Mr. Sanctions

Category: Sanctions Topics

  • Burning Questions; My Dinner with Claude – Six Countries, Two Wires: A Sanctions Compliance Cheat Sheet

    My prompt:

    ok… let’s open the aperture a bit. Explain what a compliant firm is supposed to do, for the US, UK, EU, Canada, Australia and Switzerland, in the following 2 scenarios – assuming we’re talking blocking/freezing sanctions only: Scenario A: You receive instructions to make a payment that involved a sanctioned party. Scenario B: You receive funds that involve a sanctioned party. For each scenario, also denote whether the answer is different in the case you are the beneficiary bank or an intermediary bank. Phrase this for a sanctions novice, but feel free to quote text (not full regulatory sections) – like “make economic resources available”, for example. Assume that my goal is to eventually, once I refine the response, make a “Burning Questions” post out of this

    Claude responded:

    This is exactly the kind of question that makes a good Burning Questions piece, because the honest answer isn’t “six jurisdictions, six rules” — it’s one rule almost everyone agrees on, and one narrow but consequential place where the US breaks from the rest.

    Two moves, and two roles, defined simply

    A compliant firm facing a sanctioned party has two different levers available, and confusing them is the single most common mistake:

    • Freeze/block: take the resource into your own custody, lock it away from everyone — including the customer who originally owned it — and report it. Nobody gets it until a regulator says otherwise.
    • Refuse/reject: simply decline to carry out the instruction. The money never leaves the paying customer’s account, so there’s nothing to freeze.

    And two roles matter for how this plays out:

    • Beneficiary bank: the bank holding the account of the person or entity who’s supposed to end up with the money.
    • Intermediary (correspondent) bank: a bank in the middle of the chain, routing the payment onward, with no account relationship to either the sender or the ultimate recipient.

    Scenario A: you receive instructions to make a payment that involves a sanctioned party

    Picture a customer who isn’t sanctioned asking you to send money to someone who is.

    JurisdictionWhat you doBeneficiary vs. intermediary bank
    US (OFAC)Block. Take the funds into a blocked, interest-bearing account. Don’t send them, and don’t hand them back to the customer either.No difference in principle — blocking applies regardless of whether it is the originating or intermediary bank in the chain. A purely blind intermediary with no account relationship to a non-listed related party gets a narrow pass on investigating what it has no way of knowing, but the moment it knows or should know a designated person is involved, it blocks too.
    UK (OFSI)Refuse. Don’t execute the payment; the customer’s own funds are untouched.Same principle for any bank in the chain — but correspondent banks caught mid-chain have created a genuine practical headache here (see below).
    EURefuse — going ahead would mean making economic resources available to the designated person, which every EU regulation prohibits directly or indirectly.Same in principle for whoever in the chain is asked to move the money.
    Switzerland (SECO)Refuse, for the same reason — Swiss ordinances closely mirror the EU wording, prohibiting third parties from making economic resources available to a listed person.Same in principle.
    CanadaRefuse — completing the payment would breach the ban on making any goods available to a designated person, or providing services to their benefit.Same in principle, though published Canadian guidance addressing intermediary banks specifically the way the US and UK have could not be located.
    Australia (DFAT/ASO)Refuse — a person commits an offence if they make assets available to a designated person or entity.Same in principle.

    The one country that flips the answer is the US, and it’s worth pausing on why. OFAC treats a designated person’s status as intended beneficiary of a payment as itself an “interest” in the funds, so the moment the firm has possession or control of the money for the purpose of sending it their way, it’s already blockable property — even though it started out as the customer’s own money and never actually reached anyone. Everyone else in this table requires the resource to actually belong to, or be held or controlled by, the designated person before the freeze duty exists — and a payment instruction that hasn’t been executed yet doesn’t meet that bar. So the divergence isn’t really about freeze versus reject as competing philosophies; it’s about how early each regime decides a sanctioned party has acquired an interest in money that hasn’t arrived yet.

    Scenario B: you receive funds that involve a sanctioned party

    Now flip it: money has actually arrived, or is already sitting in an account, where a designated person has a real, present interest — as the account holder, or as the completed beneficiary of an inbound transfer.

    JurisdictionWhat you doBeneficiary vs. intermediary bank
    US (OFAC)Block, and report within 10 business days.No difference — whoever’s possession or control the funds come within, blocks, subject to the same narrow intermediary safe harbor as above.
    UK (OFSI)Freeze, and report.The beneficiary bank freezes without question. An intermediary bank is generally fine to keep routing a payment onward provided the funds aren’t owned, held, or controlled by a designated person at the point it’s dealing with them — which gets complicated fast if a designated bank sat somewhere upstream (see below).
    EUFreeze, and report to the national competent authority. Notably, a bank is explicitly permitted to credit an incoming third-party payment into a frozen account without needing prior authorization for that specific act — the funds simply join the frozen pool once they land.Same logic as the UK: a true intermediary that never holds the designated person’s resources has nothing to freeze; a beneficiary bank freezes on receipt.
    SwitzerlandFreeze, and report to SECO.Same principle as the EU.
    CanadaFreeze (functionally, by disclosing the property to the RCMP and being barred from dealing with it) — firms must report property in their possession or control that is owned or controlled by designated persons and freeze such property.Same principle, applied to whoever holds it.
    AustraliaFreeze, and notify the Australian Federal Police.Same principle for whoever is holding the asset.

    This is really the headline finding: on receipt, all six jurisdictions land in the same place. The freeze duty is nearly universal once a designated person actually has a stake in the resource — the interesting divergence lives entirely in Scenario A, where the US alone extends that duty backward to cover an unexecuted instruction.

    Two wrinkles worth knowing for intermediary banks specifically

    US: OFAC’s own guidance draws the safe-harbor line precisely. An intermediary bank with no account relationship to a non-listed party referenced in a wire, and no actual or constructive knowledge of a blocking issue, isn’t expected to go digging — but the instant it has information suggesting blocked status, the duty to block attaches regardless of its position in the chain.

    UK: because the UK (unlike the EU generally) has designated entire banks, correspondent banks kept finding themselves holding payments that had passed through a now-designated bank somewhere upstream, with no clean way to either complete or return them — the industry calls these “trapped payments.” OFSI’s analysis turned on whether the designated bank still had a right of countermand over the funds at that point in the chain: if it had already discharged its role and lost any right to pull the funds back, the funds were no longer considered owned, held, or controlled by that designated bank, so the freeze duty didn’t travel downstream with it. That general licence has since been superseded by later amendments, so it’s an illustration of the reasoning rather than current operative guidance — worth pulling OFSI’s live Russia guidance before citing the mechanism itself.

    Self-check

    • US: OFAC FAQ 36 (reject example), FAQ 116 (intermediary safe harbor), and 31 CFR 501.603 (blocked-property reporting) pulled directly from ofac.treasury.gov.
    • EU: Regulation 36/2012 Article 14 template and the Council’s July 2024 Best Practices document, both previously verified.
    • UK: OFSI’s general guidance and reporting pages (gov.uk, ofsi.blog.gov.uk) plus the Trapped Payments general licence publication notice — flagged above as superseded, useful for the reasoning, not for current citation.
    • Canada: Global Affairs Canada’s own “Dealings prohibition and asset freeze” and disclosure pages — solid primary sourcing, but nothing found specific to intermediary-bank treatment; that’s a gap in published guidance, not a claim made by extension.
    • Australia: DFAT/Australian Sanctions Office guidance notes, all primary and current (2024–2025 dated).
    • Switzerland: sourced mainly through a Swiss press account describing the ordinance language rather than a direct ordinance or SECO FAQ pull — worth swapping in the exact ordinance article, and worth checking whether SECO’s FAQs address this reject/freeze point directly before publishing.
    • The “when does an interest attach” framing that ties the whole piece together is an original synthesis of the sourced material above, not a line any one source states outright.

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  • Burning Questions; My Dinner with Claude – Block vs. Refuse: Why the US and EU Handle the Same Wire Differently

    My prompt:

    so, let’s assume my customer A is neither listed nor implicated by ownership and control sanctions. It’s my understanding, therefore, if he instructs me to transfer some funds to a sanctioned part, in the EU, I can refuse the instruction. However, in the US, I am obligated to take the funds and freeze them. Am I mistaken?

    Claude responded:

    You’re not mistaken about the pattern, but the accurate version of it hinges on which US list the counterparty is on, so let’s walk through both sides properly.

