Secondary sanctions on Russia — practical compliance challenges

Since the expansion of secondary sanctions on Russia, we've been struggling with several practical compliance questions:

1. How deep does due diligence need to go to confirm no indirect Russian nexus? Some of our trade finance clients have suppliers that might have Russian sub-suppliers and it's impossible to verify the entire chain.
2. Secondary sanctions India exposure — several of our counterparties are Indian banks that increased trade with Russia. How are you assessing this risk?
3. Where's the line between "significant transaction" and routine business? The secondary sanctions guidance from Treasury isn't exactly crystal clear.

Would appreciate hearing from anyone navigating these questions, especially non-US institutions.

We've been dealing with exactly these issues. On your questions:

Depth of due diligence: Regulators generally apply a "reasonableness" standard. You're not expected to trace every sub-supplier to the origin of raw materials. But you are expected to screen direct counterparties, understand the goods/services involved, and flag obvious red flags (pricing anomalies, unusual routing, transshipment through Central Asia).

India exposure: This is a big one. We risk-rated our Indian correspondent relationships based on public reporting about their Russia trade volumes. For those rated high, we increased transaction-level monitoring and imposed tighter limits on certain commodity flows. We haven't cut anyone off but we have enhanced our due diligence significantly.

"Significant transaction" threshold: Treasury has deliberately kept this vague to give themselves discretion. Our approach: we assume any intentional, non-trivial transaction with a sanctioned Russian entity or sector could be deemed "significant." We don't try to find the minimum threshold — we try to avoid the risk entirely.

On the India question specifically — keep in mind that secondary sanctions risk isn't just about your direct counterparty. If you're processing payments for an Indian bank and those funds ultimately benefit sanctioned Russian entities, you could be in scope. The chain of exposure matters.

We added a specific Russia-related questionnaire to our correspondent banking due diligence process. It asks about Russia-related business volumes, sectors, and compliance controls. Not everyone loves filling it out but it gives us a defensible basis for our risk assessment.