Understanding the US Designation of the Wagner Group as a Transnational Criminal Organisation

Daveed Gartenstein-Ross, Emelie Chace-Donahue, Colin P. Clarke 25 Jan 2023
 

Keywords:  Wagner Group, Russia, transnational organized crime, private military company, mercenaries, sanctions

Last week US National Security Council spokesman John Kirby said that the Treasury Department will designate the private military company (PMC) Wagner Group as a transnational criminal organisation (TCO). Western states and institutions have explored a variety of legal mechanisms against Wagner in recent years, including terrorism designations and sanctions for supporting separatist forces in Ukraine. The TCO designation is thus the latest measure in a layered sanctioning strategy designed to counter the PMC’s vital and frequently brutal role in advancing Russian state interests internationally. In this piece, we demonstrate that the legal case for the TCO designation is strong. Wagner unambiguously meets the criteria for what constitutes a TCO.

The United States is declaring Wagner a TCO under Executive Order (EO) 13581, established in 2011 to block the assets of “significant transnational criminal organizations” that pose “an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.” What constitutes a significant transnational criminal organisation under EO 13581 is admittedly broad, including any “group of persons … that includes one or more foreign persons; that engages in an ongoing pattern of serious criminal activity involving the jurisdictions of at least two foreign states; and that threatens the national security, foreign policy, or economy of the United States.”

As this Perspective details, there is ample evidence to suggest that Wagner engages in an ongoing pattern of serious cross-border criminal activity. Natural resource smuggling in Africa is Wagner’s main criminal enterprise, but it has also been implicated in money laundering and illicit financing. Much of this activity appears to be designed for private gain and to help Russia circumvent and offset the impact of US and European sanctions. Wagner’s transnational criminal activities likely also extend quite a bit further. Another criminal activity that Wagner could be involved in that may come to light as the PMC’s activities are further exposed is trafficking. Wagner likely also engages in the mafia-style actions that violent non-state actors (of which PMCs are one sub-set) often resort to in conflict zones, such as extortion, theft, and armed robbery. Indeed, the group’s trajectory into criminality is only likely to increase due to its members’ feelings of impunity and the highly questionable new recruits that it is now bringing aboard.

The plummeting quality of Wagner recruits is connected to the group’s forces suffering significant casualties in Ukraine. Reporting suggests that, in response, Wagner Group head Yevgeny Prigozhin has lowered standards for his mercenaries to the point where he is now deliberately recruiting felons directly from Russian prisons. Additionally, security sources in the Central African Republic (CAR) claim that Wagner is freeing and conscripting criminals from prisons in CAR and Mali, many of whom are reportedly considered terrorist fighters by these governments and were imprisoned for violent crimes. Adding violent criminals to Wagner’s ranks underscores the PMC’s image as a TCO and ensures future anomie in areas where its members operate.

Designating a tool of Russian state power like Wagner involves numerous policy considerations, and we are not arguing in favour of the US’s designation decision. Rather, the point of this Perspective is to explain the legality of, and evidence for, Wagner’s designation for its connections to transnational organised crime.

The Wagner Group’s International Network

Wagner’s network structure facilitates its transnational criminal activity. Wagner is a node in an international web of companies owned by Prigozhin, who has been sanctioned by the United States for his close connections to the Russian government, sponsorship of disinformation campaigns, and interference in US elections. Moreover, Wagner itself is a constellation of interrelated entities. Though it functions as a coherent organisation led by Dmitry Utkin (a former officer in Russia’s military intelligence service), it does not legally exist as an incorporated entity. Instead, Wagner is best understood as a shadowy network of mercenaries fronted by various Prigozhin-linked companies, subsidiaries, and other affiliated groups. Indeed, much of Wagner’s transnational criminal activity is only visible through the activities of these constituent parts.

Though Russia and Prigozhin have long denied connections to Wagner, in September 2022 Prigozhin finally publicly acknowledged that he founded and finances the organisation. According to the US Treasury’s Office of Foreign Assets Control (OFAC), “Prigozhin relies upon a vast network of financial facilitators and front companies to enable his ability to evade sanctions and transact in U.S. dollars despite being blocked from the U.S. financial system.” This network provides a front for Wagner operations, particularly in Africa. Moreover, as OFAC notes, the network “highlights the interplay between Russia’s paramilitary operations, support for preserving authoritarian regimes, and exploitation of natural resources.”

