Where Politics and Banking Collide with Peter Piatetsky

Sanctions started in ancient Greece and now touch every bank and fintech on the planet, but most people in finance have never really examined how they work. 

In this episode, I talked to Peter Piatetsky, former US Army intelligence analyst, former Treasury Department official, and now CEO of Castellum AI, about the history of sanctions, how they've evolved from a careful diplomatic tool into something governments reach for freely, and what that means for banks. 

We covered the Turkish pastor case that changed how policymakers think about sanctions, how Peter personally figured out how to sanction aircraft at the Treasury, the existence of the UN Credit Union (one of the highest-risk financial institutions in the world), how people actually evade sanctions, and why the explosion of fintechs may be creating more sanctions risk than the sanctions themselves.

If you work in finance, you can't afford to miss this one. 

Transcript

SPEAKER_00 0:00

How do banks or companies think about conflicting sanctions?

SPEAKER_01 0:04

Panic attacks is kind of the first answer.

SPEAKER_00 0:13

Hello and welcome to In Control, where we learn about the finance of everything. I'm Tash, your host, and I'm also the CEO and founder of Cable, which supports the show. If you enjoy this, please share it with your friends and colleagues and subscribe on Apple Podcasts or Spotify. Early on in my Monzo days, I remember trawling through almost endless sanctions alerts, trying to identify if the people who were signing up for a Monzo account were sanctioned people. That job can be pretty mind-numbing. And I can't lie, I was ecstatic when we grew and I was able to hire people to do that work, so I didn't have to. Sanctions are this ever-present, operationally exhausting, pretty thankless task at all banks. Yet sanctions compliance is not driven by the same incentives as other regulatory compliance requirements. It's not about ensuring there is no consumer harm, or treating customers fairly, or trying to stop fraud or money laundering. Sanctions are primarily a political tool used to try to exert pressure on countries or groups of people or individuals in a non-violent way. So where did this tight connection between politics and money movement come from? Do they work? And how do banks deal with them? These are all questions that I need to get answers to, and so I am delighted to be chatting with Peter Piotetsky today. Peter spent time as an intelligence analyst in Afghanistan for the US Army. He worked at the Department of the Treasury with a focus on sanctions and terrorist financing. And he is now the CEO and co-founder of Costellum AI, which provides AI agents, data, and screening for sanctions compliance. Peter, thank you for joining me. And I want to start by understanding the history of sanctions. When were they introduced and why?

SPEAKER_01 1:55

First sanctions actually came about in ancient Greece, uh, during economic conflict between Athens and Sparta. And it's become a favorite tool of policymakers because policymakers get to inflict pain, economic pain, but pain that is, you know, can't can result in change in government actions, change in terrorist group actions can result, you know, depending on what is not allowed to be sold, you know, difficulties with home heating homes, obtaining medicines. So sanctions can can be deadly, but the history is thousands of years old. But in you know, it's skip from ancient Greece to 1945. Modern-day sanctions kind of began around World War II with UK and US officials trying to confiscate German assets during World War II. And then during the Cold War, actually, this was not something that was used. During the Cold War, there was still a decent amount of trade between the US and the Soviet Union. And actually, my family has a really interesting history with sanctions where uh two US uh Congress people, Jackson and Vanick, their last names, that passed a law saying, hey, Soviet Union, if you don't let certain people leave, we won't sell you grain, which might be confusing to all of us because we'd maybe like, wait, the Soviet Union was buying grain from the US during the Cold War, and the US had leverage while we were talking about nuking each other. We were also US farmers who were selling grain to the Soviets, but it's it's always economic policymaking has always been effective, but it's generally been carrot. Like, hey, you give me this, I give you that. And in the early 2000s is when, after 9-11, specifically, when we really saw the emergence of modern-day sanctions, which is a bureaucracy that is designed to put individuals, entities, and then vessels and aircraft on a list to let the private sector know that you cannot do business with ABC. And you know, it's kind of segues into your next question of does it does it work? Does it work is a fascinating question that can only be answered by if we set goals. Which is is something that is you you could say applies to everything. You're like, does the gun shoot? Yes. Are we hitting a target? Oh, I didn't know we had a target. And so policymakers, both international, like at the at the UN, EU, UK, Switzerland, Thailand, US, like everyone is doing sanctions, and then a lot of folks are trying to evaluate whether or not they work. And it's a really hard question to answer because policymakers rarely will actually set out goals, and they set out goals for the same, don't set out goals for the same reason that humans like to avoid setting out goals when they're in positions of accountability, which is you set out goals, then you can fail. So it's much easier to issue a press release being like, hey, we sanctioned these terrorists, and problem is solved, as opposed to if policymakers said, hey, we have a five-year plan, we're gonna cut off funding, blah, blah, blah. But yeah, not trying to be negative. I think sanctions have been very effective in achieving even unstated goals and happy to kind of take the conversation there as uh as you see fit.

