Due diligence and Russian sanctions: what and why?
The increased number of UK, EU and US sanctions implemented against Russia since 2014 along with extensive regulatory requirements have put UK businesses under significant pressure when it comes to due diligence.
The January 2025 OTSI Guidance Countering Russian sanctions evasion – guidance for exporters states that it is UK businesses’ responsibility to determine their sanctions risk exposure, and “to develop an appropriate set of safeguards and controls tailored to their particular circumstances”. It is expected that UK businesses take adequate steps to ensure that their sanctions risks are addressed and mitigated. Those steps may include requests for further information from an entity, research and, when necessary, taking legal advice.
EU authorities also provided some guidance to individuals and companies doing business with Russia. In April 2022, the EU Commission, in its Consolidated Guidance’s section on Circumvention and Due Diligence, recommended businesses take a risk-based approach, which includes multi-level due diligence and ongoing monitoring. The EU Commission has further indicated that due diligence “may in particular consist in screening of beneficiaries of funds or economic resources against sanctions lists & adverse media investigations”. Moreover, on 24 June 2024, as part of the EU’s 14th package of restrictive measures against Russia, the EU clarified that if the EU operator fails to carry out appropriate due diligence, they cannot invoke the non-liability contractual clause.
What are the new challenges in the due diligence of Russian companies?
Due diligence on Russian companies that UK businesses want to engage with is a lengthy process, which is often made more difficult by a lack of disclosure available on Russian companies’ websites. On 27 January 2024, Russian President Vladimir Putin signed a decree No. 73 titled “On the Temporary Procedure for the Disclosure and Provision of Information by Economic Societies, which are Economically Significant Organizations, and Certain Related Persons”, allowing Russian companies not to disclose otherwise public corporate governance and financial information. This resulted in many Russian companies withholding key information that was previously required to be disclosed in public domains and allowed Western companies to understand who is behind the Russian entities they are doing business with.
The newly announced amendments of the Russian law are going to make the due diligence process even more complex.
On 3 February 2025, the Russian Government adopted Resolution No 94 “On Amending the Resolution of the Government of the Russian Federation of 16 September 2022 No 1625” which restricts access to publicly available information about subsidiaries of Russian companies if they are owned and/or controlled by entities subject to restrictive measures or which may be subject to sanctions. The request to be added to the list of companies, information about which is restricted, shall be submitted to the Ministry of Finance of the Russian Federation. Any new company can submit such a request prior to it being registered by the Russian Tax Service. Once such request is accepted, Russian Companies House (EGRUL) will restrict information about a company, including information on its structure and founders, address and the company’s general director(s).
Updated: 6 February 2025
How Gherson can assist
The Gherson team have years of experience advising on compliance matters, including sanctions. We regularly advise clients on sanctions laws, including Russian countermeasures, and can assist companies develop policies and systems aimed at prevention of sanctions risks.
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The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.
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