Anti-Circumvention Resources Hub - Association of Certified Sanctions Specialists

ACSS Anti-Circumvention
Resources Hub

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Introduction

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EU Resources

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UK Resources

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US Resources

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Other Country Resources

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ACSS Resources

1. Introduction

Efforts to thwart sanctions undermine their effectiveness and allow individuals, entities and countries to profit. ACSS supports governments in fighting the circumvention of sanctions and has created this free resource to help publicise their initiatives. EU, UK, US regulations, corresponding guidance, frequently asked questions and additional resources from other countries form the backbone of the ACSS Anti-Circumvention Resources Hub. We have supplemented this with material from our own experts, including recordings of ACSS webinars that provide instructive reports and analysis.

2. EU Resources

EU Regulations

EU sanctions regulations contain an anti-circumvention clause prohibiting persons under EU jurisdiction from knowingly and intentionally participating in activities that attempt to circumvent its sanctions. Below are a few regulations:

EU Regulation 269/2014 Article 9
Council Regulation (EU) No 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine

Circumvention is prohibited under Article 9 of Council Regulation (EU) No 269/2014.

Pursuant to Article 9 of Council Regulation (EU) No 269/2014 of 17 March 2014, it is prohibited to participate knowingly and intentionally in activities that attempt to circumvent the measures referred to in Article 2 of said regulation (asset freeze).

Council Regulation (EU) 2023/1215 of 23 June 2023 amended Regulation (EU) No 269/2014 by adding to the listing criteria natural persons facilitating infringements of the prohibition against circumvention. This allows the EU to restrict the sale, supply, transfer or export of specified sanctioned goods and technology to certain third countries whose jurisdictions are considered to be at continued and particularly high risk of circumvention. This new “anti-circumvention” tool will be an exceptional and last resort measure when other individual measures and outreach by the EU to concerned third countries have been insufficient to prevent circumvention.

Under Council Regulation (EU) 2023/1215 of 23 June 2023 the EU also extended the transit prohibition for certain sensitive goods (e.g. advanced technology, aviation-related materials) exported from the EU to third countries, via Russia in order to reduce the risk of circumvention.

If you believe you are witnessing sanctions violations or circumvention, these can be reported to your national competent authority or anonymously via the EU whistle-blower tool.

If a particular structure was created to assist a person to evade the effects of its possible future listing, then current, ongoing participation in that structure can amount to circumvention of the restrictive measures if done knowingly and intentionally.

Article 9 can be breached even if the freezing of assets is not discontinued and no assets reach or benefit the now-listed person. Mere participation in a structure created for that purpose can be considered a breach.

In what regards the cumulative requirements of knowledge and intent, see also the jurisprudence in Case C-72/11, Afrasiabi and Others, in particular, that these requirements are met where the operator “deliberately seeks that object or effect or is at least aware that its participation may have that object or that effect and accepts that possibility”.

 

EU Regulation 833/2014 Article 12

Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine

Article 12 of Council Regulation (EU) No 833/2014 states that it is prohibited to knowingly and intentionally participate in activities that attempt to circumvent prohibitions in the Regulation.

Enforcing such provisions is, first and foremost, a matter for the national enforcement authorities, and any tips or information regarding possible circumvention should be actively reported to them.

In line with this national enforcement competence, the Commission will liaise with the National Competent Authorities of the member states if it receives information regarding possible circumvention. Finally, the Commission has recently launched an EU whistle-blower tool enabling the anonymous reporting of possible sanctions violations, including circumvention.

 

EU Guidance & FAQs

3. UK Resources

UK Regulations

Sanctions circumvention is prohibited by Article 19 of the Russia (Sanctions) (EU Exit) Regulations 2019. It is prohibited to intentionally participate in any activities if you know that the object or effect of them is directly or indirectly to circumvent the prohibitions imposed by the regulations or to enable or facilitate the contravention of those prohibitions.