SPEAKER_00 5:23

That is so interesting. Thank you. I had no idea that they started so long ago. Um, I guess it's not super surprising that they really picked up after 9-11, and obviously with the creation of the Bank Secrecy Act as well, really the banks uh being required to do a lot more for the economy as a whole. Um so you said there that makes a lot of sense. You know, they're not really setting clearly stated goals when they announce new sanctions. But could you tell us about a case where sanctions actually worked really well to change a behavior? Is there an example that we do know what the sort of rough goal was and actually it worked pretty well?

SPEAKER_01 6:02

Yes, I mean we can you know talk about a couple of examples where sanctions where there was a stated goal and sanctions achieved their stated goal. So I'd say on the very tactical, like smaller side, during Trump's first administration, Turkey detained an American pastor, and I think Donald Brunson. And so this pastor was in a Turkish jail, and State Department was like, hey, let him go, stop it. And the Turks were like, No, we won't. And this was kind of going back and forth, and somehow this issue reached uh Donald Trump, his then president, and he you know talked to his cabinet, said, Hey, what can we do? And someone said, Hey, we can start sanctioning folks in Turkey. And you know, I I wasn't there in the room for any of this, and so this is kind of my conjecture. But based on how these things work, is you know, somebody would have presented him that option, and somebody else probably State Department said, Hey, we don't do sanctions for cases like this. Let diplomats be diplomats, let us negotiate this. And someone else probably said, Look, you guys have tried to negotiate and failed, let's try the sanctions part. And what was different about this is that in the past, sanctions related to kind of government taking of prisoners of human rights abuses would have targeted lower-level officials. Like, well, this was done in this Turkish town, here's this police chief, we're gonna uh add him to a list. Trump just started sanctioning Turkish cabinet members, and after like the third one, the pastor was released, and this was done over the course of like a a week where State Department diplomacy had had failed. And what was particularly interesting is that historically sanctions have been used or viewed very much as a scalpel, like this instrument that needs to be wielded very, very carefully and judiciously. And when you have 17 interagency meetings before sanctioning everyone, and let's look at all of the potential effects and blah blah blah. And Trump won, the approach was like, no, let's just use it. And so that was kind of the most effective case I can I can think of because it was there's a very clearly stated goal, and that goal was accomplished very quickly, like within a week or less. And then once those things once the pastor was released, the sanctions were lifted. Um, it did also at the same time to a certain extent change how people viewed sanctions, which is before sanctions were viewed more so as this grand policy-making tool that deserves a lot of respect and should be used very infrequently.

unknown 9:05

Yeah.

SPEAKER_01 9:06

Like, hey, we we don't just reach for this for anything. And after Trump won, the approach, I think, changed across both Democratic and Republican administrations as you know what, we can just use this for whatever we want, whenever we want.

SPEAKER_00 9:21

That is that is super interesting, and that leads me to think about how uh the the speed up or the growth of other types of digital assets now are being used. And I wonder if there's a connection there between if the US government is going to be using sanctions so much more freely, do countries want to be able to continue to move money without actually touching the US dollar? But before you answer that, I think we need to lay the groundwork for all of our listeners to connect this to the US dollar. So if somebody is sanctioned, in that example, these Turkish cabinet members were sanctioned, what does that actually mean? What are they not able to do?