    EU: refuse, don’t freeze A’s funds

    This is the “making available” half of the earlier discussion. Customer A isn’t designated and the money is still A’s property, so it never meets Article 2(1)’s trigger (belonging to, owned, held, or controlled by a designated person). Executing A’s instruction would be the firm making resources available to the designated person, which Article 2(2) flatly prohibits absent a derogation. So the firm declines to execute, and A’s account is untouched, not frozen. There is one obligation people miss here: the Council’s Best Practices guidance is explicit that firms must report attempted transactions, including customer attempts to make funds or economic resources available to a designated person without authorization, to their national competent authority. So “refuse” is the transaction-level answer, but it comes bundled with a reporting duty, not a freeze.

    US: block, don’t reject, don’t return to A

    This is where the mechanics genuinely diverge, and the reason is definitional. OFAC’s blocking obligation attaches to property or interests in property that are within the United States or come within the possession or control of a U.S. person, and “interest” is defined expansively as an interest of any nature whatsoever, direct or indirect, present, future, or contingent. A designated person named as the intended beneficiary of a payment has exactly that kind of interest in the funds the moment the firm, a U.S. person, has possession or control of them for the purpose of completing the transfer, even though the money started out as A’s and A was never designated. OFAC’s own FAQ on this is unambiguous: once property is blocked, title remains with the blocked person, and the exercise of ownership powers is suspended absent OFAC authorization; the funds must be frozen, not seized, and reported. And the obligation to block, rather than reject, applies regardless of whether the designated person is the originator or the intended recipient of the funds. So the firm takes custody of A’s payment, places it in a blocked, interest-bearing account, files the initial blocked-property report within 10 business days under 31 CFR 501.603, and then includes it in the comprehensive Annual Report of Blocked Property due every September 30 for anything still blocked as of the prior June 30. The money does not go back to A.

    The contrast, side by side

    EU (Art. 2(1)/(2) template)US (OFAC blocking programs)
    TriggerResource already belongs to/owned/held/controlled by the designated personAny interest of any nature — including a contingent interest as intended beneficiary — once the property is within a U.S. person’s possession or control
    What happens to A’s fundsNothing; instruction is simply not executed, funds stay in A’s ordinary accountRemoved from A’s ordinary account and placed in a blocked, interest-bearing account; A no longer has free use of them
    OwnershipA retains full ownership throughoutTitle is treated as passing to/vesting in the blocked person once blocked
    ReportingAttempted “making available” reported to the national competent authorityInitial blocked-property report within 10 business days (31 CFR 501.603), then annual reporting each September 30 while still blocked

    Where this framing needs a caveat

    This only holds for a US counterparty that’s a blocked person, meaning someone on the SDN list or otherwise subject to OFAC’s blocking authority (including via the 50 percent rule). If the “sanctioned party” is instead someone subject only to OFAC’s narrower sectoral-style restrictions, such as the Sectoral Sanctions Identifications List under the Russia/Ukraine directives, there’s no blockable interest at all: OFAC’s own FAQ 36 example is exactly this case, an underlying dealing that’s prohibited but has no SDN or blocked-government interest in it, and the answer there is reject, or don’t process and return to the originator, reported under the separate rejected-transaction regime at 31 CFR 501.604. So the real dividing line isn’t “EU versus US” as such, it’s whether the applicable regime treats the counterparty as subject to a full asset freeze/blocking designation (EU Annex listing, OFAC SDN) or a narrower restriction on specific dealings (OFAC SSI, and arguably the EU’s own sectoral trade and financial restrictions on Russia that don’t run through personal designation). Matched apples to apples, both EU and OFAC would tell you to reject; it’s specifically the blocked-person case where OFAC’s answer flips to block while the EU’s stays at refuse.

    Self-check

    • OFAC FAQ 9 (blocking definition, title/possession language) and FAQ 36 (reject vs. block, with the Iran third-country example) pulled directly from ofac.treasury.gov.
    • 31 CFR 501.603 (blocked-property reports, 10-business-day initial report, September 30 annual report) and 501.604 (rejected-transaction reports) confirmed against Cornell/GovInfo CFR text and a recent OFAC annual-report reminder.
    • The “regardless of originator or recipient” framing and the broad “interest of any nature whatsoever” phrasing came from secondary sources (a law-firm compliance blog and a client alert) rather than a direct CFR pull of that exact clause — both are standard, uncontroversial restatements of OFAC’s general definitions section, but if citing the definition itself for publication, pull the exact text from the specific program’s CFR part (the phrasing is boilerplate but repeated part by part, e.g. 31 CFR 594.311, 515.312, etc., rather than centralized in one place).
    • The claim that a blocked person’s title is treated as attaching to an unexecuted, in-process payment is a synthesis of FAQ 9’s title language plus the broad interest definition, not something one source states in that combined form — flagged as inference, not a verified single-source claim.

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  • Burning Questions; My Dinner with Claude – Freeze or Refuse? Decoding the EU’s Two-Limb Sanctions Template

    My prompt:

    EU sanctions say you can’t make economic resources available to a Designated Person. Does that mean you freeze the resources, or do you refuse the transaction? Show your work

    Claude responded:

    Neither, cleanly — and the question itself flags where people go wrong, because EU sanctions regulations don’t treat “freeze” and “make available” as two labels for the same act. They’re two separate obligations, and which one governs a given fact pattern turns on a single question: do you already have the resource in your possession, custody, or control, or would you be the one handing it over?

    The architecture

    Nearly every EU sanctions regulation runs the identical two-paragraph template. Regulation 36/2012 (Syria) is a clean illustration: Article 14(1) freezes all funds and economic resources belonging to, owned, held, or controlled by listed persons, while Article 14(2) separately prohibits making funds or economic resources available, directly or indirectly, to or for the benefit of those persons. The Council’s own compliance guidance confirms this isn’t a Syria quirk: financial restrictive measures under EU regulations consist of freezing the funds and economic resources of designated persons, plus a separate prohibition on making funds and economic resources available to them. Regulation 269/2014 (Russia/Ukraine) uses the same two-limb split at Article 2(1)-(2), just with different article numbering.

    Freeze applies to what’s already theirs and already in your hands

    “Freezing” is defined as a status, not a transaction. For funds, the operative CJEU language is that freezing prevents any move, transfer, alteration, use of, access to, or dealing with funds in any way that would change their volume, amount, location, ownership, possession, character, or destination — and a March 2026 CJEU ruling on Regulation 269/2014 reads that as applying absolutely and unconditionally, extending even to ancillary rights like voting attached to frozen securities. Economic resources get the parallel treatment: freezing prevents their use to obtain funds, goods, or services. Critically, freezing doesn’t change who owns the thing and doesn’t require you to divest yourself of it: financial restrictive measures do not involve a change in ownership of frozen funds and economic resources and are not punitive, and a person who already holds or controls a designated person’s funds or economic resources is not required to give them up or seek authorization merely to continue holding them. What requires authorization is any new dealing with them.

    Making available applies to what would newly become theirs

    This is where “refuse the transaction” comes in. The CJEU (Möllendorf, C-117/06) reads “making available” broadly: rather than a specific legal category of act, it covers whatever acts are necessary under the applicable national law for a person to obtain full power of disposal over the resource, and it applies regardless of whether adequate consideration is paid. There’s nothing to freeze here, because you’re not yet holding anything that belongs to the designated person — you’re holding your own funds, goods, or services and about to transfer disposal of them. So the compliance action isn’t a freezing decision, it’s a straight refusal: don’t complete the transaction absent a derogation from the competent authority.

    Why the same wire can trigger both obligations at once

    A frozen account receiving an incoming payment shows both rules operating on a single transaction from opposite sides. On the receiving end, a financial institution that receives funds transferred by a third party into a customer’s frozen account is permitted to credit those funds without prior authorization — Regulation 269/2014 builds this in explicitly, stating the making-available prohibition does not prevent crediting of frozen accounts by institutions that receive funds transferred by third parties onto a listed person’s account. But on the sending end, the remitting party needed authorization before initiating that transfer, because from their side, routing funds to a designated person’s account is exactly the act Article 2(2) prohibits. The receiving bank freezes (accepts the credit, then locks it down as part of the frozen balance); the remitter should have refused to send it in the first place.

    The trap worth flagging: indirect making available

    The refusal duty doesn’t stop at the listed name. Making resources available to a non-listed entity that is owned or controlled by a listed person is, in principle, treated as indirectly making them available to the listed person, unless a case-by-case assessment shows the resources won’t be used by or for that person’s benefit — this is the same ownership/control test (50%+ or the control indicators) that comes up again and again in this area.

