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New U.S. Guidance on Business Risks Associated with Russia

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Key aspects:

  • On February 23, 2024, the U.S. Departments of State, Treasury, Commerce, and Labor issued a business advisory for dealings with Russia and its occupied territories.
  • The advisory highlights three key risk categories: exposure to sanctions, war crimes, and repressive laws.
  • Businesses are urged to conduct thorough due diligence, focusing on compliance mechanisms and human rights.
  • FinCEN has identified significant risks of Russian illicit activity targeting the U.S., prompting alerts for financial institutions.
  • Compliance due diligence is emphasized for OFAC-regulated transactions, EAR-related exports, and BSA requirements.
  • Businesses and individuals are encouraged to review corruption and bribery due diligence recommendations in the "FCPA Resource Guide."

Target Audience 

The target audience of the Guidance includes businesses, individuals, financial institutions, and other entities—such as investors, consultants, non-governmental organizations, and due diligence service providers. The guidance intends to provide crucial information to guide decisions amid elevated risks associated with business activities in Russia or transactions involving the occupied territories of Ukraine. This extends to activities involving the Russian military-industrial base not directly addressed by sanctions or trade restrictions. 

Entities involved in such dealings face substantial operational, legal, economic, and reputational risks. Undertaking thorough due diligence can often help mitigate these risks and enhance transparency for all stakeholders.

In general, the advisory outlines three key categories of risks for businesses and individuals related to Russia's unlawful invasion and occupation of parts of Ukraine:

  • - Exposure to sanctions, export controls, import prohibitions, money laundering, and corruption.
  • - Implication in Russia's violations of international law, including war crimes, crimes against humanity, and human rights abuses.
  • - Risks stemming from repressive laws in Russia and occupied Ukrainian areas, such as expropriation and detentions on spurious grounds.

A Comprehensive Review of Compliance Mechanisms

To address these risks in the Russian Federation and the occupied regions of Ukraine, businesses and individuals are advised to perform thorough due diligence. This should include a comprehensive review of compliance mechanisms (compliance due diligence) and an intensified focus on human rights due diligence. These measures are recommended to help minimize exposure to potential risks.

Moreover, the Financial Crimes Enforcement Network (FinCEN) under the Treasury has identified significant risks related to Russian illicit activity targeting the U.S. FinCEN has issued alerts to U.S. financial institutions, outlining illicit activity patterns and reporting obligations concerning potential Russian sanctions and export control evasion, especially in high-risk sectors. Businesses and individuals are encouraged to use these FinCEN Alerts to assess and address the elevated risks associated with financial transactions involving Russia.

Compliance Due Diligence for Sanctions and Export Controls

For those involved in transactions under OFAC regulation, it is advised to consult OFAC's website for detailed information on sanctions programs, compliance commitments, and recent advisories. Businesses dealing with export transactions subject to the Export Administration Regulations (EAR) should refer to BIS's website for guidelines on export controls and effective compliance programs.

Entities linked to the U.S. financial system should be aware of Bank Secrecy Act (BSA) requirements, including AML programs, currency transaction reports, and reporting suspicious activity. Compliance with these obligations is crucial for detecting and deterring criminal activity. U.S. financial institutions are expected to adopt a risk-based approach to identify, assess, and mitigate money laundering and terrorist financing risks. Financial institutions may seek additional information from customers engaged in business related to Russia to establish a risk profile. For guidance, financial institutions should refer to FinCEN-issued releases, regulations, advisories, and guidance on BSA obligations, facing potential civil enforcement and criminal penalties for non-compliance.

Regarding corruption and bribery, businesses and individuals are encouraged to review due diligence recommendations in the "FCPA Resource Guide."  

All the relevant links can be found in the press-release