• Dr. Henry Balani, Global Head of Industry and Regulatory Affairs at Encompass Corporation


• 03.03.2022 01:00 pm
#management

“Implementing sanctions against Russian banks and companies will be more difficult in practice than many might expect. This is because Russian companies could restructure subsidiary companies so that they are no longer classified by the Office of Foreign Assets Control as ‘Russian-owned’. To do this they can, and probably will, restructure so that their subsidiaries are no longer at least 50% owned by a Russian parent company. 

“Therefore, banks will need to review their current clients and understand their ownership structure, while comparing the latest companies and individuals that have been sanctioned. They must, then, validate their subsidiary ownership structure, with the challenge being that these companies will deliberately dilute their subsidiaries to evade sanctions.

“Another challenge is that sanctioned banks are owned by billionaires and oligarchs with direct links to President Putin. Banks will have to identify these individuals’ ownership of other companies and, in turn, validate if these companies' assets need to be frozen.

“The implication here is that, if these sanctioned billionaires and oligarchs are majority owners of these companies, it means these companies are in turn sanctioned – the bottom line is that banks must be able to identify these relationships – and quickly.”