    Self-check

    • Reg 36/2012 Art 14 and the Reg 269/2014 Art 2 language are confirmed against primary/near-primary text (Wikisource reproduction cross-checked against a March 2026 CJEU judgment quoting the operative articles directly).
    • The two-limb “freeze plus prohibition on making available” framing and the paragraph 30/44/57/59/68 content come from the Council’s July 2024 “EU Best Practices for the effective implementation of restrictive measures” (doc 11623/24) — non-binding Council guidance, not itself the law, and originally LIMITE-marked but retrievable from the public Consilium document register.
    • The CJEU case cited on “absolutely and unconditionally” (C-465/24, judgment of 12 March 2026) postdates my reliable knowledge and was pulled from a secondary reproduction (financialcrime.lu), not EUR-Lex/InfoCuria directly — worth a direct EUR-Lex pull before citing the CELEX number anywhere public.
    • Article numbering (2(1)-(2) vs. 14(1)-(2), etc.) varies by regulation even though the substantive template is uniform; derogation categories and exact definitions also live in each regulation’s own Article 1 and derogation articles, so don’t assume identical wording across regimes without checking.

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  • Burning Question: What is “control” and how do I find evidence of it?

    My initial prompt to Claude (had to re-orient its audience and remind it not to include anything related to ownership):

    First, look at the “ownership and control” regulations and guidance across the major sanctions regulators, including the US, UN, EU, UK, Switzerland, Canada, Australia, Singapore, New Zealand and Japan. Provide a list of what these regulators say constitutes “control” – don’t need to know differences between them, just give me a comprehensive list. Secondly, tell me how one would identify these elements of “control” in one’s research, including any commercial providers of such information. Check your work against your sources – identify anything in the response not supported by the sources, and then correct them. Finally, list your sources.

    and the final response:

    The control problem, in one paragraph

    Ownership is arithmetic. Control is judgment. Every major regime that extends sanctions beyond the named party does it through some version of “owned or controlled” – and while the ownership half has converged on a 50% math problem, the control half is where the regimes actually diverge, where the screening tools run out, and where the interesting compliance work lives. One clarification up front on the US: OFAC’s 50 Percent Rule speaks only to ownership and not to control – an entity controlled but not majority-owned by blocked persons is not automatically blocked, though OFAC may designate it and urges caution when dealing with entities that blocked persons control by means other than majority ownership. So for the US, control is a designation-risk and prudence question, not a legal test you apply yourself. Everywhere else below, it’s a test you apply yourself. Office of Foreign Assets Control

    And a status change that most compliance programs haven’t caught up with: for a decade, the EU’s control criteria lived only in non-binding Council guidance. As of 23 October 2025, they’re law. Council Regulation (EU) 2025/2037, part of the 19th Russia package, amended Regulation 269/2014 on the reasoning that it is appropriate to harmonise terminology across Union legal acts, that such coherence is essential to avoid ambiguity, enhance legal certainty and ensure the effectiveness of Union restrictive measures across various sanctions regimes, and that it is therefore appropriate to include in Regulation 269/2014 definitions of “owning” and “controlling” a legal person, entity or body, aligned with the definitions used in Regulation (EC) No 2580/2001. The control criteria quoted below are now Article 1(j) of the EU’s flagship asset-freeze regulation – directly applicable law in 27 member states. Global Investigations Review

    Part 1: What counts as “control” – the master list

    Pulling from the primary texts of the EU, UK, Canada, and Switzerland, plus the fact-based standards in Australia, Singapore, New Zealand, and the UN resolutions, here is everything the regulators say can constitute control without majority ownership.

    Voting power without equity

    • Now codified as Article 1(j)(iii) of Regulation 269/2014: controlling alone, pursuant to an agreement with other shareholders in or members of a legal person, entity or body, a majority of shareholders’ or members’ voting rights in that legal person, entity or body. The same concept appears in OFSI’s guidance examples. The point: a shareholder pact can hand someone majority voting power their share certificate doesn’t show. Global Investigations Review
    • Switzerland’s version drops the shareholder-agreement qualifier and adds two words that do a lot of work: per SECO FAQ 1.11(b), control exists where the person holds, formally or de facto, the majority of the voting rights of the company or organisation – with a footnote explaining that “de facto” includes acting through a straw person (Strohperson). SECOSECO
    • The UK counts majority voting rights under its first condition, and its Schedule 1 quietly extends the concept to entities that don’t vote at all: in relation to a person that does not have general meetings at which matters are decided by the exercise of voting rights, a reference to holding “more than 50% of the voting rights” is to be read as a reference to holding the right under the constitution of the person to block changes to the overall policy of the person or to the terms of its constitution. Read that again: for foundations, trusts-adjacent structures, and anything else without a general meeting, a blocking right is deemed equivalent to majority voting control. Schedule 1 also strips out treasury shares – voting rights in a person are to be reduced by any rights held by the person itself – which can push a designated holder over the line without them acquiring a thing. Legislation.gov.ukLegislation.gov.uk
    • Canada folds voting rights into its 50% prong rather than treating them as a separate control criterion.

    Board power

    • Article 1(j)(i): having the right or exercising the power to appoint or remove a majority of the members of the administrative, management or supervisory body of a legal person, entity or body. The UK’s first-condition version, from regulation 7(2)(c) as enacted: the person holds the right directly or indirectly to appoint or remove a majority of the board of directors of C. Global Investigations ReviewLegislation.gov.uk
    • The EU adds a backward-looking variant most people miss, Article 1(j)(ii): having appointed solely as a result of the exercise of one’s voting rights a majority of the members of the administrative, management or supervisory bodies who have held office during the present and previous financial year. Track record of appointments counts, not just the right on paper. Global Investigations Review
    • The UK legislation defines its board terms with unusual precision in Schedule 1: the right to appoint or remove a majority of the board means the right to appoint or remove directors holding a majority of the voting rights at board meetings on all or substantially all matters; where a person has no board, read it as the equivalent management body; and a person is treated as having the right to appoint a director if any person’s appointment as director follows necessarily from their appointment as a director of that person. A board seat that comes automatically with a parent-company directorship counts. Legislation.gov.ukLegislation.gov.uk
    • Canada’s board prong is the broadest in the world: the person is able, directly or indirectly, to change the composition or powers of the entity’s board of directors – SEMA s. 2.1(2)(b), verbatim from the consolidated statute. No “majority” qualifier at all. Commentators have flagged that read literally, the ability to appoint even one director out of many could arguably mean the person can “change the composition” of the board. Justice Laws WebsiteDentons
    • Switzerland, FAQ 1.11(a): the person can formally or de facto appoint and/or remove the majority of the members of the administrative or management body. SECO

    Dominant influence – contractual, de facto, and (in Switzerland) creditor-based

    • Article 1(j)(iv): having the right to exercise a dominant influence over a legal person, entity or body, pursuant to an agreement entered into with that legal person, entity or body or to a provision in its Memorandum or Articles of Association, where the law governing that legal person, entity or body permits its being subject to such agreement or provision. Control written into the corporate documents themselves. Switzerland mirrors this at FAQ 1.11(c). Global Investigations Review
    • And its shadow twin, Article 1(j)(v): having the power to, de facto, exercise the right to exercise a dominant influence referred to in point (iv), without being the holder of that right. This is the criterion that captures the person who sold the shares but still runs the show. One drafting note: the Best Practices version of this criterion carries a footnote – “including, for example, by means of a front company” – which the codified regulation text does not reproduce; the guidance example survives as interpretive color rather than statutory text. Switzerland’s FAQ 1.11(d) is the same provision, footnoted to the straw-person example. Global Investigations ReviewEuropean Union
    • Here’s one the law firm summaries missed entirely – SECO FAQ 1.11(h): control exists where the person, as a lender, formally and/or de facto exercises a dominant influence over the decisions of the management. A creditor-control criterion. If your debt covenants let you run the company, Switzerland says you control it. No EU, UK, or Canadian equivalent states this expressly. SECO

    The catch-alls: “wishes” and “direction”

