As can be expected and as is surely the case with other firms who practice sanctions law, Russia is becoming a larger part of our every day work. Granted, the sanctions regime against Russia following the Crimea and Ukraine crises is still nothing close to what is in place against countries like Iran, Cuba, and Syria, but in some ways that makes the work and the attention to detail all the more challenging.
Why? Quite simple – when there is a clear line in the sand (e.g., a true embargo like that against Iran, where most things are banned), many people just choose to not deal with the sanctioned country, they either cannot, or they choose not to trouble themselves by finding that narrow sliver under which they can legally do business. The reason is that the margin of error is often slim, particularly for those who are not well advised, and they do not want to risk huge penalties (it goes without saying that you should always assess your risk, because not doing business with Cuba or Iran does not necessarily mean you are not exposed, particularly if you do business in nearby jurisdictions).
With Russia it is different. The U.S. and European Union (EU) do many billions of dollars a year in trade with Russia, and the U.S and Europe are entrenched with Russia and vice-versa. There are investments in each other’s jurisdictions, they do active business with eachother. Therefore, more actors, more activities, more risk.
For those in the heavy industries sector and areas like oil and gas and banking, attention to detail in dealings with Russia is key. There are now more and more designated entities in Russia. Not all designations (such as the sectoral sanctions) constitute blanket bans. For a typical client we may have to look at who they are doing business with, poke around and do more and more due diligence on who owns the company, who it does business with, etc. before advising the client that they can or cannot go forward. The list does not end there. Who is financing the deal? Who else is involved? How do we create a proper record of our due diligence? By now, you’ve realized how even the “light” sanctions on Russia can expose certain U.S. companies to very high exposure of violations (in some way and some occasions greater than exposure to even designated Iranian entities, which companies doing business internationally must continue to be vigilant to protect themselves against).
This is all what is addressed in a proper compliance program and strategy. Unfortunately, the notion of comprehensive compliance policies is lost on many companies, and not just the small ones. Many still try to make “strategic business decisions” taking into account risk. On top of being criminal and unethical, this can naturally be very costly. What is clear is that the days that business people in the U.S. thought they could willfully (or supposedly “unknowingly”) turn on blinders is over.