Russia has established an “improvised banking system” in South Ossetia that it uses to circumvent sanctions and support breakaway states within the former republics of Ukraine, Georgia, and Moldova.
South Ossetia has become a focus of illicit financing as Russia uses the region to contravene sanctions imposed by the US and EU against doing business with these breakaway regions. The regions transfer funds to South Ossetia, and then funds are sent to Moscow where goods are purchased and shipped to Eastern Ukraine from Russia.
Analysis: South Ossetia and Russia essentially operate a separate banking system using the International Settlements Bank, which handles transactions with separatist territories. This scheme may go international soon, as South Ossetia plans to open a “representative office” in Damascus, Syria.