Insights on OFAC, EU, and US compliance challenges

At the recent panel discussion on 16 November 2023 at Caspian Week Forum 2023 in Dubai, leading experts, including Matthew Bryza, Dr. Alexander Lindemann, Mike Parker, David Peyman, Stephanie Rice and Dr. Tatiana Zakharova, addressed the complex world of sanctions imposed by entities like the US, EU, and OFAC. They examined the challenges faced by businesses inadvertently affected by these sanctions, emphasizing the crucial role of legal expertise in navigating the compliance landscape. Key topics included the impact on various sectors, the process of delisting from sanctions, and strategies for dealing with frozen bank accounts. The event highlighted the dynamic nature of sanctions and the importance of staying informed and adaptable in this ever-changing legal environment.

During the lively discussion, our experts reached a consensus that sanctions, can come at a steep price for individuals and companies that are not intended to be sanctioned. Key parties such as exporters, transporters, banks, and insurers often find themselves unintentionally ensnared by the rapidly changing sanctions landscape. In fact, a significant majority of individuals and companies that encounter business disruptions, particularly those with frozen bank accounts, are not the actual targets of US, EU, or Swiss sanctions. In such cases, expert lawyers provide invaluable legal guidance, facilitate clarifications, and procure licenses from sanctions authorities like US OFAC, Swiss Seco, and relevant Finance Ministries and State Departments to alleviate the unintended effects of sanctions on affected parties.

Conversely, circumvention centers have emerged in the 130 countries that have not imposed sanctions in response to the situation in Ukraine. Sanctioned goods and services, such as military and dual-use goods, as well as financial services, indirectly reach Russia via well-established circumvention hubs in the Caspian Sea region, including Turkey, the United Arab Emirates, Kazakhstan, China, Georgia, and Armenia. US and EU operators are duty-bound to implement enhanced due diligence measures to prevent circumvention activities. These due diligence practices are reinforced not only by criminal liability but also by the compliance departments of all US and European banks, which scrutinize transactions that may facilitate circumvention activities. Additionally, the US and EU have imposed secondary sanctions on over 200 individuals and companies operating in these circumvention hubs.

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We extend our deepest gratitude to all our experts, including:

• Matthew Bryza at Ballard Partners(lobbying firm) and a former Ambassador to Azerbaijan (ret.)
• Michael (Mike) Parker, a Partner at Arktouros law firmand an Adjunct Professor of National Security Law in the Georgetown University Security Studies Program, a former federal prosecutor with the U.S. Department of Justice’s Money Laundering and Asset Recovery Sector (MLARS) and a former Sanctions Investigator and Section Chief of OFAC’s enforcement Division.
• David Peyman, a former United States Deputy Assistant Secretary of State for Counter Threat Finance and Sanctions, Advisor of the world’s largest maritime actors, financial institutions, high-tech and DeFi firms, pharmaceutical manufacturers, and energy firms on international trade, compliance, and building positive relationships with the U.S. government and expert witness in international arbitrations.
• Stephanie Rice, a Founder and Managing Partner at Vigilance Consulting Group, a former Investigator at OFAC
• Tatiana Zakharova, LL.M., our Head of Sanctions

The panel was moderated by Alexander Lindemann, our Managing Partner and President of the Swiss Capital Market Forum.

The panel members exchanged insights into the challenges lawyers face while representing clients in sanctions-related matters. They delved into the intricacies of removing individuals and companies from sanctions lists in the EU, Switzerland, or the US OFAC. Additionally, they explored the issue of bank accounts being frozen despite not being on any sanctions list and discussed how legal experts can assist in unblocking these accounts, often by obtaining necessary confirmations from sanctions authorities.

Since February 2022, businesses face the challenge of continually changing sanctions regarding the situation in Ukraine from over 50 countries, including the US, European Union, Switzerland, Ukraine and Russia. These sanctions cover a wide range of activities between Russia and the rest of the world including, among others, trade, especially the oil and gas price cap, metals, fertilizers as purchase, import and transport, financial assistance e.g. insurance, financing via financial markets and bank accounts.