Davis Polk counsel Will Schisa was quoted in ABA Banking Journal discussing how international sanctions against Russia are impacting banks. “The last year has been all about Russia,” Will said, speaking at the December ABA/ABA Financial Crimes Enforcement Conference. “It’s really been an unprecedented sanctions effort in terms of its scale applied to a major world economy.”

Will noted that “the U.K. and EU have put forth complex sanctions that take a lot to understand and don’t always overlap directly with U.S. sanctions.” A common complication, he said, stems from the three jurisdictions not being aligned on the Russian oligarchs they have designated and applying different approaches with respect to how sanctions flow down to undesignated entities owned or controlled by those listed persons. “Working through issues like that can be very complicated,” he said.

Recognizing the complexity of sanctions, particularly outside the United States, Will noted, “For regional banks, the ultimate question may be whether they want to deal with this or simply de-risk” and exit the relationship.

Turning to enforcement, except for clearly willful misconduct or the complete breakdown in a compliance program, Will said, the agency is unlikely to “play gotcha’,” recognizing it was a difficult year for banks and regulators alike. However, as the Russia situation stabilizes, banks will be expected to improve their sanctions-compliance effort, he said. “So the standard for compliance probably does become somewhat higher.”

He also mentioned that OFAC may be revamping its enforcement guidelines, which have not changed in more than a decade. Will said, “So OFAC wants to be sure they reflect current practice and they’re responsive to the public’s concerns—I think a good-government type of thing.”

New sanctions require banks to up their games,” ABA Banking Journal (March 23, 2023)