Russia sanctions and circumvention: Fortifying global due diligence and screening in the face of evolving schemes

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/).