SPEAKER_01 10:05

In short, it's hard to get on an airplane anywhere in the world, and it becomes almost impossible to move money through any financial system or bank for any digital asset bank, credit union, almost anywhere in the world that you would have heard of.

SPEAKER_00 10:42

And so literally, like if I was sanctioned, no bank is gonna let me make a payment. I can't buy a car, but I also can't buy my lunch, like that sort of level of disruption.

SPEAKER_01 10:55

Yes. Is a short of it, unless you're using cash or gold to buy your lunch. Um and you know, of course, there are some notable exceptions to this in some very large countries where there is not blank enforcement of US sanctions, such as, of course, China, Russia, Pakistan, Iran. But if we're talking about the Western Hemisphere and Europe and large uh South Korea, Japan, Australia, kind of think, you know, NATO and US military alliances, US dollar reigns supreme, and financial services in all of those countries follow US uh sanctions. And so by credit cards, debit cards being able to send or receive funds, even if there is no requirement, let's say under Australian law, to follow US sanctions, and there there isn't. No Australian bank is going to want to hold an account for a US sanctioned person.

SPEAKER_00 11:59

Okay. And it's is it just the US government that decides who's sanctioned, or are there other governments or groups around the world that also can implement sanctions that are pretty generally recognized?

SPEAKER_01 12:11

Yeah, so there's I mean we can go with essentially G G7. So US government is US issues the most widely known and most implemented sanctions, uh, followed by European Union, followed by United Kingdom. We don't exactly have like a power ranking here. Um, but if if if this was like a sports broadcast and we did a power ranking, it'd be US far ahead, followed by EU, UK, and then you know, Switzerland, Japan. Uh and there are I think well over I think 50 to 60 countries that utilize sanctions, but many of many of them utilize sanctions essentially as a domestic law enforcement tool. For example, in in Russia and China, like they have sanctions lists, but nobody outside of Russia and China will bank or will debank someone based on that. Um and then we have United Nations sanctions, which technically have to be enforced by every United Nations member, but de facto there's no way to enforce them. So it's kind of up to the local body.

SPEAKER_00 13:32

Yeah, and that so that is that's really interesting. So all of these the the US and and the EU and the UK and these other countries can decide to issue sanctions, but who does regulate it it would be it would be local local officials.

SPEAKER_01 13:48

Okay, and then I don't know how how nerdy we we want to get, but you know, it is a combination of like your federal authorities, so let's say if we're we're talking Vietnam, US, and uh France. Before Vietnam it'd be Vietnamese government, French government, and then US government would be let's say OCC or the Fed or New York NYDFS. But then each of those countries is part of a what's called a FATI-style regional body. So a international organization where international inspectors will come in and actually talk to local banks, will talk to local money service businesses, charities, and say, Hey, you're supposed to check for financing of terrorism. You're a charity. Do you check that when you're sending money somewhere that the recipients are not terrorists? Like literally, they will, in the same way that an auditor might come to a Bank of America or a Coinbase and say, Hey, tell me about your processes. A professional in compliance will come from one country to another country and ask these these questions. And then there's the parent body called SADIF Financial Action Task Force, which has its headquarters in in Paris, and then there's rotating uh like meetings in really nice places. But those folks will like come in and visit. So it's national authorities, kind of regional, and then supranational.

SPEAKER_00 15:32

Okay, there's so much here that I want to I want to make sure we break down really carefully. So at a you know, who it sounds like the the governments all around the world can, in theory, decide that they want to sanction somebody new. Um, it depends on the sort of power, the weight that those countries have as to whether other countries also abide by that. And the US clearly leads the charge in that regard, but also the EU, the UK, and the UN are very widely accepted sanctions. And then at how they're actually regulated is by the financial regulators in each of those countries, and then there's this organization called the Financial Action Task Force that also does that for a wide uh range of countries, and those are uh professionals with a finance background or a compliance background who go in and sort of dig around these countries and try to understand if these individual countries are complying with the Financial Action Task Force's own recommendations and own view of how this should be handled. Is that pretty right? Is that pretty correct?