UK Guidance & FAQs

23 January 2024
NCA
Financial Sanctions Evasion, Money Laundering & Cultural Property Trafficking Through the Art Storage Sector

6 December 2023
NCA
Red ALERT: Exporting High Risk Goods

8 November 2023
NCA
Gold-based Financial and Trade Sanctions Circumvention

October 2023
Guidance
Royal United Services Institute (RUSI)
Illuminating the Role of Third-Country Jurisdictions in Sanctions Evasion and Avoidance (SEA)

22 May 2023
Notice
Notice to Exporters 2023/08: Russia sanctions – Trade sanctions circumvention

18 April 2023
Guidance
Guidance on financial sanctions implementation for high value dealers, luxury goods markets and art market participants

31 January 2023
Guidance
Monetary penalties for breaches of financial sanctions: guidance

July 2022
Alert
National Crime Agency, National Economic Crime Centre, Joint Money Laundering Intelligence Taskforce, and OFSI
Red Alert on Financial Sanctions Evasion Typologies: Russian Elites and Enablers

Circumvention of sanctions
A person will usually commit an offence when they intentionally participate in activities knowing that the object or effect of them is (directly or indirectly):

  • to circumvent any of the prohibitions, or
  • to enable or facilitate the contravention of any such prohibition or requirement

OFSI takes circumvention very seriously. It attacks the integrity of the financial system and damages public confidence in the foreign policy and national security objectives that the sanctions regimes support.

Professional facilitation
Facilitation of a financial sanctions breach is a form of circumvention. Individuals who act on behalf of or advise others as part of their job may be considered professional facilitators. They should ensure they act within the law while representing their client. Simply discovering a potential breach when acting for a client does not automatically make a professional facilitator party to it, but they may become so if their subsequent actions amount to collusion in the breach. Potential breaches should be reported to OFSI.

4. US Resources

US Regulations
The US has imposed various sanctions in response to Russia’s actions in Ukraine. These include Executive Orders, legislation, and regulations restricting trade, financial transactions, and dealings with designated individuals and entities.

It’s important to note that this list is not exhaustive, and other laws, regulations, and executive orders may address sanctions evasion or impose specific sanctions on countries or entities. It’s always recommended to consult the relevant authorities or legal professionals for the most up-to-date and accurate information regarding sanctions laws and regulations.

  1. 31 CFR Part 589 – Ukraine-/Russia-Related Sanctions Regulations
    § 589.213 Evasions; attempts; causing violations; conspiracies
    (a) Any transaction on or after the effective date that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this part is prohibited.  (b) Any conspiracy formed to violate the prohibitions set forth in this part is prohibited.
  2. CAATSA
    Countering America’s Adversaries Through Sanctions Act (CAATSA), PL 115-44
    Sec. 228 Mandatory imposition of sanctions concerning certain transactions with foreign sanctions evaders and serious human rights abusers in the Russian Federation:
    MANDATORY IMPOSITION OF SANCTIONS CONCERNING CERTAIN TRANSACTIONS WITH PERSONS THAT EVADE SANCTIONS IMPOSED WITH RESPECT TO THE RUSSIAN FEDERATION.‘‘(a) IN GENERAL.—The President shall impose the sanctions described in subsection (b) with respect to a foreign person if the President determines that the foreign person knowingly, on or after the date of the enactment of the Countering Russian Influence in Europe and Eurasia Act of 201 7— ‘‘(1) materially violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition contained in or issued pursuant to any covered Executive Order, this Act, or the Ukraine Freedom Support Act of 2014 (22 U.S.C. 8921 et seq.); or ‘‘(2) facilitates a significant transaction or transactions, including deceptive or structured transactions, for or on behalf of —

SSIDES
Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (SSIDES)
§8909. Mandatory imposition of sanctions with respect to certain transactions with persons that evade sanctions imposed with respect to the Russian Federation

(a) In general: The President shall impose the sanctions described in subsection (b) with respect to a foreign person if the President determines that the foreign person knowingly, on or after August 2, 2017—

  1. materially violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition contained in or issued pursuant to any covered Executive order, this chapter, or the Ukraine Freedom Support Act of 2014 (22 U.S.C. 8921 et seq.); or
  2. facilitates a significant transaction or transactions, including deceptive or structured transactions, for or on behalf of —
  3. (A) any person subject to sanctions imposed by the United States with respect to the Russian Federation
US Guidance & FAQs
US Enforcement Actions

Here are some recent enforcements by Commerce / BIS.

