Russia Sanctions Mount Following Ukraine Referendums

A new round of sanctions was imposed on Russia and its allies after Moscow held referendums to annex the Kherson, Zaporizhzhya, Donetsk, and Luhansk regions of Ukraine.

Russia quickly became the most sanctioned country in the world following its attack on Ukraine in February of this year. The restrictions are aimed at curbing Russia's ability to finance the war.

Businesses worldwide face an increasingly complex maze of Russia sanctions to navigate to reduce the risk of falling foul of regulatory compliance requirements and incurring fines and other penalties. As a result, it’s essential to have a robust denied party screening process to identify any sanctioned individuals, entities, and evaders throughout your supply chain.

Some organizations attempt to manually screen partners and suppliers against sanctions lists and in doing so unnecessarily expend countless hours and resources, especially since restricted party screening must be conducted frequently — it’s not a one-off task.

Automated screening solutions have become essential to avoiding violating Russia and other sanctions programs without relying on error-prone and time-consuming manual processes. Fortunately, automated solutions leveraging frequently updated compliance information are available to save time and protect your organization from violations.

Read on to learn more about the new sanctions against Russia and how you can navigate them to keep your organization in the clear.

As mentioned, world governments announced a new round of sanctions in direct response to the annexation of the southern regions of Ukraine.  And while Ukrainian forces attempt to reclaim these regions, the United States, United Kingdom, and European Union have clamped stricter sanctions to limit Russia's financial resources. Let’s discuss some of the notable highlights from the latest restrictions.

• The Department of State imposes visa restrictions on 910 individuals with ties to Russian and Belarusian militaries and proxies. 
• Russian national Occur-Suge Mongush, and his family, are ineligible to enter the United States.
• The Department of Treasury’s Office of Foreign Assets Control (OFAC) is designating 109 State Duma members, 169 government officials, and additional individuals with ties to the Russian government or sanctioned financial institutions as sanctioned parties.
• OFAC Russia sanctions also include 14 persons, covering international suppliers, who have supported Russia’s defense sector.
• The Department of Commerce added 57 entities located in Russia and the Crimea region of Ukraine to its restricted entity list, increasing the total count to 392.

• 33 Russian officials related to the referendum.
• Four Russian oligarchs with a combined £6.3 billion (about US$ 7 billion) net worth.
• 55 board members from state-linked organizations.
• Combined with existing measures, the UK has sanctioned over 1,200 individuals, 120 entities, and over 120 oligarchs. 

• EU-wide import bans worth €7 billion (about US$6.8 billion).
• New export restrictions.
• Bans on EU nationals from holding posts at Russian state-owned enterprises.
• New rules allowing the EU to sanction anyone facilitating sanction circumvention.

The latest wave of sanctions indicates that world governments will continue to launch new measures as the Russia-Ukraine conflict continues.

The purpose of these sanctions is to restrict Russia’s financial resources, but they also create a complicated situation for organizations across all industries aiming to mitigate the risk of inadvertently violating them.

How can your business ensure compliance with new and future potential sanctions? OFAC Russia sanctions alone have significantly expanded the number of known restricted parties — a robust software solution is your best chance at avoiding penalties.

Because further sanctions are likely, organizations must continually screen partners and suppliers. Entities not on a list today could be included in future updates.

Manual restricted party screening is possible but incredibly time-consuming, even for businesses with an extremely low volume of vetting obligations. Moreover, with over 7,700 sanctions targeting entities with links to Russia, manually screening your partners and suppliers is unrealistic for many enterprises. 

Fortunately, denied party screening is a fine-tuned solution of Descartes’ supply chain management platform that helps ensure none of your suppliers or partners are targeted by sanctions.

Our automated software and frequently updated sanctioned entities database scans everyone in your supply chain and highlights any individual or entity targeted by sanctions, whether OFAC Russia sanctions or EU import bans. You can then take corrective actions to greatly reduce the risk of fines and penalties.

OFAC Russia sanctions targets include any organization with 50% or more ownership by one or more sanctioned parties. The purpose of the 50 Percent Rule is to identify and prevent sanction evasion, yet it makes identifying sanctioned entities significantly more complex because in this case there are no official lists to screen against.

For example, you may work with a financial institution that is not explicitly sanctioned but has three sanctioned shareholders with a combined 53% ownership. By applying the OFAC’s rule, the financial institution in question should be considered sanctioned. 

Understanding a company’s shareholding structure and comparing them to various sanctioned entity lists will rapidly become time intensive and, for most enterprises, unrealistic to handle manually. 

However, automated screening solutions referencing sanctioned ownership databases can help businesses simplify the task of complying with the 50 Percent Rule.

The Russia-Ukraine conflict has created new challenges for organizations worldwide that simply want to make sure they are staying on the right side of the law and focusing on expanding their business. The number of denied parties continues to grow exponentially, and to make the situation more complex, some restricted entities have taken steps to try to evade sanctions. 

Automated denied party screening is your best line of defense. Descartes is an industry leader in supply chain management, and our screening capabilities are designed to keep you compliant with global sanctions. 

Do you want to protect your organization against unknowingly violating international sanctions? Reach out to a solutions expert today to learn more about how our automated denied party screening and other tools can help your organization maintain compliance with changing sanctions and international regulations.

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