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Unraveling the Legal Labyrinth: How Lawyers Can Safeguard Your Business from Sanctions Risks

Janina White

8 Nov 2023

Since 2014, Russia has faced a significant increase in international sanctions, making it the most sanctioned country in the world since February 2022. These sanctions primarily have a political nature, with the aim of pressuring Russia to change its behavior. The main actors in imposing these sanctions are the European Union, the United States, and Great Britain.

US, EU, and UK authorities are generally open to communication with suppliers and customers, including those from overseas. They can be reached for clarification through their official websites or by email.

The US

In the United States, the primary legislative framework for sanctions includes the Countering America's Adversaries Through Sanctions Act (CAATSA) of August 2, 2017, and the Federal Act on Freedom of Ukraine of December 18, 2014. The Office of Foreign Assets Control (OFAC) manages financial sanctions and is responsible for administering and enforcing economic sanctions against foreign states, regimes, terrorists, terrorist organizations, proliferators of weapons of mass destruction, drug smuggling, and other targets. OFAC operates within the President's emergency powers and relevant legal regulations to impose asset freezes and prohibitions on assets within the jurisdiction of the United States.

OFAC enforces two main types of sanctions:

  • SDN List: This includes individuals who have been directly sanctioned by US authorities, with their assets frozen within US jurisdiction. Being on this list results in severe consequences, including asset freezes and isolation in economic transactions with entities participating in international trade.

  • Non-SDN Sanctions (Sectoral Sanctions): These sanctions do not freeze assets but prohibit certain transactions in specific areas of the economy or with specific individuals. Violations of SDN sanctions can lead to fines, as illustrated by numerous examples of companies paying fines for OFAC violations on their website.

The EU

In the European Union, the primary authority for sanctions is the European Council, with sanctions oversight administered by the Directorate-General Financial Stability, Financial Services, and Capital Markets Union (FISMA).

The key regulatory legal act pertaining to the Russian Federation in the EU is Decision No. 833/2014, dated 07/31/2014, which addresses restrictive measures in response to Russia's actions destabilizing the situation in Ukraine. This legislative act is periodically updated by decisions from the European Council, often referred to by the number of their adoption, with the 8th package of EU sanctions currently in effect.

The UK

In Great Britain, sanctions are enforced by the Financial Sanctions Enforcement Office, a part of the Treasury, known as the Office of Financial Sanctions Implementation (OFSI). The foundational law governing sanctions against Russia, due to its exit from the European Union, is Law No. 855 of 2019.


Switzerland, while not a member of the EU, closely aligns with its sanctions policies. Switzerland enforces all packages of EU sanctions.

Risk mitigation

To mitigate the risks associated with sanctions when interacting with Russian partners, especially considering the potential for those partners to be targeted by US, EU, or UK sanctions, entrepreneurs can take the following steps:

  • Due Diligence: Conduct thorough due diligence on your Russian partners and their activities to ensure they are not involved in activities that could lead to sanctions.

  • Sanctions Screening: Implement sanctions screening software or services to regularly check your partners against sanctions lists, such as the SDN list in the United States, to ensure you are not engaging with sanctioned entities.

  • Contractual Protections: Include specific contractual clauses that address sanctions compliance, ensuring that your Russian partners are responsible for any negative consequences resulting from sanctions violations.

  • Risk Assessment: Continuously assess and monitor the risks associated with your business relationships with Russian partners. Be prepared to adjust or terminate these relationships if the risks become too high.

  • Legal Counsel: Consult with legal experts who specialize in international sanctions to understand the legal implications of your business activities and relationships with Russian partners.

  • Diversification: Diversify your business relationships to reduce reliance on a single partner or market. Expanding your network can help mitigate the impact of sanctions on your operations.

  • Stay Informed: Keep up to date with developments in international sanctions regimes, as they can change rapidly. This will help you proactively adjust your business strategies to remain compliant.

  • Government Guidance: Monitor any guidance or recommendations from the Kazakh government regarding sanctions and compliance. They may provide valuable information to help you navigate the complex landscape of international sanctions.

  • Seek Advice from Your Home Country: If you have foreign citizens on your board or in key decision-making roles, seek legal advice or guidance from their home countries on how to navigate sanctions and potential criminal liabilities.

