How will Sanctions evasion happen, then? And if it can, what's the point?

Sadly, while Sanctions may damage the economy of a targeted jurisdiction and frustrate efforts of specially targeted persons or industries, nobody will ever completely 'turn off the valve'. Even traditional finance has both historical and recent examples of non-compliance with Sanctions requirements, and there are a myriad of ways for individual transactions to slip through the cracks. These include cryptocurrency transactions (in the absence of a reputable exchange, and for use by individuals rather than entire economies), poor controls around identifying customers through KYC, and the creation of shell and nominee-controlled company accounts. Depending on the sophistication of the methods used, these may be difficult or virtually impossible to detect under most close examination.

This doesn't mean that Sanctions, or the removal of Russia from SWIFT, are not worthwhile pursuits, since evading Sanctions controls or building alternative systems takes time, effort and money, and can be quite frustrating and convoluted. Any new systems worked through to get around the need for SWIFT, or to evade Sanctions, are going to be tested and tested extremely rigorously while still in their nascent stages by both cyber hacktivists and the agencies of world governments. The trust implicit in the correspondent banking model is fragile, and not easily rebuilt by those ejected from it even in the best of times, let alone during a widely condemned military invasion. Further, potential alternatives offered by FinTechs and crypto firms alike are generally unfit for full replacement, and culturally hostile to despots, to boot. And lastly, although it is difficult to quantify, Sanctions and the removal of Russia from SWIFT represent a symbolic stance that the world will not stand for this aggression, and may show Putin a more united front than he had thought he would face. To date, the EU, US, UK, Australia, and Canada have all imposed Sanctions of various types, and even some governments who historically eschew Sanctions such as South Korea and Singapore have recently joined. So while they not be perfect, Sanctions and the removal from SWIFT make clear the prevailing world view on Russia's actions in Ukraine, and give would-be sympathisers and allies of Russia cause for thinking hard about whether to support them.

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Luke Raven is AU and NZ compliance manager with Wise.