In response to the Russian invasion of Ukraine, new sanctions/restrictive measures have been issued by the U.S., EU, UK and several other countries. Violations of these sanctions are prosecuted as felony violations of federal criminal law, and it is vital that companies understand that the standard for prosecution of even indirect sanctions violations is not intent. The government does not have to prove intent or even that you should have known. They must only prove that a violation has occurred.
The terms of these sanctions prohibit import of any goods, services or technology, either directly or indirectly. The exportation, re-exportation, sale or supply of any goods, services or technology, either directly or indirectly, is also prohibited. Even providing any kind of support, service, data sharing, business referrals or guidance violates these sanctions.
It’s the “indirectly” portion of these restrictive measures that often causes problems for companies. Any dealings with Ukraine or any country bordering Russia carries increased risk and should be scrutinized very carefully. For example, if you’re selling your product to Latvia or a known transshipment country like Dubai, you will want to scrutinize that transaction carefully to make sure it isn’t being passed on to one of the sanctioned regions, as this is also considered a violation.
The U.S. government has warned that Russia is dramatically expanding trade with China, and companies should subject any dealings with China to increased scrutiny as well to avoid inadvertently facilitating sanctions violations.
All U.S. economic and trade sanctions programs are administered and enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Every business owner should be familiar with the 2019 OFAC Compliance Framework, as it lays out guidelines for companies to follow when creating a sanctions compliance program (SCP). Although such a program is not mandatory, OFAC “strongly encourages organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States, U.S. persons, or using U.S.-origin goods or services, to employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance program (SCP).”
Failure to ask the right questions and do your due diligence is no defense against prosecution.
For additional information on sanctions compliance, visit https://home.treasury.gov/system/files/126/framework_ofac_cc.pdf