5. Other Country Resources

Canada
FINTRAC
France
Ministère de l'Économie et des Finances (France) - Direction générale des douanes et droits indirects

Notes aux opérateurs et mesures restrictives en réponse à l’agression militaire de la Russie

Financial institutions (as specified in the ACPR guidelines – See PP. 137 and 44) and other entities subject to AML requirements (listed in Art. L.561-2 of the French Monetary Code) have an obligation to declare to the French Treasury any doubt of circumvention (which is prohibited under art. L.562-6 of the same Code) using this form.

You can also find some elements defining the circumvention in the DG Trésor guidelines, last updated in June 2016 (See Question 53bis).

Germany
Recommendations to effectively fight sanctions circumvention

22 February 2023

Federal Ministry for Economic Affairs and Climate Action of Germany (Bundesministerium für Wirtschaft und Klimaschutz)

Vorschläge zur effektiveren Bekämpfung der Sanktionsumgehung

Fighting sanctions circumvention effectively

23 February 2023

Federal Ministry for Economic Affairs and Climate Action of Germany (Bundesministerium für Wirtschaft und Klimaschutz)

Effektive Bekämpfung Sanktionsumgehung

Netherlands
Sanctions against Russia: status of Dutch compliance and enforcement
Italy
UIF - Russian Elites, Proxies and Oligarchs Task Force (REPO) - Russia-Related Illicit Finance and Sanctions (RRIFS) FIU Working Group
UIF – Russian Elites, Proxies and Oligarchs Task Force (REPO) – Russia-Related Illicit Finance and Sanctions (RRIFS) FIU Working Group

9 March 2023
Banca d’Italia
Unità di Informazione Finanziaria per l’Italia

6. ACSS Resources

Circumvention FAQs
Q1: What is sanctions circumvention?

A1: Sanctions circumvention refers to the act of evading or bypassing economic or trade sanctions imposed by one country or a group of countries on another country, entity, or individual.

Q2: Why do individuals or entities engage in sanctions circumvention?

A2: Individuals or entities may circumvent sanctions to continue conducting business or trade with sanctioned entities, gain a competitive advantage, access restricted resources or markets, or mitigate the negative impacts of sanctions on their operations.

Q3: What are some common methods used for sanctions circumvention?

A3: Some common methods for sanctions circumvention include using front companies, shell companies, or intermediaries to conceal the true origin or destination of goods or funds, engaging in trade misinvoicing or fraudulent transactions, utilizing alternative financial systems or cryptocurrencies, or exploiting legal loopholes.

Q4: Are there legal consequences for sanctions circumvention?

A4: Yes, engaging in sanctions circumvention is generally considered a violation of international law and can lead to legal consequences. These consequences may include financial penalties, asset seizures, trade restrictions, loss of business licenses, or criminal charges depending on the jurisdiction and severity of the circumvention.

Q5: How do governments and international bodies detect sanctions circumvention?

A5: Governments and international bodies employ various measures to detect sanctions circumvention, including enhanced monitoring of financial transactions, trade data analysis, intelligence gathering, collaboration with foreign counterparts, and advanced technologies like data analytics and artificial intelligence.

Q6: Can individuals or entities unknowingly participate in sanctions circumvention?

A6: While it is possible for individuals or entities to unknowingly participate in sanctions circumvention due to complex supply chains or deceptive practices of counterparties, ignorance is not a legal defense. Exercising due diligence and conducting proper risk assessments is essential to avoid unintentional involvement in sanctions circumvention.