SPEAKER_01 16:32

Yeah, no, um yes. You said everything I said, but much more concisely.

SPEAKER_00 16:38

Well, that's because you're you're telling me everything I need to know. So that's awesome. Okay, I you mentioned one thing there that I want to also get clear on. This Turkish example, you know, you might sanction a Turkish ambassador. You can also sanction groups of people and businesses and assets like boats. Is that right? Talk to me about what actually you can sanction.

SPEAKER_01 17:03

Yeah, theoretically, anything. Um, and so we we should avoid giving too many ideas to to regulators. Because, you know, if you're a hammer, everything is a nail. But initially, sanctions covered in let's say early 2000s and uh up until maybe I don't remember, I don't know when the first vessel was sanctioned, but let's just say 2000 for 2010. Sanctions are really covering individuals and entities only. And meaning like a a bank, a corporate, an individual would be on a list, and then there were also sanctions against, let's say, al-Qaeda. But those are those are politically important, uh, because that's essentially a government saying, hey, we view Al-Qaeda as a terrorist organization, and anyone that belongs to it is a t is a terrorist, and then what would happen is the State Department Treasurer would go to other countries and say, Hey, you need a list of terrorists, and you need to add Al-Qaeda to that list. And what that does is it enables a country to prosecute members of that group. Because uh when Financial Action Task Force started working to help criminalize terrorist financing, what they discovered was in some cases a group had basically terrorism had to itself be criminalized first. And so there had to be a law saying, hey, this is terrorism, it's a crime. Then financing of terrorism is a crime because in some countries they would criminalize terrorism and then they would, but they didn't criminalize the financing of terrorism. So you could give, let's say, provide housing, food, um, training, tools, weapons to a suicide bomber, to a school of suicide bombers, and not be responsible. So that's kind of going to be said about groups, but the sanctions on groups are very, very political and much more prosecution-oriented because, right, no, al-Qaeda never had an account at a bank being like, hey, Al-Qaeda, this is the routing number, etc. So like 2001 through 2010, we're essentially talking about individuals and entities, and then vessels started really being added due to US pressure on Iran. Uh Iran generates significant generated and generates a significant amount of its revenue from energy sales, and a lot of those sales were once sanctions pressure started ramping up, were being made kind of in a quiet, shadowy way out of to avoid sanctions. And so investigators at the EU, UK, UN, US started saying, okay, Iran, we sanctioned Iran's national oil company. We sanctioned this refinery. How are they still making how are the Iranians still making money? And said, okay, well, they're shipping, you know, an enormous amount of oil or natural gas, and each vessel has like 60 million dollars worth of energy on it. Let's start sanctioning the vessels. And sanctioning the vessels opened up say uh risk to an entire new sector, which was specifically or it's not just maritime, but it especially insurance. Um, insuring a vessel is very, very expensive because if something happens, damages are automatically a minimum of tens of millions, if not hundreds of millions. And you want to be you're insuring the vessel, you're insuring the crew, you're also insuring the cargo. You know, someone paid 60 million for oil, they want to know that if something happens, they get their 60 million back. And so an entire new industry was spawned in terms of sanctions compliance, and whole companies were created to solve only this problem, like windward. Windward, for example, attracts risk related to vessels. Um and then older companies like Lloyd's List Intelligence, you know, built entire new business units to help understand vessel risk-related vessels. So uh, and then aircraft. So I was um, you know, lucky or unlucky enough to be the person at Treasury that was tasked with figuring out how to sanction aircraft. And the the reason for this was because the Iranian government was moving enormous amounts of fighters and weapons to Syria from Iran, and you know, the US government sanctioned heads of Iranian Air Force and airports in Iran and Syria. And then we were looking at the specific planes, and the planes that were being used. To move fighters weren't military, were not only military aircraft. It was also civilian aircraft. And so we realized: okay, the same flight that is going from Tehran to Damascus carrying Iranian Revolutionary Guard fighters is then going back to Tehran and serving on a passenger flight to Munich or to Rome? That should not be happening. And the folks that are in Rome, Munich may not know about this. And so sanction, you know, that was how aircraft got sanctioned.

