Sanctions compliance and consulting

Key sanctions regimes, risk areas and what does sanctions compliance include?

The modern sanctions architecture includes several independent but interrelated regulatory systems formed by different jurisdictions. Companies conducting international activities must take into account not only the sanctions imposed in the country of their registration, but also the restrictions in force in the states with which they directly or indirectly interact.

Sanctions compliance is not a single check, but a systematic process that covers several levels of legal and organizational control. Its goal is to ensure full compliance with international and national sanctions regimes at the level of specific transactions, business processes and corporate structure.

In most cases, sanctions compliance requires not only analysis, but also constant adaptation of legal solutions to the changing international environment. Consulting on sanctions issues involves in-depth legal expertise and the development of legal strategies to protect the interests of the client. 

U.S. Sanctions (OFAC) 

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) administers one of the broadest and toughest sanctions regimes. Its key elements are: 

• The SDN ( Specially Designated Nationals) list is a person and organization with whom interaction is completely prohibited. 

• Sectoral sanctions are restrictions on certain types of activities (for example, in energy, finance, defense industry). 

• Secondary sanctions can be applied to foreign persons who violate the regime or cooperate with SDN defendants. 

The peculiarity of the US sanctions system is its extraterritoriality: it applies not only to US residents, but also to foreign persons working using American currency, technology or infrastructure.

European Union sanctions

The EU sanctions regime is governed by decisions of the EU Council and is enforceable in all member states. It includes: 

• Personal sanctions (in the form of travel bans and asset freezes); 

• Restrictions on the export, import and provision of services in relation to certain countries or sectors; 

• Prohibition on the provision of certain financial and legal services. 

• Other specific sanctions mechanisms. 

Unlike the American system, EU sanctions are less extraterritorial, but are often used in coordination with US and UK measures. In addition, there are separate sanctions regimes adopted by specific Member States.

UK Sanctions. Anti-corruption compliance (FCPA, UK Bribery Act, 273-FZ)

The UK sanctions regime after Brexit is governed by the Sanctions and Anti-Money Laundering Act 2018. It is similar to the EU regime, but contains its own lists (UK Consolidated List) and application features, including: 

• Separate licenses and permits from OFSI (Office of Financial Sanctions Implementation); 

• High degree of coordination with the United States; 

• Application of sanctions to companies operating in the jurisdictions of British offshore jurisdictions.

International practice in the fight against corruption and money laundering includes verification of ultimate beneficiaries, sources of funding, and payment channels. The same tools are used in sanctions control. In addition, a number of persons included in the sanctions lists are included there precisely in connection with corruption or political influence. 

Therefore, sanctions compliance is logically integrated into the overall control system through AML/CFT, FCPA and anti-corruption legislation – both at the level of due diligence and in terms of internal regulatory documentation.

Russian Sanctions and Counter-Sanctions Regulation 

Russia has also introduced its own restrictive measures in response to the sanctions of other states. They include: 

• Prohibitions on the export/import of certain goods and technologies; 

• Currency control; 

• Prohibitions on transactions with certain foreign structures and persons; 

• Regime of Special Economic Measures and Procedures for Approval of Transactions with the Participation of Foreign Persons. 

In addition, there are certain regulatory restrictions that are not formalized as "sanctions", but in fact affect the admissibility of transactions.

High-risk areas 

Sanctions compliance is especially important when working: 

• with counterparties from Iran, Syria, North Korea, Cuba, Crimea; 

• Companies with links to SDN or similar lists. 

• with the participation of offshore structures, complex corporate schemes and non-obvious beneficiaries; 

• in industries that are under constant attention of regulators: financial services, energy, IT, defense, telecommunications. 

• With any foreign organizations, if you are a resident of Russia.

Verification of entities and transactions 

The first element of sanctions compliance is the identification of participants in economic activity and the analysis of their legal status. 

1. Checking against sanctions lists

SDN List (USA), Consolidated List (EU, UK, UN), lists of the Ministry of Finance of the Russian Federation and national regulators of other countries. The analysis includes not only a direct match, but also the identification of affiliated persons, structures, controlled persons, and "owners at the second level". 

