The institution of sanctions was introduced in Ukraine in 2014 when Russia’s aggression in Crimea and the eastern regions of Ukraine began. With the full-scale war starting in 2022, the scope of sanctions expanded significantly, covering not only Russian companies and individuals but also entities from various other countries. According to open data from the Ministry of Foreign Affairs of Ukraine, sanctions have been applied to nearly 10,000 individuals and over 6,000 legal entities, both from Ukraine and abroad. For more detailed information about sanctions, you can visit the Ukrainian Sanctions website.

The introduction of the State Sanctions Register in January 2024 has enabled tracking of the current sanctions landscape. However, despite these advancements, there are still many ambiguities and inconsistencies within the sanction regulations. The procedure for imposing sanctions can sometimes appear opaque, rushed, and one-sided, and there is no effective mechanism for reviewing or lifting sanctions, making it difficult for businesses to prove their good faith in front of the state.

The Ukrainian legal community anticipates that the number of cases involving the nationalization of assets due to sanctions will grow, and sanctions violation and circumvention will soon be criminalized. So, what does this mean for Ukrainian businesses? How can companies protect themselves and their assets? And, ultimately, why should sanctions compliance become mandatory for every Ukrainian company?

What Are the Sanctions Imposed on Businesses Linked to Aggressor Countries?

Since 2014, when Russia began its aggression against Ukraine, sanctions on Russian companies and individuals have become a key part of the national security mechanism. Initially, these sanctions were temporary economic restrictions aimed at halting illegal actions. However, after the full-scale invasion of 2022, sanctions have become much stricter, targeting not only Russian companies but also their indirect associations.

Key Changes in Sanction Legislation

In recent years, there have been several key changes in Ukraine’s sanction legislation:

1. Blocking the assets of Russian businesses, even those indirectly linked to Russia.
2. Nationalization of assets owned or controlled by sanctioned individuals during wartime.
3. Introduction of new criminal code articles in 2022, including Article 111-2 on “Assisting the Aggressor State” and Article 111-1 on “Collaborative Activity.”
4. Creation of the State Sanctions Register, allowing businesses and individuals to track sanctions status.

Despite these updates, the sanctions law remains vague, unpredictable, and lacks transparency, leaving businesses uncertain about what actions might expose them to sanctions.

Risks for Businesses Linked to Russia

One of the primary risks for Ukrainian businesses is the application of sanction regulations retroactively. Russian businesses were heavily involved in Ukraine’s economy before 2014, including in privatization processes, and many of them continued operations until the full-scale invasion in 2022. As a result, businesses that had ties to Russian entities before the war are now at risk of facing criminal investigations for treason or financing aggression.

Consequences for Business

For businesses under sanctions, three main types of consequences can arise:

1. Reputational Risks: Even a mere mention of past ties with Russia can cause a negative public perception, impacting partnerships and customer trust.
2. Legal Risks: Businesses associated with Russia before 2022 can be prosecuted under Articles 110-2 and 111-2 of the Criminal Code, leading to investigations, asset seizures, and even arrest.
3. Sanction Imposition: The Ukrainian government can nationalize assets from companies with links to Russia, further complicating their operations.

How to Avoid Falling Under Sanctions?

Businesses need to proactively monitor their contracts, operations, and supply chains to avoid falling under sanctions. Some key recommendations include:

1. Avoid actions that may trigger sanctions.
2. Monitor legal proceedings and information campaigns around national security issues, as they often precede sanctions.
3. Regularly check the State Sanctions Register and other open databases such as Opendatabot, YouControl, and media sources to stay informed.

Sanctions Compliance: A Necessity for Businesses

Sanctions compliance is becoming increasingly critical for Ukrainian businesses. It is not only about avoiding legal consequences but also about maintaining trust and reputation. Sanctions compliance helps businesses avoid financial and legal risks and enables them to demonstrate reliability in the marketplace.

As Ukraine continues to strengthen its sanctions enforcement, businesses that implement robust compliance measures will be better equipped to navigate these challenges and thrive in an increasingly regulated environment.

Conclusion

1. Monitoring sanctions is an essential task for businesses in Ukraine. Companies need to be prepared for potential sanctions risks and have systems in place to minimize these risks.
2. Implementing sanctions compliance ensures that businesses remain transparent and avoid legal trouble, securing their operations and assets.
3. Maintaining transparency and compliance helps businesses build stronger relationships with international partners, opening up new opportunities for cooperation.

In conclusion, sanctions compliance is becoming an integral part of every Ukrainian company’s strategy. Its importance will only continue to grow as Ukraine strengthens its legal framework in response to geopolitical tensions and evolving security challenges.