38 Asian Legal Business | October 2024 are complex, multilateral and continue to change incrementally in real-time in response to the situation on the ground in Ukraine.” The U.S. has imposed both sanctions and export controls, and the UK and European Union (EU) have imposed sanctions as have Poland, Japan, Singapore and Australia. In turn, Russia has imposed countermeasures. Japan, for instance, has imposed asset freezes that prohibit payments and capital transactions by Japanese residents or entities to cover individuals and entities from Russia and Belarus along with a range of sanctions and export controls. Singapore imposed export controls in March 2022 along with a range of financial measures that prohibit Singapore financial institutions from dealing with designated banks or other entities. Australia has put in place a broad sanctions regime that puts restrictions on assets dealing with designated persons or entities, exports of certain goods, imports or purchases and a series of services. As of December 2023, Australia’s sanctions list includes more than 1,000 persons and over 100 entities from Russia, Belarus and Iran, noted Clifford Chance. New Russian sanctions have been largely driven by the EU and the UK. As a result, companies from across Asia that previously relied on European products or tech to sell to Russia have had to address significant business challenges and overcome considerable hurdles in obtaining goods. What’s worse, “blocking statutes” that states have passed in order to nullify the extraterritorial effect of foreign laws and U.S.-imposed sanctions have also put companies at risk of being caught between conflicting legal requirements. China’s Ministry of Commerce, for instance, instituted Blocking Rules that could allow Chinese nationals to bring lawsuits in China to claim damages against persons who comply with banned foreign sanctions laws. “No foreign law has officially been targeted yet, but there is always a concern that they are stuck between a rock and a hard place,” Hansson added. Sanctions have also impacted areas related to financial crime and have made anti-money laundering (AML) and knowyour-customer (KYC) requirements that much more stringent and expensive to meet. The financial crime space has seen massive new changes that would require covered investment advisers to implement risk-based AML programmes as well as programmes to counter any potential financing of terrorism. New environment Financial institutions in Asia are quickly adapting to this new environment, with compliance frameworks aimed at addressing the increased focus on sanctions evasion and circumvention. “As part of increasing their sanctions compliance, we are seeing more Asian companies embrace screening and due diligence tools,” Hansson said. One potential silver lining may be that the sanction-related risks Asian companies now face are largely the same as the ones faced by companies in other regions. However, the extraterritorial reach of U.S. sanctions has meant that even businesses with limited direct exposure to the U.S. market may find themselves Sanctions Global economic relationships have grown increasingly complex, with companies across the Asia Pacific often finding themselves in the middle of an ever-changing sanctions landscape driven by simmering geopolitical tensions. Asian financial institutions, in particular, have had to dramatically ramp up their sanctions’ compliance programs, according to Leigh Hansson, a partner in the Global Regulatory Enforcement group at Reed Smith. “A few years ago, we rarely received inquiries from Asian financial institutions about sanctions compliance, but in the past couple of years those inquiries have significantly increased,” Hansson says. The impact has been particularly dramatic for businesses with a global footprint or operations across borders. The war in Ukraine has led to a spiderweb of sanctions that impact a broad swath of operations. In a June 2024 briefing, international law firm Clifford Chance noted: “These sanctions Geopolitical gridlock In an era of escalating geopolitical tensions, Asian companies find themselves navigating an increasingly complex sanctions landscape and experiencing an urgent need for robust compliance programmes. By Asian Legal Business • Asian firms face complex global sanctions landscape • Extraterritorial sanctions impact Asian businesses globally • Tech and finance sectors require advanced compliance tools
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