    • The UK’s second condition is the famous one, and here it is straight from regulation 7 as enacted: a person who is not an individual (“C”) is “owned or controlled directly or indirectly” by another person (“P”) if either of the following two conditions is met (or both are met)… The second condition is that it is reasonable, having regard to all the circumstances, to expect that P would (if P chose to) be able, in most cases or in significant respects, by whatever means and whether directly or indirectly, to achieve the result that affairs of C are conducted in accordance with P’s wishes. The same wording appears across UK regimes – the quotation above is from the Misappropriation Regulations, identical to the Russia Regulations’ version. Note “if P chose to” – OFSI’s recent call for evidence spells out the implication: evidence that a designated person has not exercised control does not mean they lack the ability to do so; this may be referred to as hypothetical control. Legislation.gov.ukBlog
    • How far can “by whatever means” stretch? The UK courts spent late 2023 finding out, and the saga is worth telling properly because it’s the best available case study in what an open-textured control test does under pressure. In Mints v PJSC National Bank Trust, the question was whether a bank 99% owned by the Central Bank of Russia – itself not sanctioned – was nonetheless “owned or controlled” under regulation 7 by two designated persons: Mr Putin and Ms Nabiullina, the Central Bank’s governor. The Court of Appeal’s view, per Sir Julian Flaux C: the provision has no limit as to the means or mechanism by which a designated person is able to achieve the result of control, and the Court found that “in a very real sense… Mr Putin could be deemed to control everything in Russia.” When counsel objected that this was absurd, the Court’s answer was brutal: the absurd consequences arise not from giving the Regulation its clear and wide meaning but from the subsequent designation by the Government of Mr Putin without having thought through the consequences of Mr Putin being at the apex of a command economy – that he “called the shots.” BAILII + 4
    • The correction came in three waves. First, the FCDO issued a statement within days: the case was “not decided on this point” – emphasizing the control commentary was obiter – and “there is no presumption on the part of the Government that a private entity based in or incorporated in Russia or any jurisdiction in which a public official is designated is in itself sufficient evidence to demonstrate that the relevant official exercises control over that entity.” Second, the High Court in Litasco narrowed the test’s temporal reach: even though Putin had the power to place the Russian parent company under his control should he wish to, for the purposes of regulation 7(4) it is the current state of affairs of the entity and any existing influence that matters, not the state of affairs that an individual – including Putin – could bring about. Third, the government made it formal guidance: FCDO does not generally consider designated public officials to exercise control over a public body in which they hold a leadership function; the UK government does not consider that President Putin exercises indirect or de facto control over all entities in the Russian economy merely by virtue of his occupation of the Russian Presidency; and a person should only be considered to exercise control over private entities where this can be supported by sufficient evidence on a case-by-case basis. Where does that leave a practitioner? With a statutory test that is capability-based (“if P chose to”), a leading judgment reading it at maximum width, a follow-on judgment insisting on existing influence, and official guidance carving out political office – which is precisely why OFSI’s call for evidence (closing 13 April 2026) is now asking industry about its experience with the control test, while separately signposting that it continues to explore alignment with EU and US partners on aggregation and on moving the “more than 50%” threshold to a “50% or more” standard. The UK control test is, officially, under review. Matrix Chambers + 3
    • OFSI’s guidance gives the operational example of the catch-all in action: having the ability to direct another entity in accordance with one’s wishes, through any means, directly or indirectly – for example, a designated person may have control or use of another person’s bank accounts or economic resources and may be using them to circumvent financial sanctions. And note the individual-as-front example: if Person A is a family member or friend of designated Person B and there is evidence Person B is using Person A to enter into transactions, Person A is also subject to the same restrictions as Person B. Control isn’t only over companies. GOV.UKGOV.UK
    • Canada’s equivalent: it is reasonable to conclude, having regard to all the circumstances, that the person is able, directly or indirectly and through any means, to direct the entity’s activities – SEMA s. 2.1(2)(c). Global Affairs Canada has taken the position in its guidance scenarios that “considerable influence over strategic decision-making” is enough to trigger it – language that appears nowhere in the statute and arguably broadens its plain wording, and GAC’s updated guidance also appears to take the view that the mere presence of a listed person on an entity’s board could amount to control. Justice Laws Website + 2

    Asset and finance-based control

    These are now Article 1(j)(vi)-(viii) of Regulation 269/2014, mirrored in Switzerland’s FAQ 1.11 – and they have no UK or Canadian equivalent, which matters if you’re building one control checklist for a multi-regime program:

    • Having the right to use all or part of the assets of a legal person, entity or body; Switzerland’s version is broader – the person can formally or de facto dispose of all or part of the funds and economic resources of the company or determine their use (FAQ 1.11(e)). Global Investigations ReviewSECO
    • Managing the business of a legal person, entity or body on a unified basis, while publishing consolidated accounts; (Switzerland FAQ 1.11(f) matches.) Global Investigations Review
    • Sharing jointly and severally the financial liabilities of a legal person, entity or body, or guaranteeing them. (Switzerland FAQ 1.11(g) matches.) Global Investigations Review

    Plain-English translation of that last pair: if the books are consolidated, or if someone is on the hook for the company’s debts, that’s a control signal. The codified EU list is expressly open-ended – “controlling” a legal person, entity or body means, but is not limited to the eight criteria – and note what the regulation did not import from the guidance: the Best Practices’ rebuttable-presumption language stayed behind. The guidance says if any of these criteria are satisfied, it is considered that the entity is controlled, unless the contrary can be established on a case by case basis – Switzerland states the same presumption-and-rebuttal at the close of FAQ 1.11: if one of these criteria is met, it is to be assumed that the company or organisation is controlled, unless the contrary can be demonstrated in the individual case – but the regulation’s definition is silent on rebuttal. Whether that silence changes anything in practice is exactly the kind of question the EU courts will eventually get. Global Investigations Review + 2

    Fact-based regimes with no criteria list

    • Australia has no entity-level control test at all – the question is control of the asset: ownership and control of an asset is determined according to the factual circumstances, including the kind of asset and the laws of the jurisdiction in which it was created, and it is not necessary for the asset to be directly held by the designated person. ASO guidance adds that control can be indicated by a designated person’s command or direction over the asset – for example, through possession or the ability to dictate how it may be dealt with – and the guidance does not reveal whether any particular percentage is indicative. Australian Government Department of Foreign Affairs and TradeMinterEllison
    • Singapore’s statutory hook is simply funds, financial assets or economic resources owned or controlled, directly or indirectly, by a designated individual or entity, with no published criteria for what “controlled” means. Monetary Authority of Singapore
    • New Zealand’s regime is likewise asset- and dealing-based with minimal control guidance; one industry survey notes that APAC government bodies provide very limited guidance, and in practice the finance industry there tends to observe the OFAC approach when dealing with OFAC frameworks. SymphonyAI
    • Japan effectively drops out of a control-only analysis: its extension of Russia/Belarus asset freezes runs on 50% or more of shares directly held – pure ownership, no qualitative control test. Global Investigations Review

    The UN layer underneath everything

    UN resolutions are where the “owned or controlled” formula originates, and they add the third leg every practitioner should treat as part of this family. UNSCR 1373’s designation criteria cover any entity owned or controlled directly or indirectly by designated persons, and any person or entity acting on behalf of, or at the direction of, them – and Singapore’s IMC-TD applies exactly those criteria domestically. The UN never defines control or sets criteria; the ownership and control requirements sit in the asset freeze sections of the individual regime resolutions (the Haiti regime under Resolution 2653 is one example) and are implemented by all UN member states. IMF eLibrary + 2

    Part 1b: The non-ownership concepts that aren’t quite “control”

    Three adjacent doctrines deserve their own entries, because they catch parties the control criteria miss.

    “Acting on behalf of or at the direction of.” The EU treats this as a distinct concept whose effects can be placed on an equal footing with ownership and control, but which should be determined in and of itself. Since the concept has no definition, the EU offers four assessment criteria: the precise ownership/control structure including links between the parties; the nature and purpose of the transaction, coupled with the stated business duties of the entity; previous instances of acting on behalf or at the direction of the listed party; and disclosure from credible, reliable and independent sources and/or factual evidence indicating that directions were given. Switzerland bakes the same idea into the freeze itself – Article 15(1) of the Ukraine Ordinance freezes assets of natural persons, companies and organisations acting on behalf of or on the instructions of listed parties. And it shows up in specific UK prohibitions – the Russia regime’s “prohibited persons” definition covers a person owned or controlled directly or indirectly by the Central Bank of the Russian Federation, the National Wealth Fund, or the Ministry of Finance, or a person acting on behalf of or at the direction of these entities. European Union + 3

    “Holding or controlling” someone else’s funds. Separate from controlling an entity, the EU freezes funds a designated person merely holds or controls: all situations where, without having a title of ownership, a designated person is able lawfully to dispose of or transfer funds or economic resources he, she or it does not own, without any need for prior approval by the legal owner – including holding bearer instruments, having powers of representation allowing them to order transfers from accounts they don’t own, or administering a bank account as a parent or guardian. A power of attorney over a non-sanctioned relative’s account is squarely in scope. This is the mechanism behind the classic “assets parked with family” evasion pattern. European Union

