Advising on international sanctions

Main Sanctions Regimes Subject to Legal Analysis 

Sanctions regulation is a set of norms adopted by different states and international associations that restrict certain types of economic, financial or other activities. It is important for businesses to understand that sanctions regimes differ not only in jurisdiction, but also in the nature of the restrictions, legal registration and the degree of their application to foreign entities. 

Legal advice on foreign sanctions requires taking into account the key regimes that banks, investors and international counterparties are guided by.

U.S. Sanctions (OFAC) 

The regime, administered by the Office of Foreign Assets Control (OFAC), is highly detailed and rigorous. It includes: 

• blocking sanctions (SDN List) — a complete ban on any transactions with persons and organizations included in the list; 

• sectoral sanctions — restrictions in specific areas (finance, energy, defense, etc.); 

• Secondary sanctions are measures against third countries and foreign persons for cooperation with the targets of primary sanctions. 

OFAC has extraterritorial effect: US sanctions are applied to foreign companies if they use American banks, technology, goods or contracts denominated in dollars.

European Union sanctions 

The EU sanctions policy is formed by decisions of the EU Council and is put into effect by regulations that are binding on all member states. Characteristics: 

• the presence of personal restrictions (ban on entry, freezing of assets); 

• sectoral measures (energy, technology exports, finance); 

• prohibitions on the provision of certain services (including legal, accounting and marketing); 

• limited extraterritorial effect, but a high degree of coordination with US and UK sanctions.

UK Sanctions 

Its own sanctions regime operates on the basis of the Sanctions and Anti-Money Laundering Act 2018. Administration is carried out by the Office of Financial Sanctions Implementation (OFSI). Mode Features: 

• use of a separate national list of persons, with the possibility of imposing an assets freeze; 

• interaction with financial institutions on the issue of refusal of transactions; 

• Strict requirements for legal justification for exemptions or licenses.

Other Jurisdictions 

In addition to the United States, the EU and the United Kingdom, sanctions regimes are in effect in Canada, Switzerland, Japan, Australia, as well as within the framework of the decisions of the UN Security Council. Although their influence may be less universal, they play an important role in international business structuring, cross-border investments, choice of jurisdiction and interaction with financial institutions. 

Sanctions law consultation requires a comparison of several regimes at once, especially if the transaction or structure covers several countries. The lawyer not only explains the text of the sanctions acts, but also determines which regime is applicable, how it affects the interests of the client, and which actions are safe from the point of view of international law.

What does legal advice on sanctions include? 

Consultations on sanctions regulation are not just about informing about the presence of prohibitions. This is a comprehensive legal service that includes an analysis of applicable regulations, an assessment of legal consequences and the development of recommendations that allow you to build a legal model of behavior in a specific situation.

Analysis of sanctions legislation 

The first step is to establish the applicability of the sanctions regime to the client's business. For this purpose, the following is carried out: 

• analysis of the client's profile, its jurisdiction, industry and ownership structure; 

• determining whether the activity falls within the scope of specific sanctions (e.g. OFAC, EU, UK); 

• verification of the parties involved against sanctions lists, including taking into account affiliation and indirect control; 

• Explanation of technical provisions, industry and financial restrictions (including sanctions codes, notes and footnotes). 

Legal advice includes the translation of the wording of sanctions regulation into the applied language of business, indicating the real consequences, and not only legal formulas.

Risk and legal impact assessment 

The next stage is to assess the risks associated with the planned actions or the already existing situation. It may include: 

• the likelihood of asset locking, denial of service, or transaction denial; 

• the risk of prosecution for violation of the sanctions regime, including the actions of foreign regulators (for example, OFAC enforcement); 

• assessment of the risk of "secondary infection" - the spread of the sanctions status through affiliated structures; 

• the impact of sanctions risk on reputation, investment attractiveness and corporate stability. 

The appraisal is drawn up in the form of a conclusion or memorandum suitable for internal use, submission to investors, banks or government agencies.