SPEAKER_00 22:34

And when we say that like a vessel or an airplane is sanctioned as like this physical object, does that mean that nobody should sell it and put in gas? And that uh no airport should accept it, or no shipyard or wherever it is that vessels go into, they shouldn't accept it. Like what practically does that mean?

SPEAKER_01 22:59

Yeah, in in practice it it means that a nobody should do any transaction with it. Yeah um which all comes down to enforcement because you know anyone can go onto flight radar and see, hey, Mahan Air, there are sanctioned Mahan Air in Iran airplanes that still continue to fly to some airports, uh including in Europe. So is the US government going to sanction, let's say, the Frankfurt International Airport? Is the US government going to sanction Heathro?

SPEAKER_00 23:39

Yeah.

SPEAKER_01 23:39

No. Probably not. Yeah, probably not. Yeah, and but it means that there was a conversation that was had between the US government and the UK government, or the US and German government saying, hey, you need to stop these planes uh from landing, and those governments said, Well, they're civilian aircraft. So it all comes down to enforcement. And what US government and others that have focused on these type of sanctions have typically done is if they can't convince the government, they will go after the insurer. Because a government might say, hey, we're not gonna kick out Iran air, but they're not gonna let an uninsured aircraft land. And so that's where governments can exert pressure is nobody's going to fuel an uninsured aircraft or let it land because yeah.

SPEAKER_00 24:29

Yeah, back to the money every time. Um so one thing that I I'm interested in is given the US government and the UK government and the UN and the EU can all impose sanctions that are pretty widely accepted and and complied with, what happens if there are conflicting people, organizations, countries on those sanctions list? Is it basically that they all just stay up to date with each other? Or how do banks or companies think about conflicting sanctions?

SPEAKER_01 25:03

Panic attacks is kind of the the first the first answer. But I think during even during Trump, like basically in US sanctions from 2000 through the end of Biden administration have more or less been cohesive with international sanctions. Like if there was a during Obama and Biden, even during Trump won, if there was a difference between US and EU or US and UK sanctions, or even US and Japan, it would have been a minimal difference.

SPEAKER_00 25:38

Okay.

SPEAKER_01 25:39

Uh because there would have been a significant amount of coordination, and so folks with titles like global head of sanctions, they could essentially implement a OFAC sanctions program, and it's the largest sanctions list, and that would cover everything.

SPEAKER_00 25:54

Yeah.

SPEAKER_01 25:55

Um, and they could and it would be very similar, it would be larger than the EU or UK or UN list, but it there would not be a significant amount of items, let's say, on the EU or UK list that are not on the UN list. And the things that are on the US list that would not be on the EU list would generally be targets that US or sorry, EU or U UN or UK would agree with, like narco traffickers. Yeah. Um, but the list would become a lot more political, and now folks have to have a US sanctions program, EU sanctions program, APAC sanctions program.

SPEAKER_00 26:31

And and is there some, just for those listening, if you don't know, OFAC uh is the Office of Foreign Asset Control, which is the US's um sanctions uh list maintainer. I don't know if that's the correct way to think about it, but um people talk about US sanctions, they say OFAC usually. Um so what it's also possible to sanction a whole country, right? It North Korea is sanctioned, isn't it?

SPEAKER_01 26:58

Yeah, so you would have um what we call a co comprehensive sanctions program, which would say it's basically that you can't do business with with a country. Um but then there will also generally be you know 452 exceptions. So like a humanitarian exception one, humanitarian exception two. Um, you know, one of the most interesting financial institutions in the whole world is the United Nations Credit Union. So it's a credit union that serves UN employees, and it's one of the most high-risk institutions in the world because everyone there is a politically exposed person, which is a kind of a risk rating um of certain type of client. And not only are they is everyone there a pep, but some of the people with accounts there are North Korean government officials, for example. And I I think there was like a you know, in the UN credit union, they get an authorization from OFAC to bank North Koreans.

