Russia Service Restrictions Challenging for Compliance Departments, Law Firm Says
One of the “most challenging” aspects of complying with U.S. and Western sanctions against Russia during the past year has been the service restrictions, which has created hurdles for companies trying to understand “exactly what types of activities fall within the scope of the covered services,” Sidley Austin said. In a Feb. 22 alert describing key compliance lessons from one year of Russia sanctions, the law firm said the service restrictions are “broad,” affecting everything from accounting to quantum computing, and not always carried out equally across various sanctions regimes.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
“Despite broad alignment among the EU, UK, and United States,” Sidley said, “these measures have been implemented in different ways, with different exceptions and licensing grounds and even at different times across the jurisdictions.”
The firm said companies must continuously evaluate their internal compliance policies as new categories of sanctions and restrictions are introduced. In addition to sanctions screening, which can help ensure compliance surrounding individual designations and export-controlled items, new service restrictions “may affect unexpected areas of operations,” Sidley said. The firm said the range of issues raised by the services restrictions, which can include legal services, auditing and bookkeeping, is “broad,” especially for a global company that “may rely on services centers in one jurisdiction to cover an entire region, including Russia.”
The firm also warned that efforts by the U.S. and allies to create an international sanctions enforcement coordination mechanism could increase compliance risks for companies. A multilateral enforcement coordination tool has been proposed by the Bureau of Industry and Security and within the G-7 and the EU (see 2302240054, 2210210029 and 2212160027).
Sidley noted enforcement can differ greatly by jurisdiction. Some nations may not have “clear disclosure processes or incentives,” the firm said, while others may settle export violations criminally that would have been settled administratively somewhere else. “Even ad hoc enforcement information sharing increases the risk of a company’s facing investigations in multiple jurisdictions,” the firm said, “and companies should weigh these considerations when choosing to disclose potential violations.”