Recommendations and support 

The consultation ends with the development of a legal position and specific actions, including: 

• recommendations for modifying the terms of transactions or contracts; 

• proposed alternative models of settlement, interaction with counterparties or transfer of functions; 

• preparation of explanatory letters or legal position for banks, brokers, auditors; 

• support of correspondence or communication with foreign or Russian regulators; 

• registration of an application for a permit (license) to OFAC, EU, OFSI, the Ministry of Finance of the Russian Federation, etc. 

Consulting can be both one-time (for example, on a specific transaction) and accompany a longer process - business restructuring, investment deal, entry into a new market.

Typical situations in which sanctions consultations are held 

Sanctions restrictions are rarely obvious, especially when it comes to complex cross-border transactions, multi-level structures or operations using international payment systems. Advice on international sanctions is especially in demand in situations where business is faced with legal uncertainty and requires a quick legal assessment of the consequences. 

1. Suspicion of the sanctions status of the counterparty or beneficiary 

The client discovers that his potential partner is registered in a country with a sanctioned regime or is associated with a person included in the sanctions lists. The question often arises: is it possible to conclude a contract, make calculations or use a third jurisdiction? 

We check against international lists (OFAC SDN, EU Consolidated, UK Sanctions List, etc.), analyze the ownership structure, level of control, possible affiliation, and offer a secure model of interaction or recommendations for refusal. 

2. A transaction in foreign currency through a foreign bank is planned 

Even if the parties to the transaction are not sanctioned, the transaction may be blocked due to the fact that the settlement is made through a bank associated with the sanctioning jurisdiction (for example, the United States or the EU). 

The consultation allows you to understand: which banks are at the greatest risk, whether alternative settlements can be used, whether bank notification or the provision of additional documents is required. 

3. Participation in international supply with a potentially sanctioned component 

If the product, technology or equipment may be subject to export restrictions, a legal analysis is required to determine whether the transaction violates the sanctions or export control regime. 

As part of the consultation, we check the commodity codes, the country of origin, the applicable restrictions and develop a legal position or alternative options for routes and contractual terms. 

4. Obtaining investment or financing from abroad 

When a company or project receives funds from foreign investors, banks or funds, it is necessary to make sure that the financing structure, corporate connections and ultimate beneficiaries do not raise concerns with regulatory authorities or payment systems. 

In this case, consultation allows not only to identify risks, but also to prepare legal opinions, explanations for partners, and agree on the wording of contracts. 

5. Reorganization of business with the participation of foreign persons 

A change in the ownership structure, the exit of foreign participants, restructuring with the participation of offshore companies - all this can affect the sanctions interests of several jurisdictions at once. 

We conduct sanctions analysis at the intersection of corporate and international law and offer solutions that take into account the requirements of both Russian and foreign regulators.

The difference between consultations on foreign sanctions and general sanctions compliance

Although sanctions consultations and sanctions compliance solve similar tasks — minimizing risks and complying with restrictions — from a legal point of view, these are different formats of work that are used in different situations and require a different approach.

Advice on foreign sanctions – targeted legal due diligence 

This is a one-time or situational service provided when a specific question arises: whether it is possible to make a transaction, interact with a counterparty, use a foreign bank, attract investments. The consultation is based on: 

• analysis of legislation and sanctions lists; 

• the application of the rules of a particular jurisdiction (for example, the United States or the EU); 

• risk assessment and recommendation; 

• formation of a position for communication with a bank, partner or regulator. 

It allows you to make an informed and legally justified decision in conditions of uncertainty or sanctions pressure.

Sanctions compliance is a systemic internal policy 

Compliance includes building a permanent model for managing sanctions risks, adapted to the structure and specifics of the business. It covers: 

• development of internal policies and regulations; 

• creation of a system for checking counterparties and transactions; 

• support in the mode of constant monitoring. 

Compliance is necessary when a company operates in high-risk areas on a regular basis, interacts with dozens of counterparties or is serviced through "unfriendly" banks. 

In many cases, consultation and compliance work in tandem: consultation helps to make a targeted decision (for example, on a transaction), compliance provides control and repeatability in the long term.