Checking the company and counterparties for sanctions

How to check for a conflict with sanctions legislation 

The sanctions verification procedure is based on a comprehensive legal and factual analysis of information about the company or counterparty. The goal is to establish whether a person falls under the restrictions imposed by international or national sanctions, or is connected to sanctioned entities through a ownership structure, control or chain of transactions. 

1. Collection and analysis of initial information 

The check begins with a detailed study of: 

• registration data of the company (name, country of registration, legal address, TIN, OGRN, etc.); 

• ownership and beneficiary structures; 

• data on managers and representatives; 

• field of activity, geography of operations, industry affiliation; 

• participation in international projects or public procurement. 

If we are talking about a potential counterparty, an analysis of available information from open sources, paid databases and registers is carried out. 

2. Checking against sanctions lists 

Automated and manual checks are being carried out against the existing sanctions databases: 

• OFAC (США) — SDN List, SSI List, Non-SDN Lists; 

• ЕС — Consolidated Sanctions List; 

• UK – UK Sanctions List (OFSI); 

• UN - lists according to Security Council resolutions; 

• the Russian Federation — sanctions under presidential decrees and government resolutions; 

• sanctions lists of Canada, Australia, Japan, Switzerland, etc. 

Verification is carried out not only by name, but also by identifiers, transliterations, affiliates and organizations. 

3. Establishment of affiliation and application of the "50% rule" 

The following is analyzed: 

• chain of ownership and control; 

• participation of persons from the sanctions lists in the authorized capital (directly or indirectly); 

• the presence of joint control with other sanctioned persons. 

Even if the audited company does not appear in the lists, but more than 50% of it is controlled by SDN persons, it is considered blocked under OFAC rules and similar EU approaches. But the criteria for control and affiliation are more complex and have a variety of applications. 

4. Analysis of transactions and industry specifics 

Lawyers check not only the organization itself, but also the nature of the planned interaction: 

• whether the transaction is subject to export control restrictions or sectoral sanctions; 

• whether it is possible to block a transaction through the bank compliance line; 

• whether permission is required from foreign or Russian regulators. 

5. Preparation of conclusions and recommendations 

Based on the results of the audit, the client receives: 

• a written opinion on the sanction status of the company or counterparty; 

• assessment of legal risks, including reputational and secondary risks; 

• recommendations for changing the terms of the transaction, refusing to interact or obtaining permission; 

• if necessary, slip of the tongue templates, letters for banks and compliance departments. 

The audit is carried out both as part of sanctions due diligence before the transaction and in the process of compliance support for current activities. The regularity and depth of analysis depend on the industry, the jurisdiction of counterparties and the level of sanctions risk.