    Transfers to third parties – Switzerland’s test for whether the assets ever really left. SECO FAQ 1.12 addresses the scenario head-on: where there is reasonable suspicion at the time of assessment that funds or economic resources were formally transferred to third parties – for example, sales of company shares or gifts to family members or other connected natural persons – but the sanctioned person still exercises control over them, those funds must be frozen; and it is not decisive when the transfer took place. That last clause deserves a highlight: a transfer completed before sanctions ever existed can still leave the assets under the sanctioned person’s control. SECO’s non-exhaustive assessment criteria: the closeness of the relationship (family, business, personal) between the sanctioned person and the third party; the economic and/or professional independence of the third party who is now nominal owner; the value and frequency of the transfers compared with transfers made to that person before the sanctions; the existence and content of formal agreements between them; and whether the transfer respected the arm’s length principle – for example, the sale conditions of company shares. The footnote grounds this in case law: the Federal Administrative Court’s judgment B-3925/2023 of 29 July 2024 on the concept of indirect control. SECO + 2

    The EU’s control red flags. The 2024 Best Practices added a set of circumstances that don’t establish control but tell you to go check the criteria above – and note these red flags stayed in the guidance rather than moving into the regulation. Verbatim from paragraph 67: a designated person who is the largest shareholder compared to others (the worked example is 40% against 10% holders); a management buyout where the designated previous owner can buy back the company under favourable conditions; a transfer of a relevant number of shares shortly before or after designation – where “relevant” includes smaller transfers that let the seller fall below the ownership threshold; front persons – a new owner closely connected to the designated previous owner such as a family member or former employee or business partner, possibly with an abnormal sale price, or an advisor with ultimate decision power even though the title doesn’t suggest it, or a written agreement giving a non-shareholder sole authority over the business, or nominal managers whose decisions are made by designated persons; and needlessly complex structures involving shells, LLCs or trusts linked to a designated person, especially ones set up or renamed around the time of designation or with no credible business activity. European Union

    One structural note worth internalizing: the UK does not aggregate for the ownership prong the way the EU does, but its guidance immediately pivots to control as the backstop – if each designated person’s holding falls below 50% and there’s no joint arrangement, the company isn’t owned by a designated person – but ownership and control also relates to voting rights, board appointment rights, and it being reasonable to expect a designated person could ensure the company’s affairs are conducted per their wishes. If any of these apply, the company could be controlled. And Schedule 1 quietly claws back some of what the no-aggregation position gives away: shares or rights held jointly are treated as held by each holder; shares or rights subject to a “joint arrangement” – an arrangement that the holders will exercise all or substantially all their rights jointly in a pre-determined way – are treated as the combined holding of each party; a share held by a nominee is treated as held by the principal; and where a person controls a right, the right is treated as held by that person rather than by whoever formally holds it. Nominees and voting pacts don’t launder control in the UK. Where the math clears, the control test is what’s left standing. GOV.UKLegislation.gov.uk

    Part 2: How you actually find this stuff

    The awkward truth about control research is that most of the evidence lives in documents, not databases. Here’s the map from criterion to source.

    Match the criterion to its paper trail. Voting rights that diverge from equity – through dual-class shares, voting agreements, or proxies – are evidenced by the articles of association, the shareholder register, and shareholder agreements; a board-control right can sit with a minority shareholder as a contractual term. Consolidated accounts and guarantee arrangements (EU Article 1(j)(vii)-(viii), SECO 1.11(f)-(g)) live in audited financial statements and their notes. Dominant-influence agreements live in the constitutional documents – and for UK purposes, so do the blocking rights that Schedule 1 deems equivalent to majority voting control in entities without general meetings. Switzerland’s creditor-control criterion points at loan agreements and covenants. The “wishes” and “direct the activities” tests live in the messier record: who actually shows up in board minutes, who signs, who the press says runs the place – and, post-Litasco, evidence of current influence carries more weight in the UK than evidence of what a designated person could theoretically do. SECO’s third-party transfer test points at a distinctive evidence set: relationship mapping, the transferee’s own economic standing, pre- versus post-designation gift patterns, and whether the sale price would survive an arm’s length comparison. Adjuvanto

    Use OFSI’s due diligence list as your evidence checklist. When OFSI updated its enforcement guidance, it listed what it considers relevant research, and it reads like a control-investigation template: the circumstances of board and management appointments including backgrounds, relevant experience, and relationships with designated persons; board or shareholders’ meeting minutes concerning recent changes in ownership and control; ongoing financial liabilities directly related to a designated person such as personal loans, loan guarantees, property or equipment; shareholder agreements, voting agreements, put or call options or other coordination agreements; and any benefits conferred to the designated person by the entity or transactions between them. OFSI also lists as mitigating examination of formal ownership and control mechanisms, examination of actual or potential de facto control, open-source research on persons able to exercise control, and – because ownership and control is not static – regular checks and ongoing monitoring. DLA PiperDLA Piper

    Ask the questions the EU Helpdesk says to ask. Collect information from the counterparty and public sources – corporate registries, beneficial ownership records, financial statements, governance documents – then verify when you see red flags, and ask targeted questions on beneficial ownership, voting rights, board appointment powers, shareholder agreements, financing and guarantees, consolidated accounting, and rights to use assets. Document your steps, findings, and decisions. That documentation line isn’t filler – in a strict-liability environment like the UK’s, the file you build is the mitigation. Financialcrime

    Layer the workflow. A sensible sequence: screen against the relevant sanctions lists; request beneficial ownership disclosure, ideally certified or backed by corporate registry extracts, down to natural persons for high-risk jurisdictions; consult corporate registries and data aggregators for shareholder information; then screen every identified owner against the lists – then extend beyond ownership with checking board members’ biographies for links to sanctioned persons, reviewing shareholder agreements and trust documents for hidden control mechanisms, and analyzing funding flows. Accept the known obstacles going in: nominee shareholders and layered holding companies, registries that are unreliable or unavailable in some countries, and structures that shift quickly – so one-off checks aren’t enough. One field report on this kind of research is worth quoting for realism: ownership relationships sometimes don’t appear in the subsidiary’s own corporate documents and have to be established from the parent’s website, news stories, or shared directors; registry addresses turn out to be out of date or belong to a school; and private citizens can be listed anonymously in corporate documents, totally obscuring their beneficial ownership. Sanctions Lawyers + 3

    Commercial providers. The vendor landscape splits roughly into three layers:

    • Curated sanctions-nexus datasets – built specifically to answer “is this unlisted entity caught anyway?” Kharon offers Sanctions 50-Plus and Control datasets identifying entities that may be considered blocked under US, EU, and UK regulations, built by collecting and analyzing corporate records, securities and regulatory filings, company websites and press releases, global media, and social media to trace chains across jurisdictions, with analyst-verified ownership chains mapped down to the securities level by ISIN and CUSIP. Dow Jones Risk & Compliance offers Sanctions Control and Ownership (SCO) data for identifying indirect links to sanctioned individuals or entities. These products are strongest on ownership math; the “Control” components are the part to interrogate in a demo, since control determinations are exactly what resists automation. Kharon + 2
    • Ownership-graph platforms – Sayari uses graph analytics to pre-compute ownership structures and flag indirect or beneficial owners on sanctions lists, supporting 50% rule and “shadow SDN” compliance and EU equivalents, with an entity resolution and ownership graph covering 500M+ companies across 250+ jurisdictions. SayariSayari
    • Registry aggregators and raw corporate data – OpenCorporates, Orbis, and Refinitiv are the aggregators typically cited for shareholder information alongside national registries. Sanctions Lawyers

    Flagged plainly as general knowledge rather than something verified against this session’s sources: LSEG World-Check, LexisNexis WorldCompliance, and Moody’s Grid also serve this market, though they are primarily screening lists rather than ownership-graph products (Orbis, in the Moody’s stable, is the ownership dataset). And a structural caveat that applies to every vendor: databases are built from filings, and criteria like “de facto dominant influence,” creditor control, blocking rights, or “affairs conducted per their wishes” often leave no filing at all. Vendor data narrows the field; it doesn’t finish the job.

