Аrticles 20 June 2022

Risk Price: What Is the Cost of Cooperation with Sanctioned Companies

RuAssets

Showing ties with Russia globally

Risk Price: What Is the Cost of Cooperation with Sanctioned Companies

International sanctions against russia are political and economic measures aimed at stopping russia’s aggression against Ukraine. The world community supports Ukraine economically and financially. As for business, russia has shown that it is not a reliable partner. However, there are still companies and entrepreneurs that intentionally or because of negligence ignore ties with russia. Such businesses are threatened with legal, reputational and financial problems.

* Some linked materials were published only in the Ukrainian language. Please use any web translator to read them.

How Anti-russian International Sanctions Are Violated

Despite all the bans, risks, and considerations of humanity, some Western companies violate the sanctions.

"Ekonomichna pravda" writes that russian companies circumvent the sanctions and buy equipment for ammunition production from the EU.

The German pharmaceutical company "B.Braun" continues doing business in russia, sponsoring the aggressor, and in 2021 alone replenished russia’s budget by 12 mln USD. For this money, russia can buy 170 “+"BM-30 Smerch" missiles or any other weapon with which the occupants can kill Ukrainians.

Limited Liability Company "Insurance Company Johnson" is a member of a joint holding company with a counterparty operating under the jurisdiction of the russian federation. The parent company is SC JOHNSON&SON, INC. The registration address is included in the list of risky jurisdictions of the Global Terrorism Index.

According to the R&D center of YouControl, the most significant number of entrepreneurs who continue working in the russian market are in Turkey, China, Iceland, Slovenia, and Greece. But in other countries, there are enough of them too. All these companies take a significant risk with their money and reputation.

How Will Companies Be Punished for Cooperating with russia

The New York Times writes that the US Administration warns foreign banks about the unacceptability of helping russia circumvent the sanctions. If companies support russian enterprises or oligarchs on whom financial restrictions are imposed because of the war in Ukraine, they risk losing access to the US and European markets.

"If you provide material support to an individual or legal entity subject to sanctions, we can extend our sanctions pressure on you and use our tools to prosecute, – the US Deputy Secretary of the Treasury Adewale Adeyemo said. – I want to make it clear to these institutions in the country and other countries that may not have imposed sanctions: the United States of America, our allies, and partners are ready to act decisively if they violate our sanctions."

Adeyemo emphasized that American banks were careful not to violate sanctions, but individuals and legal entities of russia were looking for workarounds to create trusts and use proxy servers.

Thus direct or indirect cooperation with companies registered in russia can be regarded as a support of the military aggression against Ukraine and have the following consequences:

- the EU member states, the USA, and other states may impose sanctions policies concerning such legal entities;

- the law enforcement agencies of Ukraine may initiate an investigation into such cooperation;

- seizure of property and blocking of bank accounts;

- negative reputational consequences due to public condemnation of the company policy.

Is It Possible to Avoid Punishment for Ties with Counterparties Subject to Sanctions?

Relations with risky counterparties will have a negative result of financial, reputational and operational nature:

⚪ fines;

⚪ seizure of property and accounts;

⚪ blocking of banking transactions;

⚪ loss of reputation due to public criticism.

Even in those cases when links are distant and mediated through typical contractors, and places of registration, a connection with a counterparty at levels 3-4 is still considered as cooperation and a violation of sanctions. Any business contacts, especially new ones, need special attention.

A wrong decision can have been paid for years.

Next steps

In fact, it is about risk management and the need to be as careful as possible while working in countries with socially unacceptable policies, especially when these policies can lead to terrorist financing.

Suppose the goal of companies is doing business ethically. In that case, it is desirable to exclude links with russian and belarusian businesses. "Russian footprint" can be traced among partners, suppliers, customers, and other counterparties. You can detect the hidden assets of russian and belarusian oligarchs and links with PEPs in other countries with the international platform RuAssets from YouControl.

RuAssets is a nuclear weapon against the russian economy. This is precisely what the Head of the National Agency on Corruption Prevention (NACP) called this tool. It helps detect and prevent financial and sanctions risks.

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