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Cellular Companies as a Model of a Mechanism for Reducing Sanctions Risks for Business

Author

Listed:
  • Viktor S. Utkin

    (Financial Research Institute, Moscow 127006, Russian Federation)

  • Yury V. Kuznetsov

    (Financial Research Institute, Moscow 127006, Russian Federation)

Abstract

Economic sanctions, including financial ones, will be increasingly used in the practice of international relations in the foreseeable future as an instrument of pressure of some states or interstate associations on others. This creates incentives for the search and implementation of financial innovations aimed at reducing sanctions risks for businesses. The article demonstrates that the impetus for the creation of some important modern financial instruments and infrastructures was the attempts of states to legislatively or administratively regulate the market. The case of sanctions is likely to be no exception. One of the possible models for minimizing sanctions pressure on businesses can be the legal form of a protected cell company. It have been a financial innovation that originally emerged in the captive insurance industry and its objective was, among other things, to reduce the regulatory burden. Structures similar to protected cellular companies can potentially create the possibility to make the operations of national businesses of target countries opaque for external actors (financial regulators and monitoring agencies) that enforce sanctions. In the same time this model preserves the control of the target country’s own jurisdiction and transparency of business for its regulators. In essence, it creates a kind quasi-offshore legal regime, which, unlike traditional internal offshore zones, is designed to mitigate not internal, but external regulatory pressure.

Suggested Citation

  • Viktor S. Utkin & Yury V. Kuznetsov, 2021. "Cellular Companies as a Model of a Mechanism for Reducing Sanctions Risks for Business," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 67-74, August.
  • Handle: RePEc:fru:finjrn:210405:p:67-74
    DOI: 10.31107/2075-1990-2021-4-67-74
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    References listed on IDEAS

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    1. R. Alton Gilbert, 1986. "Requiem for Regulation Q: what it did and why it passed away," Review, Federal Reserve Bank of St. Louis, issue Feb, pages 22-37.
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    More about this item

    Keywords

    economic sanctions; financial sanctions; reducing of the regulatory burden; protected cell company; financial innovation;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F39 - International Economics - - International Finance - - - Other
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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