    Part 3: Source re-check

    Comparing this version against the primary texts now in hand:

    1. EU codification – now verified from EUR-Lex. Regulation (EU) 2025/2037 is quoted directly: recital 6 (the harmonization rationale and the 2580/2001 alignment), the full Article 1(j)(i)-(viii) control definition, and the “means, but is not limited to” open-endedness. Comparing the codified text against the Best Practices confirmed three things the secondary memos glossed over: the criteria are substantively identical to guidance paragraph 64; the front-company footnote did not travel into the regulation; and neither did the rebuttable-presumption language of paragraphs 65-66 or the paragraph 67 red flags, which all remain guidance-level. Also note scope: the codification is to Regulation 269/2014 (the Russia/Ukraine asset-freeze regulation); the Best Practices remain the cross-regime articulation.
    2. UK regulation 7 – now sourced to legislation.gov.uk directly, replacing the law firm consolidation used in the prior pass (the wording matched). The identical reg 7 text across regimes is confirmed by the Misappropriation Regulations on the same site. New Schedule 1 findings from the primary text: the blocking-rights deeming rule for entities without general meetings, and the treasury-share reduction – neither appeared in any secondary source consulted.
    3. Mints – substantially verified, one honest limitation. BAILII refused a direct fetch, but the search index returned text from the judgment itself (including the reg 7 wording as set out in it and the case posture), and the official judiciary.uk PDF is linked in the sources. The Flaux quotations (“no limit as to the means or mechanism,” “called the shots,” the “absurd consequences” passage, “control everything in Russia”) are sourced to four independent law firm and chambers commentaries that agree with each other; the FCDO statement is quoted via Matrix Chambers, which reproduces it verbatim; Litasco is sourced to commentary, not the judgment. For publication, paragraph-level pinpoints (the control discussion sits at [225]-[233]) should be checked against the judiciary.uk PDF.
    4. The Mints-to-guidance arc – corrected and completed. The prior pass compressed this into one sentence sourced to a single commentary. It’s now told in sequence with the FCDO statement, Litasco, and the public officials guidance quoted from gov.uk directly – including the government’s explicit position that Putin’s presidency alone does not establish control over the Russian economy, which is the operative counterweight to the Mints dicta.
    5. SEMA s. 2.1 – verified against the consolidated statute, including the foreign-state carve-out. GAC’s “considerable influence” position remains framed as an interpretive stance that arguably outruns the statute.
    6. SECO FAQ – verified from the document itself (FAQ 1.10-1.13), including criterion (h) (creditor control) and the FAQ 1.12 transfer criteria that the English-language secondary literature missed. Translations from the German are mine and should be checked before publication. One residual note: the fetched edition is the “Korrekturmodus” (tracked-changes) version showing the February and June 2026 states; the control criteria at 1.11 are not among the marked changes, but the clean current PDF should be the citation of record.
    7. OFSI call for evidence – the closing date (13 April 2026) and the aggregation/”50% or more” alignment exploration are sourced to Crowell commentary on the call for evidence, consistent with the OFSI blog post.
    8. Japan remains characterized as having effectively no control test, per the GIR chapter. Provider claims – Kharon, Sayari, Dow Jones SCO, and the OpenCorporates/Orbis/Refinitiv trio are source-backed; World-Check, WorldCompliance, and Grid remain explicitly labeled as unverified general knowledge.
    9. Nothing now rests on an unfetched primary except the Mints and Litasco judgments themselves (commentary-corroborated, with the Mints PDF located) and the Best Practices’ cross-checks noted above.

    Sources

    Primary texts fetched and quoted verbatim this session

    Case law

    Regulator and official sources

    Commentary and secondary sources

    Vendor materials

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  • June 30, 2026: OFSI shares what it learned from its ownership and control call for evidence

    Office of Financial Sanctions Implementation HM Treasury

    Ownership and control: insights from the call for evidence

    OFSI would like to thank every respondent who offered their views on the call for evidence on the ownership and control Test in UK Financial Sanctions Regulations that closed on 20 April.

    As part of the Review of Sanctions Implementation and Enforcement published in May 2025, HMG committed to delivering measures to provide further clarity on ownership and control. The call for evidence delivers on our commitment by reviewing in further detail concerns from industry by gathering targeted insights about the control test in financial sanctions legislation.

    We focused on hypothetical control as a direct response to industry feedback, which has highlighted greater implementation challenges associated with the control element of the ownership and control test rather than the ownership element.

    OFSI received 42 responses, with many providing valuable and in-depth insights.

    Responses clearly communicated where hypothetical control appears most often in practice, reporting that it was most commonly encountered under the Russia regime and in cases involving state-linked entities, politically connected individuals, and trusts. The insights provided have helped to expand OFSI’s understanding of how frequently firms encounter hypothetical control scenarios and the impact on their business operations.

    For example, respondents report that costs increase when there is need to make assessments on limited information. This includes enhanced due diligence, engaging external legal advice and delaying or escalating business decisions for senior review. A number of firms provided clear and quantifiable costs for these measures, which has further supported OFSI’s understanding of the impacts.

    Many responses also set out clear examples of tools and legal concepts relevant to control assessments. It was noted that these can be helpful for understanding the nature of control, though not always reliable for implementing the test itself.

    The responses to the call for evidence will play an important role in informing UK Government’s ongoing work. While respondents expressed differing views on the most appropriate way to address reported challenges, the evidence provided will help support potential next steps.

    In the meantime, firms are still expected (and required by law) to assess ownership and control in line with existing UK financial sanctions guidance.

    The factors for establishing whether an entity is owned or controlled are set out in relevant UK sanctions regulations, including a schedule that provides rules for interpretation. However firms should also consult relevant guidance for support, such as:

    As this remains an ongoing policy under review, we continue to monitor feedback we receive from our industry stakeholders and international partners on ownership and control, and will continue to explore our options to provide greater clarity to industry through established channels.

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  • Burning Questions: The “entry to the United States” part of Executive Orders and related matters

    The prompt:

    please explain, in layperson’s terms, how OFAC travel sanctions (barring entry to the US) are actually enforced. Check your response against your sources and correct anything that is not well-supported by the sources. List your sources, too, please.

    The response:

    How “OFAC Travel Sanctions” Actually Work: A Layperson’s Explanation

    Before anything else, there’s an important framing note: OFAC itself doesn’t bar people from entering the United States. That’s not OFAC’s job. OFAC is a Treasury Department office whose core business is financial and economic sanctions — blocking assets, prohibiting transactions. The travel-entry piece is handled by a different set of legal authorities and different agencies. The phrase “OFAC travel sanctions” is a bit of a shorthand that bundles together several distinct mechanisms.

    Here’s how those mechanisms actually work.

    1. The SDN List Does Not, By Itself, Bar Entry

    When OFAC designates someone as a Specially Designated National, their assets are blocked and U.S. persons are generally prohibited from dealing with them. That’s the core legal effect. The SDN List is a financial/transactional prohibition tool, not an immigration tool.

    The primary purpose of the SDN List is to combat threats to national security and foreign policy objectives by isolating and financially constraining the listed parties. The designations prevent these individuals and entities from accessing the U.S. financial system and conducting business with U.S. persons.

    2. The Entry Ban Comes from a Different Legal Source: Presidential Proclamations and Executive Orders

    The actual legal hook that bars entry is separate, and it traces back to Section 212(f) of the Immigration and Nationality Act (INA). Under Section 212(f), whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate.

    For people designated under OFAC sanctions programs, the key legal instrument is Presidential Proclamation 8693, signed in 2011. The State Department’s own Foreign Affairs Manual — its internal instruction book for consular officers — is explicit: PP8693 suspends entry of applicants designated under IEEPA. OFAC implements and enforces IEEPA sanctions. Designated individuals and organizations are listed on OFAC’s searchable SDN list.

    In practice, most OFAC sanctions programs are built on IEEPA (the International Emergency Economic Powers Act), so this proclamation connects OFAC designations to a formal entry bar. Additionally, many individual executive orders that create specific OFAC programs have their own travel suspension language. A typical executive order finds that the unrestricted immigrant and nonimmigrant entry into the United States of aliens determined to meet one or more of the criteria in the order would be detrimental to the interests of the United States, and suspends entry into the United States, as immigrants or nonimmigrants, of such persons, except where the Secretary of State, or the Secretary of State’s designee, determines that the person’s entry is in the national interest of the United States. Such persons shall be treated in the same manner as persons covered by section 1 of Proclamation 8693.

    So the pipeline is: OFAC designates → the executive order or PP 8693 kicks in the entry suspension → State Department and DHS enforce it.

    3. The Secretary of State Has Independent Authority Too

    Separate from all of that, the Secretary of State has power under INA Section 212(a)(3)(C) to declare anyone inadmissible whose entry would have potentially serious adverse foreign policy consequences for the United States. The State Department actively uses this in sanctions-adjacent contexts. For example, when Secretary Rubio authorized travel sanctions on Colombian government officials in early 2025, the announcement cited INA 212(a)(3)(C), under which the Secretary of State can render inadmissible to the United States any alien whose entry “would have potentially serious adverse foreign policy consequences for the United States.”

    4. How It’s Actually Enforced at the Border

    The practical enforcement chain runs through two agencies: the State Department (for visa issuance) and Customs and Border Protection (CBP) (for border entry).

    Before arrival — visa denial. If a designated person applies for a U.S. visa, consular officers check watchlists. Under INA Section 213(g), no visa or other documentation shall be issued to an alien if the consular officer knows or has reason to believe that such alien is ineligible to receive a visa or such other documentation under section 212, or any other provision of law. The entry suspension under PP 8693 and applicable executive orders makes them ineligible. Visa denied.

