In the June 1, 2026, settlement between an economic consulting and advisory firm (“the company”) and the U.S. Treasury’s Office of Foreign Assets Control, companies are reminded that conducting transactions indirectly with a non-blocked but restricted party and structuring transactions to avoid sanctions can result in significant fines and penalties.
Here, the company was hired by a law firm who needed its services in connection with litigation involving its client, VTB Bank OAO. At the time, the company knew that VTB, a Russian-government owned bank, was the subject of certain U.S. sanctions that prohibited persons from extending new debt to VTB if more than 14 days maturity (see Executive Order 13662, Directive 1 at https://ofac.treasury.gov/faqs/370).
The company, however, believed it could avoid sanctions laws by sending invoices for its services provided to VTB to the law firm which would pay it after payment was received from VTB (thereby indirectly extending prohibited “new debt” to VTB).
Although VTB failed to pay the law firm on certain of the company’s invoices, the company engaged in discussions with the law firm and VTB on doing additional work under a retainer funded by VTB. This new arrangement required the law firm to first be paid by VTB after which the law firm would pay the company. While VTB made one partial payment of approximately $57,000 to the law firm under this retainer arrangement, VTB never paid the other five outstanding invoices for work performed by the company.
What is notable about this case is that despite the company’s awareness of sanctions risks in conducting transactions with VTB under Directive 1, it structured the transaction to avoid direct dealings with VTB, which direct transactions may have been detected through screening by third party banks.
As OFAC noted here, “it is prohibited to do indirectly what one cannot do directly.” https://ofac.treasury.gov/media/935651/download?inline.