Financial Crime World

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EU and UK Impose “Crude Oil Price Cap” on Russian Exports

In a bid to tighten the screws on Russia’s energy sector, the European Union (EU) and United Kingdom (UK) have imposed a “crude oil price cap” that restricts financial or technical support for exports of Russian crude oil to third countries.

Blocking Sanctions: A Growing Concern for Kazakhstan

Kazakhstan-based companies may also face challenges due to the growing list of blocking sanctions imposed by the US, EU, and UK against Russia. These sanctions restrict dealings with Russian individuals and entities, including banks, energy companies, and state-owned enterprises.

Red Flags for Sanctions Circumvention

The US authorities have identified several “red flags” that may indicate an attempt to circumvent sanctions against Russia, including:

  • The use of shell companies to conduct international bank transfers
  • Refusal to provide data on the end use of products
  • Failure to install, train, and maintain purchased goods
  • Inconsistencies in IP addresses and company locations
  • Weak online presence or lack of representation by the organization involved

Licensing Regimes: A Complex Web

In cases where a sanctions nexus is unavoidable, Kazakhstan-based businesses may need to seek licenses from relevant authorities. The licensing regimes vary across the US, EU, and UK, with different requirements and restrictions in place.

For example, the US requires payments to be made into blocked accounts, which may not provide a good discharge of obligations. In contrast, EU-wide licenses are not available, and businesses must apply to national competent authorities for specific permits.

Practical Steps to Mitigate Sanctions Risks

To navigate these complex sanctions regimes, Kazakhstan-based businesses may want to consider the following practical steps:

  • Monitor the current status of sanctions
  • Include sanctions-specific clauses in transaction documents
  • Establish internal policies to eliminate sanctions nexus
  • Use alternative currencies and financial systems to minimize risks
  • Watch for “red flags” that may indicate sanctions circumvention

By taking these precautions, Kazakhstan-based businesses can reduce their exposure to sanctions risks and continue to operate effectively in a challenging international environment.