UK Warns Foreign Firms About Sanctions Risks, Offers Compliance Tips
The U.K. last week warned foreign companies that it may sanction them if they’re involved in activities that could contribute to Russia’s invasion of Ukraine, leading to “serious consequences for your business and other financial dealings.” The country’s Foreign, Commonwealth & Development Office said British businesses are also on the lookout for companies that may be doing prohibited business with Russia, and if U.K. companies can’t be "assured" that a foreign firm isn’t involved with Russia, “some UK companies may take a cautious approach (sometimes termed ‘de-risking’) and refuse to do business with you.”
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The warning was included in new guidance from the FCDO about the sanctions risks faced by non-U.K. companies. The guidance includes “practical steps” to manage these risks, adding that although there is no “one-size-fits-all” approach, foreign companies should be carrying out a general “risk assessment” to make sure they don't come under the scrutiny of the U.K. government.
That may include analyzing business partners for any ties to Russia; scrutinizing the end-use and end-users of any goods; and looking into whether payments are being made through shell companies, cryptocurrency, or other methods that may signal sanctions evasion. The U.K. also urged foreign companies to establish a company-wide sanctions compliance policy that signals “commitment” by senior officials and includes routine due diligence on customers. They should also track their businesses’ trade flows and buyer patterns “over a period of time,” which “may reveal significant shifts in exports of higher-risk products, indicating the possibility that these products are being procured for diversion to Russia.”
U.K. businesses also may ask foreign companies to include clauses in contracts that say the transaction won’t result in a sanctions violation. They may also want assurances that goods won’t be indirectly sold to any entity on a U.K., U.S. or EU sanctions list or any entity majority owned by an entity on one of those lists.
While only U.K. persons are legally required to comply with U.K. sanctions, the country stressed that foreign companies could face severe business damages if they flout the U.K. rules.
“If you are designated by the UK, it will prevent UK nationals, businesses, and any other persons in the UK from providing you with access to the UK economy,” it said. “In addition, many international businesses may voluntarily choose not to do business with you.”