SPEAKER_00 28:04

I did not know this. This is fascinating.

SPEAKER_01 28:06

Yeah, there will generally be like a blanket ban, like, hey, you can't do anything with any of these countries, and then people will start complaining, and people complain about everything, but people will start complaining, and for example, they'll say, you know, I don't know details of what happened, but this is my assumption of like how this would have played out. The North Koreans would have said, hey, we can't do anything, like we we can't function in the US because no one will open an account for us, and State Department would have said, like, well, you guys are bad. Like, okay, well, sure, whatever, but you we you are allowing us to be here at the UN, right? And State Department would say yes. Like, well, we need to like be able to buy food and pay rent, and your sanctions are not allowing us to do that. And so then there would have been a conversation of like, hey, we need to let the North Koreans like have accounts somewhere because, or we have to kick them out of the UN. And it's like, well, we can't kill them out of the UN, so we have to give them some lit very limited surveilled accounts.

SPEAKER_00 29:13

And so, to your previous point of now banks have to have this US sanctions pro program and they have to have a UN sanctions program and so on. That feels to me to also be fairly sort of based on a bank's risk appetite. Like if you're in, I don't know, Switzerland, you get to decide which of those programs you you want to comply with beyond Switzerland's own program. And that might, you know, you might get pressure from the Financial Action Task Force, FATEF, you might get pressure from the UN and others. But really, it's like a risk appetite-based decision. Is that is that kind of right?

SPEAKER_01 29:48

Yeah, no, it's uh spot on. I'd say it's yeah.

SPEAKER_00 29:52

Okay. And so then there's this bank, the UN Credit Union that I had never heard of before, that's job is basically to say, okay, banks have their own risk appetites, and most of them don't like to bank high-risk PEPs, a politically exposed person. You know, most banks don't want to uh take on the risk around bribery and corruption of having these super high-profile politicians. But the UN has these super high-profile politicians and all these countries that we want to fly and communicate and have these meetings to try to move diplomacy forward, they need to fly here and they need to pay for their food and they need to pay for a hotel. And so this credit union has basically decided that their risk appetite, their whole point of being is to service those people. That's so interesting. Because the the a question that I have for you, Peter, is if a whole country is sanctioned, what are some of the knock-on impacts to other people? Now, my guess is some person in North Korea is not being allowed a UN credit union bank account, but maybe someone very senior in the government there is, so that they can fly around. And so is there also this strange tension then of if you sanction a whole country, you might be trying to move um move some uh political situation forward, but all the the regular people in that country are being hugely detrimented because they can't access any financial services.

SPEAKER_01 31:24

Yes. You're spot on. The the people that whenever broad-based sanctions are issued, the those that will be hurt the most are those that are the most vulnerable. Um because a you know top government official and a despotic regime will have access to tools of espionage and fake IDs, private planes, secret bank accounts set up by spies, you know, passports from other countries. Uh the Iranian Revolutionary Guard Corps, which has been sanctioned like 17 different times for 17 different reasons, has made an enormous amount of money um over the last you know two decades since there's been a lot of pressure on on Iran because regular you know corporations have essentially exited Iran, but Iran is still a large market and Iranians want to buy things, so smuggling is happening, like has happened throughout history. Anytime there's been a demand for a certain good. And yeah, in this case, like the Iranian government cornered the smuggling market.

SPEAKER_00 32:41

And so that that sounds like you know, ways that people are trying to evade sanctions. So Vladimir Putin, he's sanctioned, but I'm guessing he's managing to find ways to fly and move money and buy things and and whatnot. And you mentioned, you know, having separate passports. What are some of the ways that people try to actually evade sanctions?