The interconnectedness of Wagner, Prigozhin, and the Russian government provides opportunity, cover, and deniability for each of the three. One key component of this network’s business model is security agreements with African governments and in-kind payment in the form of natural resource mining concessions rather than hard currency. The model allows the network to exploit valuable natural resources like gold and diamonds for private gain and to help Russia access lucrative revenue streams while operating outside of formal financial systems—an arrangement with clear implications for helping Russia to circumvent sanctions levied against it. Wagner Group has also forged agreements with African governments to gain access to uranium, oil, and manganese. Some of Prigozhin’s front companies carrying out natural resource extraction in Sudan (M Invest and Meroe Gold) and the Central African Republic (M Finans and Lobaye Invest) have been sanctioned by OFAC, which also linked them directly to Wagner, noting that they “serve as cover for PMC Wagner forces.”

The Wagner network is also linked to other entities, including government actors and paramilitary groups. In countries where Wagner provides security services to governments, it typically establishes close relationships with officials in those countries’ security apparatuses. In some cases (for example, Sudan and the Central African Republic), local government officials appear to be complicit in the network’s criminal activities.

The Wagner Group’s Transnational Criminal Activity

Natural Resource Smuggling

Wagner’s most direct connection to TOC activity is the smuggling of natural resources. Linda Thomas-Greenfield, the US Ambassador to the United Nations, told the U.N. Security Council in October 2022 that “one of the most immediate and growing concerns in Africa is the Kremlin-backed Wagner Group’s strategy of exploiting the natural resources of the Central African Republic (CAR), Mali, and Sudan, as well as other countries … to fund Moscow’s war machine.” Although Russia may legally extract and transport some of the natural resources it has access to via concessions awarded by local governments, it also appears to smuggle some of these resources in a manner explicitly designed to circumvent US sanctions. Wagner’s role in helping Russia evade sanctions is a criminal act in itself, and is a modus operandi likely to be used even more frequently by Moscow moving forward.

In Sudan, Wagner has been implicated in Russian gold smuggling operations. The smuggling network appears to be facilitated by Prigozhin-linked Wagner front companies and corrupt Sudanese military officials. In July 2022, international news outlets reported that Sudanese officials had intercepted a Russian cargo flight preparing to leave Khartoum with about a ton of gold hidden in the cargo hold. Around the same time, Sudanese anti-corruption officials said they had detected sixteen Russian cargo flights traveling between Latakia, Syria (where Russia has a major air base) and Port Sudan that were suspected of smuggling gold. Sudanese military leadership reportedly waived inspections of the flights. The primary recipient of Russia’s gold concessions in Sudan is M Invest and its subsidiary Meroe Gold, which, as noted above, are sanctioned by the United States due to their links to Prigozhin and Wagner. Though the connections between the cargo flights and these front companies are somewhat opaque, because they are Russia’s main gold conduit in Sudan, it is reasonable to infer that the outfits and, therefore, Wagner were involved in facilitating the smuggling operations.

Although the July 2022 incidents are the most definitive evidence in open source reporting of Wagner’s connection to Russian gold smuggling in Sudan, it is likely that such activity is part of an ongoing pattern. According to British media, while official statistics suggest that Sudan exports hardly any gold to Russia, a Sudanese gold company executive said that “the Kremlin is the largest foreign player in the country’s huge mining sector.” The executive went on to claim that much of Russia’s gold mined in Sudan “is smuggled in small planes from military airports dotted across the country to Russia.” An estimated 70 to 90 percent of Sudan’s gold is smuggled out of the country, often routed and laundered through the United Arab Emirates. A large portion of this gold’s movement is handled by Russian smuggling operations, according to experts and Sudanese officials. Wagner almost certainly plays a role in facilitating these operations.

