The United States and Europe have launched two rounds of sanctions against Russia, which formally annexed the Crimean region of Ukraine on March 21st. The recent addition of 20 more individuals and Bank Rossiya to the U.S. black list has begun to have ramifications for the Russian economy, as reported by The Economist1The Wall Street Journal2, and Bloomberg3. Some lawmakers advocate for more stringent sanctions, such as the type that were imposed against Iran4. But Washington has other tools at its disposal that could more subtly dampen the Russian economy without requiring legislative action.

The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) could take the helm for such “stealth” sanctions by ramping up enforcement with respect to Russia of the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business and imposes certain record keeping and internal control requirements on issuers5. The DOJ and SEC “could also signal to US-based banks that their full and total compliance with the existing Foreign Corrupt Practices Act is expected and will be subject to extensive audit.”6

The effect of increased regulatory scrutiny could be quite significant. U.S. banks and their overseas operations and European and global banks with U.S. operations would likely scale up their “Know Your Customer” (KYC) policies and other controls over Russian individuals and entities, all leading to greater compliance within the global financial system7. This would make it more costly for Russian firms to satisfy their capital needs in the international capital markets.8

As the fallout from Russia’s action in Ukraine continues, the Obama administration, in coordination with European nations, will likely consider a wide range of financial and economic sanctions against Russia. Stealth sanctions should be seen as complementary to other options. That they limit unnecessary publicity and political wrangling is just further indication of their utility.