Q7: What are the implications of sanctions circumvention for global security and stability?

A7: Sanctions circumvention undermines the effectiveness of sanctions as a tool for promoting global security and stability. It can enable sanctioned countries or entities to continue engaging in illicit activities, such as financing terrorism, acquiring weapons of mass destruction, or violating human rights, thereby posing regional and international security risks.

Q8: How can countries strengthen their efforts to prevent sanctions circumvention?

A8: Countries can strengthen their efforts to prevent sanctions circumvention by improving international cooperation and information sharing, enhancing regulatory frameworks, enforcing stricter penalties for violations, promoting transparency in financial transactions, and investing in advanced technologies for monitoring and detection.

Q9: Are there legitimate channels for obtaining sanctions exemptions or licenses?

A9: Yes, in some cases, countries provide legitimate channels for obtaining exemptions or licenses to engage in specific activities with sanctioned entities. These exemptions or licenses are typically granted based on compelling humanitarian, diplomatic, or national security justifications and require a rigorous application process.

Q10: How can businesses ensure compliance with sanctions regulations and avoid unintentional circumvention?

A10: Businesses can ensure compliance with sanctions regulations and avoid unintentional circumvention by implementing robust compliance programs, conducting thorough due diligence on partners and suppliers, monitoring and auditing their transactions and supply chains, staying updated on sanctions lists and regulatory changes, and seeking legal advice when necessary.

Red Flags of Sanctions Circumvention

Here are 10 red flags that may indicate potential sanctions circumvention:

1. Unusual Payment Methods:

Payments made through unconventional methods, such as cash, cryptocurrencies, or third-party intermediaries, without a valid explanation can be a red flag for sanctions circumvention.

2. Frequent Changes in Shipping Routes:

Frequent changes in shipping routes or destinations, particularly to countries under sanctions or high-risk jurisdictions, may suggest attempts to disguise the true origin or destination of goods.

3. Inconsistent Pricing or Trade Discrepancies:

Significant discrepancies between declared prices, invoice values, or trade volumes compared to market norms or industry standards can indicate trade misinvoicing or fraudulent practices to bypass sanctions.

4. Use of Front or Shell Companies:

Transactions involving front or shell companies with limited operations, assets, or legitimate business purposes, especially if they are located in high-risk jurisdictions or offshore havens, may be a red flag for sanctions circumvention.

5. Complex Ownership Structures:

Complex ownership structures involving multiple layers of intermediaries or offshore entities, especially when used to obfuscate the true beneficiaries or obscure links to sanctioned entities, can indicate sanctions evasion.

6. Unusual or Nonexistent Business Activities:

Lack of visible or credible business activities, such as websites, physical offices, or legitimate customer relationships, coupled with significant financial transactions, may indicate attempts to disguise illicit activities under the guise of legitimate business.

7. Transactions with High-Risk Individuals or Entities:

Engaging in transactions with individuals or entities previously implicated in sanctions violations or those located in jurisdictions known for facilitating sanctions circumvention should raise concerns.

8. Rapid Movement of Funds:

Unexplained and significant movements of funds between accounts, particularly involving jurisdictions subject to sanctions or high-risk financial centers, may suggest attempts to obscure the origin or purpose of the funds.

9. Ignoring or Avoiding Sanctions Lists:

Failure to conduct proper due diligence, disregarding official sanctions lists, or not implementing effective screening processes can be a red flag for potential sanctions circumvention.

10. Evasive or Inconsistent Responses:

Deliberately providing incomplete, inaccurate, or evasive information regarding business operations, counterparties, or transaction details when questioned about potential sanctions risks can indicate attempts to hide illicit activities.

These red flags are not definitive proof of sanctions circumvention, but they can indicate that further investigation or enhanced due diligence is warranted to ensure compliance with sanctions regulations.