SPEAKER_01 33:04

The most tried and true method for sanctions evasion is to use a non-sanctioned uh individual or entity. So I forget I forget what the what the term for is, but you know, a a proxy, if you will. So you know, like a a not a non-sanctioned spouse or child um or friend when the US government was issuing a lot of sanctions related to Russia and on oligarchs, it was discovered that there was a high-profile violinist in Russia that had several billion dollars in assets. Um, and he was holding those assets on behalf of some of his very well-connected friends. But it's just you know, if you know you're if you're the folks that are being targeted for sanctions generally know what they're being targeted for, and these are people that have made life decisions to you know either abuse other humans or finance terrorism or engage in proliferation, and so they have no qualms about essentially committing more crimes to evade them, yeah. Evade them. But but the the most tried and true and most effective method is getting a trusted third party to hold assets for you, and from there is just a bunch of variations on using like other names, other identifiers, other addresses, and kind of a constant whack-a-mole with governments and uh you know companies that are trying to get information to catch you.

SPEAKER_00 34:47

And so this is perhaps one of the reasons why KYB, know your business checks and beneficial ownership checks are so important. Because if you're Vladimir Putin and you try to set up a new company that's not sanctioned and you are the director or the beneficial owner of that company, that's why banks and and fintechs have to do those checks. It's one of the reasons they have to do those checks to understand actually who is it that sits behind this corporate entity.

SPEAKER_01 35:13

Yeah, 100%.

SPEAKER_00 35:14

Yeah. Okay, you uh I I want to end with talking about something that you mentioned right at the top, which was the way that sanctions are being used is changing. Um, Donald Trump in his first term, it sounds like he started to become a little bit more freewheeling with the sanctions and using them more directly to try to solve issues that perhaps previously would have would have been handled by regular diplomacy. And one of the things that I I wonder and I would like you to talk a little bit about, Peter, is is that changing how people use alternative asset classes? Um and uh we recently had the the case of Contigo, this fintech app, um, come to light. Jason McCullough did some reporting on this, where it seems like they were set up to try to help uh people in Venezuela move money out of Venezuela, but Venezuela was sanctioned. And therefore this should have been a case of actually Contigo was enabling sanctions and sanctioned people to move money. So talk a little bit about how the change in the use of sanctions is sort of moving people towards trying to find other ways of accessing the financial system that maybe goes beyond the US dollar.

SPEAKER_01 36:33

Yeah, I and I can definitely be be wrong here, but I'd say my my spicy take is that the increased use in sanctions has no effect on or has significantly less of an effect on consumer like consumer behavior or individual behavior than we think it is, because what it does is really significantly impact how banks and very large fintechs operate. Okay. Um and especially in in the US, UK, and Europe. But I mean consumers are just generally drifting towards fintech apps and because they're easier to use and they're more pleasing to use. And you know you know, all those conversations about like, is China a bank? Is China not a bank? Um all the fintechs trying to get banking charters. Fintechs are just they're a lot of things that have been extremely good at acquiring customers and have been operating on kind of a move very fast and think about compliance later uh model because you want to think about compliance when you have actual customers. If you don't have customers and you don't have a customer base, there's no point uh uh investing that. And what we're because it's become so much easier to stand up a fintech, some fintechs quickly acquire a large amount of customers before giving a second, third, or fourth fought to sanctions. Um whereas if the same and but but to to your to your point, if someone wants to send money from a sanctioned jurisdiction, they may not be able to do that in a bank in the first place. And I mean, to what extent is someone using a fintech or digital assets to move money? Is it because it's a faster and more pleasing user experience, or is it because of sanctions? And it's probably a little bit of of of both, but I would actually say it's there's more richness created by the fact that there's a lot more new entrants that are moving money faster. And have traditionally invested less in compliance.

SPEAKER_00 38:49

Yeah. Yeah, that uh that certainly rings true as well. Oh, Peter, this was so fascinating. Uh we went from Sparta all the way to present day. We discovered about a new credit union, the UN credit union, and uh and we learned about how even airplanes can be sanctioned. Um, thank you so much for joining me and making sure that my sanctions knowledge was up to date. I really appreciate it.

SPEAKER_01 39:12

My pleasure. Thank you for having me and have a wonderful day.

SPEAKER_00 39:16

And if you uh if you enjoyed this, please share it with your friends and colleagues and subscribe on Apple Podcasts or Spotify. See you next week for another episode of In Control.