    If they already have a visa — revocation. The Department of State’s Visa Office of Screening, Analysis, and Coordination (CA/VO/SAC) can revoke visas of individuals in, or en route to, the United States.

    At the border — database checks. CBP obtains certain information about individuals traveling to the U.S. on commercial or private aircraft through CBP’s Advance Passenger Information System (APIS). The information obtained from APIS is screened against TECS Records and other law enforcement databases in order for CBP to ascertain if any security or law enforcement risks exist. These pre-arrival TECS queries include checks against lookouts, watchlist matches, etc. TECS is CBP’s primary enforcement database.

    If they show up anyway. When an individual presents for inspection, the CBP officer receives an alert leading to secondary screening. During this detailed review, the traveler may be temporarily detained and subjected to extensive questioning. For non-citizens, a watchlist match can result in a finding of inadmissibility and denial of entry into the United States.

    5. What About Waivers?

    The entry bar isn’t absolute. Executive orders typically include an exception where the Secretary of State can allow entry if it’s in the national interest. No waiver is available for immigrants or nonimmigrants ineligible under INA 212(f) in the standard sense — but proclamations and executive orders typically carve out a national-interest exception administered by the Secretary of State. When the Department of State, in consultation with the Department of the Treasury, designated a person for sanctions, the Department of State will also be the adjudicating agency for delisting.

    The Bottom Line

    “OFAC travel sanctions” is a shorthand for a multi-agency, multi-legal-authority mechanism. OFAC does the designating. The Presidential Proclamations (especially PP 8693) and executive order travel suspension provisions do the formal legal work of making entry inadmissible. The State Department enforces it at the visa stage. CBP enforces it at the border. It’s a coordinated system, not a single switch — which means there are also more moving parts where things can go wrong (or be worked around).

    Sources

    • OFAC SDN List FAQ, ofac.treasury.gov — on what the SDN list actually does
    • State Department Foreign Affairs Manual, 9 FAM 302.14, fam.state.gov — the authoritative consular instruction connecting PP 8693 and OFAC/IEEPA designations to entry ineligibility
    • Presidential Proclamation 8693 (July 24, 2011, referenced throughout executive orders) — the standing proclamation suspending entry of IEEPA-designated individuals
    • Example OFAC executive orders (Cuba, Russia, ICC-related), ofac.treasury.gov — showing the “entry suspended / treated as PP 8693 persons” boilerplate in individual programs
    • INA Section 212(f), 8 U.S.C. § 1182(f), uscode.house.gov — the statutory authority for presidential entry suspensions
    • INA Section 212(a)(3)(C), as discussed by the State Department (fam.state.gov and nafsa.org) — the Secretary of State’s separate foreign policy inadmissibility authority
    • CBP TECS Privacy Impact Assessment, dhs.gov — on how border screening databases work in practice
    • NAFSA, nafsa.org — on travel bans and restrictions, including the 3(C) authority
    • State Department, 9 FAM 403.11, fam.state.gov — on visa revocation procedures

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  • June 1, 2026: OFAC Enforcement Action against a prominent compliance firm

    Claude’s summary:

    What Happened

    FTI Consulting, Inc. (“FTI”), an international consulting and advisory firm headquartered in Washington, D.C., has agreed to pay $1,050,000 to settle potential civil liability for apparent violations of OFAC sanctions targeting Russia’s financial sector.

    Between April 2019 and November 2019, FTI issued six invoices—totaling approximately $353,862—for economic consulting services it was providing in connection with a civil lawsuit in Singapore on behalf of VTB Bank OAO (“VTB”), a Russian state-owned bank. At all relevant times, VTB was listed on OFAC’s Sectoral Sanctions Identification (SSI) List and was subject to Directive 1 under Executive Order 13662 (“Directive 1”), incorporated into the Ukraine-/Russia-Related Sanctions Regulations (URSR), 31 C.F.R. part 589. Directive 1 prohibits U.S. persons from dealing in new debt of more than 14 days’ maturity with covered entities and bars any transaction structured to evade or avoid those prohibitions.

    The apparent violations arose from how the engagement was structured. FTI had been engaged by a global law firm to provide expert economic consulting services to VTB. FTI’s compliance officials recognized early on that directly invoicing VTB would create sanctions risk. To address that risk, FTI and the law firm agreed to an indirect payment arrangement: FTI would invoice the law firm, but the law firm would pay FTI only after first receiving payment from VTB. FTI had no recourse against the law firm unless VTB paid first—and no direct recourse against VTB if invoices went unpaid.

    OFAC found that this structure did not insulate FTI from liability. Because VTB was ultimately responsible for funding FTI’s invoices, FTI was—in economic substance—extending new debt to VTB on each occasion an invoice went unpaid or was paid after the permissible 14-day tenor. Payment delays were severe: individual invoices remained outstanding for 35, 90, 92, 99, and as many as 198 days.

    Multiple warning signs accumulated throughout the engagement that FTI did not adequately act on. FTI continued to perform work and issue new invoices even as prior invoices remained unpaid for months. In July 2019, FTI joined a call directly with VTB to discuss overdue payments. When FTI later demanded that the law firm pay the outstanding invoices from its own funds, the law firm declined, explicitly stating it had not assumed VTB’s credit risk—a signal that VTB’s non-payment directly affected FTI.

    FTI issued its final invoice on November 26, 2019. By March 2020, across all six invoices totaling approximately $353,862, FTI had received only one partial payment of approximately $57,000. A second partial payment of approximately $19,400 followed in June 2020, 198 days after that invoice was issued. In May 2021, the law firm informed FTI it no longer represented VTB, at which point FTI ceased collection efforts. FTI subsequently conducted an internal review and submitted a notification of potential violation to OFAC.

    OFAC found that FTI violated §§ 589.202 and 589.213 of the URSR on six occasions by indirectly dealing in new debt of longer than 14 days’ maturity with an SSI-listed entity.

    The Penalty

    OFAC classified all six violations as non-egregious and determined that FTI did not voluntarily self-disclose them—notwithstanding FTI’s eventual notification to OFAC following its internal investigation. Under OFAC’s Economic Sanctions Enforcement Guidelines (31 C.F.R. part 501, app. A), the applicable base civil monetary penalty for a non-egregious, non-voluntary-disclosure case equals the schedule amount: $525,000.

    The final settlement of $1,050,000—double the base penalty—reflects upward adjustment after weighing the aggravating and mitigating factors below, with particular emphasis on promoting future compliance among similarly situated firms.

    Aggravating Factors

    • Reckless disregard for multiple warning signs — FTI’s senior managers were aware of the Directive 1 restrictions on VTB from the outset and deliberately structured the engagement to reduce sanctions exposure. But warning signs accumulated and went unaddressed: invoices went unpaid for months; FTI participated in a direct call with VTB to discuss overdue payments; and the law firm explicitly disclaimed responsibility for VTB’s non-payment—a clear signal that FTI bore VTB’s credit risk. Despite all of this, FTI continued to work and issue new invoices throughout.
      • General Factors: Willful or Reckless Violation of Law / Awareness of Conduct at Issue — FTI had actual knowledge of the applicable prohibitions from the start and designed a payment structure specifically to address them. OFAC treats continued conduct in the face of accumulating red flags as recklessness, particularly where the firm was already sensitized to the risks involved.
    • Harm to the objectives of the sanctions program — U.S. sanctions on VTB were designed in part to limit VTB’s access to credit from U.S. sources. FTI’s indirect arrangement undercut this objective by extending prohibited credit to VTB over extended periods. The intermediary structure also obscured VTB’s role in the transaction in a way that may have prevented other parties in the payment chain from screening the activity.
      • General Factor: Harm to Sanctions Program Objectives — The conduct frustrated the practical aims of Russia’s sectoral sanctions and reduced the ability of other transaction participants to identify and screen out the sanctioned party’s involvement.
    • Size and sophistication of the firm — FTI is a large, internationally active consulting firm with extensive experience serving clients across industries and jurisdictions worldwide. OFAC applied heightened scrutiny here to promote greater awareness of indirect dealings prohibitions among other firms with the resources and expertise to implement robust sanctions compliance.
      • General Factor: Individual Characteristics — Sophisticated, globally operating entities are held to a higher standard of compliance awareness and are expected to dedicate appropriate resources to identifying and managing sanctions risk commensurate with their exposure.