Sudanese officials say that Russia smuggles Sudanese gold via land routes to CAR, where Wagner is also facilitating gold smuggling activity, given its longstanding presence there and intimate security relationship with the government. Russia smuggles gold and diamonds out of the CAR, according to European security officials, who say Wagner once ran the country’s customs operations. Russia’s main gold and diamond mining companies in CAR are M Finans and Lobaye Invest, which, as noted, OFAC sanctioned for their links to Prigozhin and Wagner. Given Wagner’s close relationship with the CAR government, reported involvement in the country’s customs operations, and links to Russia’s main mining companies in the CAR, it is likely that Wagner is involved in Russian gold and diamond smuggling there.

Wagner’s involvement in Russian natural resource exploitation and smuggling likely also extends to other countries in Africa where it operates (or may soon operate), including Mali and Burkina Faso, which along with Ghana are among the top three gold-producing countries in West Africa. The Global Initiative Against Transnational Organised Crime’s Observatory of Illicit Economies in West Africa noted that Wagner’s “warm relations with [some of] the [West African] governments present an opportunity for Russia to continue to financially benefit from gold-mining operations and evade sanctions by laundering gold through transit and destination markets.”

Money Laundering and Illicit Financing

Wagner almost certainly engages in money laundering and illicit financing, though evidence in open sources of its involvement in these activities is somewhat murky. Wagner’s most visible financial dealings walk the line between licit and illicit activity, relying heavily on cut-outs to circumvent US and European sanctions on itself, Prigozhin, and Russia. Through Prigozhin-linked companies, Wagner procures government contracts, in many cases receiving payment in the form of natural resource mining and exploration rights or hard assets such as gold and diamonds. By avoiding formal financial systems, these types of transactions enable Wagner and Prigozhin to skirt the US financial system. Since sanctions are typically only enforceable where transactions touch US jurisdiction or US financial regulatory systems, Wagner and Prigozhin are able to generate funds while circumventing sanctions. Moreover, Wagner’s acceptance of payment in gold and diamonds may lead to the smuggling and laundering of these proceeds.

Wagner may also be indirectly helping Russia circumvent sanctions through cryptocurrency fundraising by its network. According to credible information from blockchain analysis firms, Wagner-affiliated Task Force Rusich (which has since been designated by OFAC) began fundraising on Telegram in February 2022, posting cryptocurrency addresses that as of September 2022 had received more than $100,000 USD. Though small in scale, such activity still helps Russia by funding a US-sanctioned entity aiding its war effort in Ukraine. This example also highlights the possibility that Wagner and the Prigozhin network could be using other affiliated entities to raise funds for Russia.

Wagner has also been suspected by experts in the past of attempting to use cryptocurrency to skirt sanctions. In May 2022, when CAR announced that it would adopt cryptocurrency as legal tender, experts posited that the move might be geared toward enabling Russian investments in the country. Internet access in CAR is sparse, making widespread cryptocurrency use by the local population unlikely. Given Wagner’s robust security presence in CAR and close relationship with the corruption-prone government, expert speculation at the time noted that Wagner could be seeking to use cryptocurrency as another form of payment—besides natural resource concessions—to circumvent sanctions.

Other Criminal Activity

While there are few instances in open sources linking Wagner directly to drug, weapons, or human trafficking, it is not beyond the pale to speculate that Wagner may have engaged in such activity. Further investigation in this regard, including by government offices and journalistic outlets, is thus amply justified.

For one thing, Wagner has been implicated in international arms embargo violations, especially in Libya. According to a European Council decision, Wagner has been “involved in multiple and repeated breaches of the U.N. arms embargo in Libya … including delivery of arms as well as deployment of mercenaries into Libya in support of the Libya National Army (LNA).” US military officials have also accused Wagner, in cooperation with Moscow, of violating the UN arms ban in Libya by accepting and using cross-border shipments by Russia of various types of weapons to support the LNA.

In addition to this rather robust evidence of arms embargo violations, there are also some weak indicators regarding Wagner that are worth noting in case a broader pattern becomes evident. In 2012, Nigerian authorities arrested fifteen members of a Wagner precursor company, Moran Security Group, for arms smuggling. The group, which had contracts in Nigeria to protect merchant ships from pirates, sailed into Lagos carrying a cache of arms and ammunition. Authorities said that “there is no indication that the vessel was authorized to come into Nigeria and, worse still, to carry arms,” though they later dropped charges due to diplomatic pressure.

