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Sanctions ‘use regulations as foreign-policy tool’

The ALG 2024 Corporate Crime and Regulation summit at Croke Park in Dublin has heard that sanctions on Russia following the Ukraine invasion have led to jumps in the consumer price index there of over 11%, with Russians feeling significant cost-of-living impacts.

The summit (16 October) heard that difficulty getting replacement parts would have broad longer-term consequences for everyday Russians in terms of employment levels and standard of living.

Material deterrent

Russian aircraft may be operating with sub-standard parts, and there is a general shortage of high-tech goods, important for military capabilities. 

Nina Hart (visiting lecturer and PhD candidate at King’s College London) said that this might not be a material deterrent.

Should the war end, Hart said, she expected a phased withdrawal of sanctions, to incentivise the parties.

EU asset-freeze regulations prohibit businesses from transacting directly or indirectly with entities owned or controlled by sanctioned individuals.

Sinéad Goss (international head of financial crime legal at Citi) agreed that actually determining who owned or controlled businesses, particularly those with Russian connections, was far from straightforward. 

Many entities had very obscure ownership chains, Goss said, in jurisdictions where it was hard to see public registers, and there was no publicly available information.

That due diligence burden fell on those trying to comply with sanctions, and was expensive, the summit heard.

Divergence

There may also be divergence in interpretations of EU sanctions by different member states’ competent authorities.

Barrister Maya Lester (Brick Court Chambers, London) said that her website globalsanctions.com kept track of a very fast-moving area and offered free alerts.

The sharp end of sanctions compliance involved many overlapping, sometimes inconsistent, sanctions regimes, the summit heard.

Legal regulations were being used as a foreign-policy tool, the event was told, which created inherent difficulties because different governments took different approaches.

Paper trail

Lawyers were advised to keep a paper trail to show that they had done their best to comply in a fast-changing situation, the summit heard.

There had already been legal challenges – civil litigation and arbitration – on these issues in Britain, Lester said.

“This is a very difficult and uncertain area for everyone having to comply,” she said.