    Mitigating Factors

    • Meaningful cooperation with OFAC’s investigation — FTI agreed to toll the statute of limitations and assisted OFAC’s investigation by producing comprehensive contemporaneous documentation, including by waiving attorney-client privilege.
      • General Factor: Cooperation with OFAC — FTI’s substantive cooperation reduced the burden on OFAC’s investigative process and contributed to an efficient resolution of the matter.
    • Limited scale of the transactions relative to FTI’s overall business — The six invoices, totaling approximately $353,862, represented a very small fraction of FTI’s overall payment activity.
      • General Factor: Harm to Sanctions Program Objectives — The limited economic magnitude of the violations reduced the overall severity of harm caused to the sanctions program’s objectives.
    • Meaningful remediation of its compliance program — Following the violations, FTI took concrete steps to strengthen its sanctions compliance infrastructure: (1) implemented training specifically addressing sectoral sanctions, with targeted outreach within its legal department regarding law firm engagements; (2) updated its sanctions compliance policies and restricted party screening procedures; (3) supplemented its sanctions compliance resources; and (4) strengthened risk assessments and controls in response to Russia’s full-scale invasion of Ukraine in 2022.
      • General Factors: Adequacy of Compliance Program / Remedial Response — FTI’s post-violation improvements demonstrated a genuine commitment to addressing the root causes of the violations and reducing the likelihood of recurrence.
    • No prior OFAC enforcement history — FTI had not received a Finding of Violation or a Penalty Notice from OFAC in the preceding five years.
      • General Factor: Prior OFAC Actions Against the Subject — A clean OFAC enforcement record is a recognized mitigating consideration under the Enforcement Guidelines.

    OFAC’s broader message: This settlement underscores a foundational principle running throughout OFAC’s regulatory framework—it is prohibited to do indirectly what cannot be done directly. Firms must ensure that their sanctions risk analysis reflects the full economic and practical reality of a transaction, not just its formal structure. OFAC will look past contractual arrangements to assess what is actually happening on the ground, and arrangements that merely create the appearance of compliance—without addressing the underlying prohibited conduct—do not provide a safe harbor.

    What Are the Takeaways?

    You can’t route a prohibited transaction through a third party to make it permissible. The fact that FTI billed the law firm rather than VTB directly did not change the underlying economic reality: VTB was the party ultimately responsible for funding FTI’s invoices, making FTI the effective creditor to a sanctioned entity. OFAC has long maintained that U.S. persons cannot use intermediaries to do on their behalf what they are forbidden from doing themselves. If a sanctioned party is the ultimate source of funds, the transaction is prohibited regardless of how many parties stand in between.

    Sectoral (partial) sanctions can be surprisingly expansive in scope. VTB was not fully blocked—it was subject to the more targeted restrictions of Directive 1. But those restrictions were still broad enough to reach FTI’s indirect invoicing arrangements. Companies that deal with parties subject to less-than-full-blocking sanctions measures should not assume that the narrower designation means lower risk. Each transaction must be evaluated carefully on its own merits to confirm that the underlying activity—and any related transactions—are fully permissible.

    Assess the economic reality of a transaction, not just its paperwork. When evaluating whether a proposed arrangement is compliant, firms should look at what is actually happening economically—not just what the contracts say. Structures that appear compliant on their face but fail to address the underlying prohibited economic relationship are not a defense. In the debt context specifically, a sanctioned counterparty’s repeated failure to make contracted payments is a red flag that demands a thorough reassessment of the arrangement’s compliance status, not continued performance.

    Other Resources

    OFAC Compliance and Enforcement Resources

    On May 2, 2019, OFAC published its Framework for OFAC Compliance Commitments, which outlines OFAC’s expectations for what an effective sanctions compliance program looks like and how OFAC factors compliance program quality into its evaluation of apparent violations and settlement determinations. An appendix to the Framework identifies common root causes of sanctions violations drawn from OFAC’s investigative experience.

    For additional information on the civil penalties process, see:

    • The OFAC regulations governing each applicable sanctions program
    • The Reporting, Procedures, and Penalties Regulations, 31 C.F.R. part 501
    • The Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A

    Recent civil penalties and enforcement information are available on OFAC’s website at ofac.treasury.gov/civil-penalties-and-enforcement-information.

    FinCEN Whistleblower Program

    The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) administers a whistleblower incentive program covering potential violations of OFAC-administered sanctions, the International Emergency Economic Powers Act (IEEPA), and the Bank Secrecy Act (BSA). Individuals located anywhere in the world who provide information about sanctions violations may be eligible for a financial award if their information leads to a successful enforcement action resulting in monetary penalties exceeding $1,000,000 and the statutory requirements of 31 U.S.C. § 5323 are satisfied. The program is open to whistleblowers across all industries and enterprise types, and FinCEN is currently accepting tips.

    For more information on OFAC regulations generally, visit ofac.treasury.gov.

    and the full Enforcement Information:

    20260601_ftiDownload

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  • April 15, 2026: OFSI lays out its 3-year strategy

    OFSI today published its 2026-2029 strategy – and summarized it in a blog post:

    OFSI Strategy 2026-29

    This year marks ten years since the Office of Financial Sanctions Implementation (OFSI) was established.  

    Over the last ten years, OFSI has built stronger capability and confidence, enhancing licensing, enforcement and intelligence, deepening international partnerships, and supporting firms to navigate increasingly complex sanctions regimes. 

    This Strategy marks the start of OFSI’s second decade, setting out an ambitious agenda for 2026–29 to keep UK financial sanctions effective, resilient and impactful. 

    At its heart is the new, clear operating model: we will Promote, Enable, Respond and Change (PERC).  

    • Promote: make sanctions rules and expectations clearer, so compliance is the norm and non-compliance has visible consequences. 
    • Enable: reduce friction for legitimate activity through practical guidance, strong licensing service standards and digital-first services. 
    • Respond: act quickly and proportionately on breaches, using the full enforcement toolkit to deter and disrupt non-compliance and circumvention. 
    • Change: embed lasting improvements by learning from cases and engagement, strengthening sanctions design and driving sustained compliance cultures. 

    We will focus our policy and operational decisions—and our resources—on the areas of greatest impact, grounded in high-quality data, evidence and a stronger understanding of threats, risks and context. We will deliver timely and proportionate licensing, proactive and impactful enforcement, robust and targeted counterterrorism designations, and focused compliance support in our highest impact areas.  

    We will maintain open, regular engagement with industry to understand how sanctions are operating in practice and to make compliance as clear and workable as possible. We will provide more direct support to industry, to support compliance and reduce friction across the system. We will use a feedback-loop approach: insights from firms’ queries, licensing applications, compliance challenges and suspected breach reporting will inform where we target guidance, which scenarios we prioritise for clarification, and how we design and improve our services. In turn, we will feed learning back to industry through timely updates—such as blogs, FAQs, guidance and lessons learned from enforcement—so that firms can strengthen controls, reduce repeat issues and respond quickly to emerging risks. 

    We will work in close partnership across government, with regulators and law enforcement, and with the private sector and international allies to strengthen the impact of UK financial sanctions and support effective compliance. We will use structured engagement and information-sharing to build a shared understanding of emerging risks and circumvention typologies, align expectations and guidance where possible, and coordinate action to reduce arbitrage and close gaps. Through these partnerships, we will improve the quality of compliance support, target our operational activity more effectively, and amplify the deterrent effect of enforcement. 

    The Strategy sets out Key Performance Indicators (KPIs) against which we will monitor our progress under the Strategy. We will report against these in our Annual Review starting with the next publication this Autumn.  

    And here’s the strategy:

    OFSI_Strategy_2026-29Download

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  • April 13, 2026: Not so fast! OFSI extends deadline for ownership and control input

    Office of Financial Sanctions Implementation HM Treasury

    Call for evidence on ownership and control in financial sanctions regulations

    OFSI has extended the deadline for its call for evidence on how UK financial sanctions regulations on ownership and control are applied in practice. The call for evidence will now close at 11:59pm on Monday 20th April 2026.

    We have extended the deadline to allow firms and other stakeholders more time to prepare and submit evidence, including practical examples from real cases. 

    The Call for Evidence seeks industry views on how the ownership and control test is applied in practice, including where firms face challenges. The test is designed to stop designated persons from sidestepping UK sanctions by hiding behind complex company structures, trusts or proxies. However, assessing the ability of a designated person to control an entity — even if they are not actively doing so — can be difficult in practice and may create additional costs and legal risk.

    We are particularly interested in evidence and examples on:

    • How often ‘hypothetical control’ is present in real financial sanctions cases; 
    • The impact it has on compliance costs, legal risk and business decisions (including derisking); 
    • Whether existing legal concepts and typologies of control are helpful in applying ownership and control regulations.  

    Read the full call for evidence and how to respond here.   

    Read more about the background and scope of the exercise in our blog here.

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