In 2021, Lithuanian media reported that a Lithuanian national connected to Wagner was arrested for leading a drug smuggling organisation. The man was reportedly recruited by a Wagner subsidiary in Germany and was also on the radar of Spanish authorities for his drug smuggling activities. It is unclear if he was a member of Wagner at the time of this arrest or whether his activities were connected to Wagner.

Finally, though not transnational organised crime activity in the traditional sense (because the activity does not cross borders or jurisdictions), Wagner uses criminal means, including violence and excessive force, to control civilian populations in the countries where it operates. Indiscriminate violence, public executions, and sexual assault have been central to the group’s intentionally brutal campaigns. Examples include summary executions and systemic sexual violence in Ukraine; numerous instances of rape, murder of unarmed civilians, and human rights violations in CAR; deployment of landmines and IEDs in and around Tripoli; and the execution of nearly 300 men in a village in Mali.

Conclusion

The Wagner Group has acted in a predatory manner, siphoning resources in exchange for security. Practically speaking, the TCO designation is not all that different from the US sanctions imposed on Wagner in 2017 for supporting separatist forces in Ukraine. Both sanctions regimes block Wagner’s property and financial assets in the United States. But the implications of the designation go further than financial impact.

For one, there are implications in the United States with respect to budgets that can be drawn from and authorities that can be invoked vis-a-vis Wagner now that it is considered a TCO. Perhaps more importantly, the imposition of multiple sanctioning mechanisms against the PMC provides a layered approach. Some states that are unwilling to take the diplomatic risk of cooperating with the United States on Ukraine-related sanctions on Wagner may be more willing to cooperate on criminal sanctions. Moreover, should circumstances change that cause the Ukraine-related sanctions on Wagner to be lifted (such as, for example, the end of the Ukraine war), the TCO designation ensures continued sanctioning authority. Most of the groups that have been designated as transnational criminal organisations under EO 13581 have remained on the list indefinitely.

The US designation of Wagner as a TCO represents a new layer in countering the PMC by targeting its financial assets and may trigger other authorities like watch-listing that enable interdiction of its network. Even so, Wagner has demonstrated its ability to circumvent sanctions, and thus the tangible impact of the designation may be difficult to observe. A fully resourced strategy for dealing with Wagner and other groups like it is still needed.


Daveed Gartenstein-Ross is an Associate Fellow at ICCT and the founder and chief executive officer of the private firm Valens Global. Before founding Valens, Gartenstein-Ross had established himself as a leading subject matter expert on violent non-state actors and terrorism, with the International Herald Tribune describing him as a “rising star in the counterterrorism community.” He is also a senior fellow at the Foundation for Defense of Democracies (FDD) and leads a project on domestic extremism there. @DaveedGR 

Emelie Chace-Donahue is the director of analysis at Valens Global and supports the firm’s public sector clients. 

Colin P. Clarke is a Senior Research Fellow at The Soufan Center. He is the Director of Policy and Research at The Soufan Group, where his research focuses on domestic and transnational terrorism, international security, and geopolitics. Prior to joining The Soufan Group, Clarke was a professor at Carnegie Mellon University, and a senior political scientist at the RAND Corporation, where he spent a decade researching terrorism, insurgency, and criminal networks. Clarke is also an Associate Fellow at the International Centre for Counter-Terrorism (ICCT), a non-resident Senior Fellow in the Program on National Security at the Foreign Policy Research Institute (FPRI), an Associate Fellow at the Global Network on Extremism and Technology (GNET), and a member of the “Network of Experts” at the Global Initiative Against Transnational Organized Crime.

Related Readings: 

Demuynck, M., Mehra, T. Raising the stakes against the Wagner Group: From mercenaries to a designated terrorist group? Perspective, International Centre for Counter-Terrorism, 17 January 2023.

Mehra, T., Thorley, A. Foreign Fighters, Foreign Volunteers and Mercenaries in the Ukrainian Armed Conflict. Perspective, International Centre for Counter-Terrorism, 11 July 2022.

Baldaro, E., D’Amato, S. Counter-Terrorism in the Sahel: Increased Instability and Political Tensions. Perspective, International Centre for Counter-Terrorism, 7 July 2022

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