The National Crime Agency (NCA) in the UK has issued a critical warning to financial institutions and regulated sectors regarding Russia’s ongoing efforts to bypass sanctions and acquire restricted goods and services through intermediary countries. Sanctions imposed on Russia due to its invasion of Ukraine have severely constrained its ability to purchase a wide range of products, including crucial military supplies, on international markets. However, Russia is persistently employing complex supply chains and alternative routes to procure these sanctioned items.

Working in collaboration with key government departments, including HMRC, the Department for Business & Trade, the Foreign, Commonwealth & Development Office, and HM Treasury’s Office of Financial Sanctions Implementation, the NCA has aimed to assist financial institutions and businesses in identifying potential suspicious transactions. They have highlighted specific red flags, such as customers significantly overpaying for items on the Common High Priority list, transactions involving entities with minimal or no web presence, and purchases that do not align with the buyer’s typical business activities.

This alert from the NCA is not limited solely to the regulated sector; it also has relevance for sectors involved in anti-money laundering (AML) compliance, including law firms in the UK. Law firms play a critical role in ensuring that their clients’ transactions adhere to AML regulations and sanctions measures. They must exercise due diligence and be vigilant when handling financial transactions or providing legal services that may be linked to entities attempting to evade sanctions.

Law firms in the UK need to be aware of the potential risks associated with clients who may be engaged in activities that circumvent sanctions. They should implement robust AML compliance procedures, including thorough client identification and verification processes. Additionally, staying informed about the latest developments in sanctions and collaborating with relevant authorities can help law firms fulfill their obligations in preventing money laundering and sanctions evasion.

As part of the broader international effort, the G7 countries have introduced measures to strengthen compliance and enforcement, preventing Russia from benefiting from G7 economies. They have established a Common High Priority items list, which includes items frequently found on the battlefield in Ukraine, such as integrated circuits and various electrical and mechanical components. Businesses, including law firms, are strongly advised to conduct meticulous due diligence to ensure that products associated with this list do not ultimately end up in Russia, thereby avoiding any legal and reputational risks.

The NCA’s warning underscores the ongoing challenges posed by Russia’s attempts to evade sanctions. For law firms in the UK, it emphasises the importance of stringent AML compliance, active due diligence, and staying informed about sanctions developments to mitigate risks associated with clients engaged in activities related to sanctions evasion.