Russia sanctions and circumvention: Fortifying global due diligence and screening in the face of evolving schemes
Abstract
This paper provides an analysis of the extensive sanctions imposed on Russia following its invasion of Ukraine. The primary aim of this paper is to explore the evolving landscape of sanctions circumvention by Russian entities and their global partners and to propose a robust framework for strengthening global due diligence and screening practices to detect such schemes. This paper is structured into three main sections. Firstly, it reviews significant actions taken by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the US Department of State since 24th February, 2022. It details the shift in focus towards third-country actors and highlights specific sanctions imposed on individuals and entities aiding Russia’s evasion efforts. Next, this paper delves into identified evasion tactics, such as trade diversion, shell companies, trade-based money laundering (TBML), cryptocurrency use and sanctions list evasion and discusses OFAC’s legal authorities and key trends in targeting these tactics. Finally, this paper proposes best practices for financial institutions and other entities to enhance their due diligence and screening processes. It emphasises a riskbased compliance programme tailored to the specific risks associated with business activities, customers, counterparties and geographic locations, providing specific recommendations intended to address unique risks in the US–Russia sanctions context. Readers will take away an understanding of the current state of Russia sanctions, the sophisticated methods used for circumvention and practical recommendations for enhancing compliance efforts in this challenging landscape. This article is included in The Business and Management Collection (https://hstalks.com/business/).
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Author's Biography
Michael E. Zolandz is the Chair of the Federal Regulatory and Compliance Practice, Dentons, and serves as the Managing Partner of Washington, DC Office, Dentons. Michael focuses his practice on advising clients on their most critical and complex trade compliance and foreign investment projects, specialising in cross-border transactions and regulations related to international commerce. Michael offers clients practical expertise and guidance in advising on US export controls, US trade sanctions programmes, anticorruption programme development and notification procedures before the Committee on Foreign Investment in the United States (CFIUS). Michael has led internal investigations and regulatory disclosures under US export control and sanctions programmes and managed complex compliance enhancements and programme development for US and multinational companies across industry sectors.
Shahrzad Noorbaloochi is a Managing Associate with the Federal Regulatory and Compliance Practice, Dentons. Shahrzad’s practice focuses on economic sanctions, export controls, anti-boycott regulations, national security reviews under the Committee on Foreign Investment in the United States (CFIUS) and the Foreign Corrupt Practices Act (FCPA). Shahrzad also has experience aiding clients in the areas of import controls, customs compliance, antidumping and countervailing duty proceedings and Section 301 and 232 tariffs. Shahrzad has also litigated claims before the US Court of International Trade. Prior to joining Dentons, Shahrzad completed clerkships at the US District Court for the Eastern District of Virginia and the DC Court of Appeals.
