-africa-54609375. Iraq was de-designated twice: First, to allow the Reagan Administration to aid Baghdad in its 1980-88 war with Iran. The George H.W. Bush Administration added Iraq back after its 1990 invasion of Kuwait. Iraq was de-designated yet again by his son's administration in 2004, after the overthrow of Saddam Hussein's regime. See Pillar, supra, at 170; see also Dianne Rennack, Cong. Rsch. Serv., r43835, state sponsors of acts of international terrorism—legislative parameters in brief 8 (2021), https://sgp.fas.org/crs/terror/R43835.pdf.
[17] See Nat'l Comm'n on Terrorism, Countering the Changing Threat of International Terrorism 22 (Aug. 2, 2000), https://www.govinfo.gov/content/pkg/GPO-COUNTERINGTERRORISM/pdf/GPO-COUNTERINGTERRORISM-1-5-1.pdf.
[18] See Charlie Savage, Judge Recommends Rejecting Bid by Sept. 11 Families to Seize Frozen Afghan Funds, New York Times (Aug. 27, 2022), https://www.nytimes.com/2022/08/27/us/politics/sept-11-afghan-central-bank.html.
[19] See Country Reports on Terrorism, supra note 8, at 150.
[20] Id. at 98, 216. Upon information and belief, Russia also supports left- and right-wing extremist groups in the United States.
[21] Rep. of the Indep. Int'l Comm'n of Inquiry on Ukraine, U.N. Doc. A/77/533, at ¶¶ 32, 36, 52, 56, 60, 68-69, 75-80 (2022), https://documents-dds-ny.un.org/doc/UNDOC/GEN/N22/637/72/PDF/N2263772.pdf?OpenElement. On February 28, 2022, the International Criminal Court opened an investigation into war crimes in Ukraine. See id. at ¶ 35.
[22] See, e.g., 8 U.S.C. §1182, 18 U.S.C. §2331, and 22 U.S.C. §2656f; Exec. Order No. 13,224, 3 C.F.R. §13224 (2001); What We Investigate, FBI, https://www.fbi.gov/investigate/terrorism (last visited Jan. 9, 2023); and Joint Chiefs of Staff, Joint Publication 3-07.2, Joint Tactics, Techniques, and Procedures for Antiterrorism I-1 (1998), https://irp.fas.org/doddir/dod/jp3_07_2.pdf.
[23] See Fayhee et al, supra 1.
[24] See Cami Mondeaux, DOJ Appoints Former 'Nazi hunter' to Prosecute War Crimes in Ukraine, Washington Examiner (Jun. 21, 2022, 5:27 PM), https://www.washingtonexaminer.com/policy/defense-national-security/doj-appoints-nazi-hunter-to-prosecute-war-crimes.
[25] See Attorney General Merrick B. Garland Statement on the Passage of the Justice for Victims of War Crimes Act, Department of Justice (Dec. 22, 2022), https://www.justice.gov/opa/pr/attorney-general-merrick-b-garland-statement-passage-justice-victims-war-crimes-act.
[26] See Foreign Terrorist Organizations, U.S. Dep't of State, https://www.state.gov/foreign-terrorist-organizations/ (last visited Jan. 9, 2023). For example, there are fourteen groups directly affiliated with al-Qaeda or the Islamic State.
[27] See Erin Banco, U.S. Officials: Russia Is Increasingly Relying on Wagner in Ukraine, Politico (Dec. 22, 2022, 3:41 PM), https://www.politico.com/news/2022/12/22/russia-wagner-ukraine-prisoners-00075276.
[28] Just this January the group's owner, Yevgeny Prigozhin, sarcastically told a group of mercenaries returned from the front, "Don't rape any broads!" Allison Quinn, 'Don't Rape Any Broads': Putin's Chef Proudly Unleashes His Prison Fighters, Daily Beast (Jan. 5, 2023, 6:44 AM), https://www.thedailybeast.com/putins-chef-yevgeny-prigozhin-frees-prison-fighters-dont-rape-any-broads. Article 27 of the 1949 Fourth Geneva Convention makes rape a war crime. It is reasonable to assume on that the Wagner Group is specifically responsible for war crimes in Ukraine.
[29] 18 U.S.C. §2333.
[30] See Sanctions List Search: Private Military Company "Wagner", Office of Foreign Assets Control, https://sanctionssearch.ofac.treas.gov/Details.aspx?id=22543 (last visited Jan. 9, 2023).
[31] For example, financial institutions in knowing possession of funds in which Wagner or its agents have an interest also incur a specific obligation to retain the funds and report them to OFAC. See Foreign Terrorist Organizations, supra, note 29.
[32] Victoria Kim, What is the Wagner Group?, New York Times (Mar. 31, 2022), https://www.nytimes.com/2022/03/31/world/europe/wagner-group-russia-ukraine.html; see also Andrew Roth, Russian mercenaries reportedly in Venezuela to protect Maduro, The Guardian (Jan. 25, 2019), https://www.theguardian.com/world/2019/jan/25/venezuela-maduro-russia-private-security-contractors.
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