  • Legal Structure: Consider the legal structure of your business in a way that provides a level of legal protection to the individuals involved. For example, establishing a separate legal entity for certain activities might help shield individuals from potential personal liability.

    Remember that navigating the complex world of international sanctions is challenging, and the best approach may vary depending on your specific circumstances and the nature of your business relationships. Consulting with legal experts and staying informed is crucial to ensuring that you remain compliant and minimize the risks associated with sanctions.

Risk minimisation

To minimize the risks associated with sanctions, several strategies can be employed:

  • Sanctions Compliance Checks: It is essential to conduct sanctions compliance checks. You don't necessarily need to invest in expensive services; there are online resources available:

  • Incorporate Sanctions Clauses: As stated, including sanctions clauses in contracts is a prudent approach. These clauses typically contain mutual assurances from the parties that neither they nor their affiliates, participants, shareholders, or beneficiaries are subject to international sanctions at the time of the contract's conclusion. Additionally, these clauses establish mechanisms for contract termination, withdrawal from joint ventures, and other methods for ending cooperation if sanctions are imposed on one of the parties, rendering further collaboration impossible.

  • Examine Corporate Structures: To verify a party's assurances regarding sanctions compliance, legal experts should thoroughly scrutinize the counterparty's corporate structure. It's crucial to assess not only the partner but also the individuals in control and their ultimate beneficiaries for any sanctions implications.

  • Supply Chain Analysis: To gain a comprehensive understanding of transaction-related risks, lawyers should request details of the entire supply chain associated with the deal. This is important because sanctions can impact various elements such as transshipment ports or transport links, and insurance coverage may be affected due to sanctions.

  • Voluntary Sanctions Restrictions: When planning long-term international collaborations, it's important to consider the potential for foreign companies to voluntarily impose sanctions or compliance requirements. This may involve:

    • Requesting an end-user certificate from foreign partners.

    • Monitoring and controlling the sales of specific goods by foreign partners.

    • Implementing measures to exclude citizens of the Russian Federation from management positions, board memberships, or shareholding in the company.

    • Imposing restrictions on sharing product, service, or technology information with individuals from sub-sanctioned countries.

  • Anticipate Cooperation Challenges: Be prepared for banks, logistics companies, and other critical components of the supply chain to potentially refuse cooperation based on suspicions of involvement in sub-sanctioned transactions, even without providing specific justifications.

By implementing these measures, businesses can better navigate the complex landscape of international sanctions and reduce their exposure to associated risks.

30 seconds summary

  • Sanctions Compliance Checks: Regularly check for sanctions compliance using accessible online resources for the US, EU, and UK sanctions.

  • Sanctions Clauses in Contracts: Include sanctions clauses in contracts to ensure parties' compliance and establish termination mechanisms in case of sanctions.

  • Corporate Structure Examination: Scrutinize the corporate structure of partners to verify sanctions compliance, including those in control and their beneficiaries.

  • Supply Chain Analysis: Assess the entire supply chain to identify potential sanctions-related risks, including impacts on ports, transport, and insurance.

  • Voluntary Sanctions Restrictions: Consider voluntary compliance measures by foreign companies, such as end-user certificates and restrictions on sharing information.

  • Anticipate Cooperation Challenges: Be prepared for cooperation challenges, as banks and logistics companies may refuse involvement due to suspected sub-sanctioned transactions.

  • Continuous Monitoring and Adaptation: Stay informed about evolving sanctions regulations and adjust business strategies as needed to remain compliant and minimize risks.

Janina is a solicitor registered in England and Wales, and the Republic of Ireland, and a member of the American Bar Association. Her extensive legal expertise spans Corporate Law, Sanctions, and Corporate Governance. Beyond law, Janina is a Chartered Company Secretary and showcases a passion for global cultures, evident in her fluency in eight languages. Advising multinational giants, her unique blend of legal acumen and cultural insight sets her apart, offering readers a rich, global perspective on her subjects. Janina is also a private investigator and a member of the Association of British Investigators and she is actively using the investigative techniques (including the use of the Artificial Intelligence, OSINT and HUMINT)  in her legal work.

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