Recordings of ACSS Webinars on Sanctions Evasion
Preventing and Detecting Circumvention of EU Trade Restrictions via Third Countries

ACSS Webinar Recording
Preventing and Detecting Circumvention of EU Trade Restrictions via Third Countries
Download the Participants Guide with the presentation slides under “Additional References” here.

U.S. Secondary Sanctions Unpacked

ACSS Webinar Recording
U.S. Secondary Sanctions Unpacked
Download the Participants Guide with the presentation slides under “Additional References” here.

Top 10 Missteps in Sanctions & Export Control Compliance

ACSS Webinar Recording
Top 10 Missteps in Sanctions & Export Control Compliance
Download the Participants Guide with the presentation slides under “Additional References”  here.

U.S. Export Controls for Financial Institutions

ACSS Webinar Recording
U.S. Export Controls for Financial Institutions
Download the Participants Guide with the presentation slides under “Additional References”  here.

Top 10 Red Flags on Potential Russian Sanctions Evasion Attempts

ACSS Webinar Recording
Top 10 Red Flags on Potential Russian Sanctions Evasion Attempts
Download the Participants Guide with the presentation slides under “Additional References” here.

Glossary

Here’s a glossary of important terms related to sanctions circumvention:

A - Z

Blacklisting: The process of adding an individual, entity, or vessel to a sanctions list or blacklist. Being blacklisted imposes restrictions and penalties, such as asset freezes, travel bans, or trade and financial transaction restrictions.

Circumvention: The act of finding ways to bypass or evade sanctions measures, often by using creative methods to continue trade or financial transactions with sanctioned entities.

Dual-Use Goods: Goods, technologies, or materials with civilian and military applications. Dual-use goods can be subject to export controls and restrictions to prevent diversion for illicit purposes, including sanctions circumvention.

Evasion: The act of deliberately avoiding or bypassing sanctions measures to continue trade or financial transactions with sanctioned entities or countries.

Front Company: A company established or used by an individual or entity to engage in illicit activities, such as sanctions evasion. Front companies often serve as intermediaries or conduits for transactions involving sanctioned parties.

Hawala System: An informal value transfer system commonly used in parts of the Middle East, South Asia, and Africa. The Hawala system relies on a network of trust and facilitates the transfer of funds without physically moving money across borders, making it susceptible to abuse for sanctions evasion.

Money Laundering: The process of making illegally obtained money appear legal by disguising its true origin, typically through a series of complex financial transactions. Money laundering can be employed to facilitate sanctions evasion by disguising the proceeds of illicit activities.

Phantom Shipping: A technique used to conceal the true ownership or origin of goods by manipulating shipping documentation, such as falsifying bills of lading or changing vessel names. Phantom shipping can be employed to evade sanctions and disguise the movement of goods.

Trade-Based Money Laundering: A specific form of money laundering that involves manipulating trade transactions, such as over or under-invoicing, misrepresentation of goods, or false descriptions, to move funds across borders while disguising their illicit origin.

Sanctions: Measures imposed by governments or international bodies to restrict or prohibit trade or economic activities with a specific country, entity, or individual, typically as a response to violations of international law or human rights abuses.

Sanctions Evasion Techniques: Various methods are employed to circumvent sanctions, such as using alternative routes or intermediaries, engaging in complex financial transactions, establishing covert networks, employing false documentation, or exploiting regulatory loopholes.

Shell Company: A business entity typically created to own assets, conduct financial transactions, or facilitate trade while obscuring true ownership or control. Shell companies are commonly used to hide the involvement of sanctioned individuals or entities.

Smuggling: The illegal transportation of goods, commodities, or individuals across borders or through restricted areas. Smuggling can be used to evade sanctions by bypassing official trade channels and controls.

Trade Embargo: A complete ban on trade or economic relations with a specific country or region. Trade embargoes often involve severe restrictions on imports and exports and are a common form of sanctions measure.

It’s important to note that engaging in sanctions circumvention is illegal and can have severe legal and financial consequences. This glossary is provided for informational purposes only and should not be interpreted as a guide or endorsement of such activities.

 

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