The invasion of Ukraine by the Russian army and the continuing destruction of the country have triggered strong reactions from most Western countries, who have imposed increasingly strict sanctions on Russia and Belarus.
The situation is evolving rapidly and the latest sanctions by the EU are some of the most extensive ever adopted. Switzerland has followed suit and adopted most of the EU’s measures. The sanctions now affect a large number of individuals and entities, the financial sector as well as trade in goods and services. Companies dealing with Russian and Belarusian business partners face a legally complex and risky landscape.
We have summarised the latest developments in 10 questions you need to ask yourself to protect your company from violating the latest sanctions against Russia and Belarus. The detailed answers to the questions can be found in our article here. The article reflects the state of the sanction regimes of 1 April 2022.
1. Is my business affected by the EU & Swiss sanctions?
2. Can I still do business with the countries targeted by the sanctions and their nationals?
3. Do I trade goods that are impacted by the sanction regimes?
4. Does my business perform services that are sanctioned?
5. Can my customers in Russia and Belarus still settle the sales price?
6. With whom am I (not) allowed to do business?
7. Is there any further impact on my Russian business partners?
8. Can I still invest in Russia and Belarus?
9. Can I still pursue contractual obligations concluded before the entry into force of the latest Russia-related sanction regimes?
10. Beyond legal considerations – did you consider all the ethical and economic aspects?
The first 9 questions above ultimately present the legal bottom line in the current sanctions’ environment: Am I still allowed to do business with Russia and Belarus? But your internal evaluation should not stop there.
Even if you answer yes to this question, and you have the appropriate compliance system in place to navigate the complex sanctions framework, there are other non-legal aspects that will play into your decision. This will, on the one hand, involve a cost-benefit analysis in the face of increased cost and complexities (considering supply chain disruptions, compliance costs, financial uncertainties but also legal repercussions due to an early termination of contracts). On the other hand, it is ultimately also an ethical question that companies need to evaluate against their corporate values.
New sanction packages have been published by the EU Council every week since the invasion of Ukraine. The situation is very fluid and extremely complex. Automated solutions do help with the screening of business partners, but they are usually not implemented overnight.
Companies which don’t operate a mature Trade Compliance Framework are not equipped to navigate this sudden, highly complex and risky challenge and should refrain from doing business with the sanctioned countries.
Trade Compliance functions need to be at the highest level of alert. The situation must be closely monitored; existing business partners and trade flows should be reviewed in detail to protect your company from violating the current sanctions packages.
Is your company trading with Russia or Belarus? Do you operate local branches or subsidiaries? A cautious and risk-based attitude should prevail.
Would you like to discuss this topic? Deloitte would be happy to discuss with you the challenges and solutions to ensure your company complies with the applicable rules.