2. Corporate Structure Analysis

Verification of ownership chains, nominee participants, the use of offshore jurisdictions and formal directors to identify hidden links with those involved in sanctions. 

3. Verification of transactions

Analysis of contracts, subject of the transaction, supply routes, settlement currency, participation of intermediaries, applicable jurisdictions and banks. It is determined whether the transaction falls under direct or secondary sanctions.

Risk Identification and Assessment 

Based on the collected data, a legal and compliance risk assessment is carried out. 

1. Legal risks

Violation of direct prohibitions, violation of the terms of previously issued licenses, possible inclusion in sanctions lists. 

2. Risks of settlements and blocking

The likelihood of banks refusing to accept payments, freezing assets, blocking transactions in SWIFT or correspondent networks. 

3. Reputational risks

Working with high-risk counterparties may lead to the termination of relations with other partners or the refusal of auditors/banks. 

The results are drawn up in the form of an internal memorandum, legal opinion or analytical report, depending on the format of interaction.

Development and implementation of a sanctions control system 

Internal rules and procedures are being developed for companies conducting regular activities in sanction risk areas. 

1. Sanctions policy of the company

This is a document that defines the company's approach to sanctions regulation, the area of responsibility, the model for coordinating transactions and actions in the event of an incident. 

2. Sanctions clauses

Correct wording in contracts is drawn up, limiting liability for the inability to fulfill obligations in connection with sanctions, or prohibiting interaction with certain persons. 

3. Internal Control Regulations

Procedures for checking new counterparties, stages of transaction approval, instructions for employees and compliance departments are recorded.

Advising on international sanctions 

We provide legal advice on sanctions law in various jurisdictions, including: 

• OFAC (USA): requirements for residents and non-residents, interpretation of 31 CFR, practice of applying secondary sanctions; 

• EU and UK: interpretation of restrictive measures established by EU Council decisions and Sanctions and AML Act 2018; 

• Russian Law: Analysis of the  Effect of Temporary Economic Measures, Restrictions on Currency Transactions and Transactions with Unfriendly States. 

Consulting includes both an assessment of the current situation and the preparation of a position on potential sanctions incidents or inspections by banks and regulators. As well as the search for suitable banks and jurisdictions for doing business.

Support in obtaining licenses and permits

In some cases, especially when working with persons or jurisdictions from sanctions lists, the legal execution of a transaction is possible only with special permission. We accompany clients when applying for: 

• OFAC licenses (Specific or General License); 

• Permits from the Office of Financial Sanctions Implementation (UK); 

• Licenses of the competent authorities of the EU states; 

• Permits of the Government Commission for Control over Foreign Investments in the Russian Federation. 

We prepare justifications, a dossier on the transaction, formulate justifications for the good faith and absence of sanction objectives of the transaction and represent the interests of clients in the relevant authorities.

Interaction with foreign banks and regulators 

One of the risks in foreign economic activity is the refusal of services by banks, even in the formal absence of violations. In these cases, we: 

• prepare legal positions and explanatory letters; 

• draw up legal opinions on the good faith of the client; 

• We accompany communication with the compliance departments of banks, brokers, custodians and auditors. 

We also participate in explaining the legal position to foreign counterparties who are afraid of interacting with Russian companies or clients who have a risk of a sanctions conflict.

Drafting of legal opinions and memoranda, connection of sanctions compliance with other legal areas

As part of sanctions consulting, it is often required to prepare legally verified documents, such as: 

• legal opinion on the sanctions status of the counterparty or beneficiary; 

• memorandum on the admissibility of the transaction; 

• a dossier on the client for bank compliance; 

• explanatory notes to be submitted to state or international bodies. 

Such documents are used when submitting applications, negotiating or justifying a legal position with interested parties.

Sanctions regulation does not exist in isolation – it is closely intertwined with other areas of law and compliance, which requires a comprehensive approach to the legal assessment and development of the company's internal policy. Ignoring this relationship can lead to unforeseen legal consequences, even with formal compliance with sanctions norms.

Export controls and cross-border restrictions. Corporate Law and Business Structuring