The last year has been a year of uncertainty and financial difficultly; a year dominated by sanctions and escalating energy costs resulting from Russia’s invasion of Ukraine.
A lot has been said about these sanctions, including how much of a dent they are making in the Russian economy and how many individuals and businesses have been affected. As noted in a previous guide to Russian sanctions and AML, it’s not just Russia that has faced the wrath of the West. Belarus and Iran have also been sanctioned.
What few have mentioned, though, is what happens to the people who breach the sanctions.
What are the penalties for people and corporations that blatantly ignore, undermine, or try to circumvent sanctions?
What the Law Says
As you might expect, sanctions are treated very seriously, and breaching them is considered a criminal offence. The exact penalty depends on the jurisdiction, but most governments have a maximum penalty that includes both a fine and prison time.
In the United Kingdom, financial sanctions are punishable by up to 7 years in prison, and authorities also have the power to impose “a monetary penalty”. It notes that the maximum is £1,000,000 and half the value of the resources/funds.
In the US, the Treasury Department’s Office of Foreign Assets Control (OFAC) is responsible for investigating and punishing companies found to be in breach of sanctions. The extent of the fines and prison time vary based on the breach, but they have the power to fine millions of dollars for multiple breaches and offenders could face up to 20 years in prison.
As for the EU, the laws vary based on the member state in which the offence was committed. Typically, offenders will face a maximum prison time of between 2 and 12 years, along with fines that relate to the extent of the crime and/or the company’s turnover.
Of course, these aren’t the only major powers to have placed sanctions in recent years. Australia, Canada, and numerous other countries have also sanctioned Russian entities and don’t look too kindly on people who breach these rules.
In Australia, for instance, individuals found in breach of sanctions could face up to 10 years in prison, along with substantial fines. Sizeable fines are also imposed on corporations. The maximum fine is fixed at 2,500 penalty units for individuals and 10,000 penalty units for companies (equating to around $370,000 USD and $1.45 million USD respectively) or three times the value of the transaction.
Previous Cases
Circumventing sanctions not only breaks the law. It also gives potentially dangerous entities access to foreign markets and assets, ones that they could use to fund illegal endeavours. They need to be taken very seriously, and governments are doing just that.
This is especially important during the ongoing war, when Western governments are keen to make an example of offenders.
Charles McGonigal is one such example. McGonigal is a former FBI official who was arrested alongside a former Russian diplomat in January 2023. It was claimed that the former head of FBI counterintelligence violated sanctions by agreeing to provide services to Oleg Deripaska, a Russian billionaire who was once Russia’s richest man.
McGonigal is also facing charges for taking money from a foreign agent while still in the FBI.
The case is still ongoing, but it’s reported that he is facing four charges related to sanctions and money laundering, each of which comes with a maximum penalty of 20 years in prison. He is also facing charges relating to making false statements and falsifying records.
In the same month, a British man was arrested for helping a Russian oligarch evade sanctions relating to a $90 million yacht. The arrest occurred in Spain and the defendant was charged alongside a Russian businessman.
These are just a couple of examples of people who have been arrested for breaching sanctions, but as the legal process is slow, many cases have not yet concluded. It’s also a very complicated business, especially when you consider that the majority of the currently active sanctions have only been in place since February of last year.
Other Sanctions
Sanctions are nothing new. It might seem that way, as they have been thrust into the media spotlight over the last year, but they’ve been around for a long time, and there are many ongoing sanctions.
We discussed the sanctions against Russia, Belarus, and Iran above. What many people don’t realise is that Russian sanctions began in 2014 following the annexation of Crimea, with the US, UK, Canada, Australia, and EU all acting against certain individuals. Russia responded with reciprocal sanctions.
What’s more, the US alone has had sanctions against North Korea and Cuba since the 1950s and also sanctioned Iran in 1979 (the sanctions were lifted 2 years later and then reintroduced in 1987).
The UK maintains a long list of sanctions that includes entities from Afghanistan, Syria, the Central African Republic, and North Korea, to name just a few.
These sanctions are not just the result of illegal annexations and invasions and can also stem from poor human rights records, civil war, and political events such as the 1979 storming of the US embassy in Tehran.
Needless to say, there are a lot of sanctions out there and a lot of potential obstacles for global businesses to dodge. That’s why it’s important for international companies to do their due diligence and make sure they’re not working with sanctioned entities.
How to Avoid Doing Business with Sanctioned Entities
At A Data Pro, we provide a range of risk intelligence services to help companies navigate the increasingly complex world of regulations, laws, and sanctions. We combine complex AI with an experienced human touch to help companies stay compliant and thus avoid the harsh penalties and pitfalls that result from breaking regulations.
For instance, our sanctions lists include information from authorities around the world, and they are updated regularly to include recent sanctions as well as historic ones. Our due diligence reports also cover many bases.
If you’re worried about the future of your business and your continued compliance, contact us today.
