Kremlin's Phantom Network Evades Sanctions with Cryptocurrency and Shell Companies
The Kremlin has found ways to evade economic collapse and limit its isolation despite Western sanctions imposed after the Russian invasion of Ukraine. One of these methods is a parallel financial structure, known as A7, founded in Kyrgyzstan and backed by Moscow. This network, which includes shell companies in several countries, processes payments and issues a stablecoin called A7A5. The person behind A7 is Ilan Shor, a Moldovan businessman implicated in a massive bank fraud in his home country, who fled to Russia in 2023. Shor helped the Kremlin circumvent financial isolation, and the network began to take shape in spring 2024. A7 obtained licenses from Russia's central bank to operate as a distributor, broker, and securities depository, and several satellite companies were established to provide financial services.
A7's tentacles crossed national borders, with shell companies in Kyrgyzstan, Hong Kong, China, Turkey, the United Arab Emirates, and several African countries. These entities are linked to or controlled by A7 and serve to obscure the origin and destination of Russian funds. The network allows Russian capital to keep moving through international financial conduits without raising suspicions. A7 also developed an automated system to falsify invoices and receipts, altering descriptions of the products being purchased and their identification codes.
Crypto became another major tool for A7 to evade Western sanctions. On September 4, Ilan Shor boasted in a videoconference with Vladimir Putin about his company's figures, stating that in 10 months they had processed between 1,500 and 2,000 transactions daily. The scheme works as follows: a Russian buyer wants to pay for an item bought abroad and sends rubles to A7 in Kyrgyzstan via PSB, which provides infrastructure and loans. The Central Asian country's legislation is permissive toward cryptocurrency transactions, allowing the Russian origin of the funds to be concealed.
A7 issued its own stablecoin, A7A5, which was designed specifically to evade controls and sanctions. Unlike other assets, it cannot be frozen, making it harder for authorities to intervene when illicit activity is suspected. European banks in Russia, such as Raiffeisen Bank, have been accused of being key channels for sanctions evasion.