Energy Sanctions, Oil Caps and Shadow Fleets - Navigating Shifting Regulations

Since the start of 2026, shifting sanctions and export controls have reshaped global energy trade. In this episode, our resident compliance expert Vincent Gaudel is joined by global sanctions expert George Voloshin, to explore how US policy changes toward Venezuela, Iran, and Russia are colliding with continued EU and UK restrictions, driving fragmentation across oil markets. They break down what this means in practice for financial institutions, energy firms, insurers, and shipping companies navigating a faster‑moving, less aligned sanctions landscape.

DISCLAIMER: The information provided in this podcast is for informational purposes only and is not intended to and shall not be used as legal advice.  The views and opinions expressed in this podcast are solely those of the speakers and do not necessarily reflect the views or positions of LexisNexis Risk Solutions. LexisNexis Risk Solutions does not warrant that the information provided in this podcast is accurate or error-free.

Transcript

Welcome And Guest Introduction

Vincent Gaudel 0:12

Welcome to the RecTech Pulse podcast, where industry experts discuss the latest trends in financial crime compliance. My name is Vincent Gaudel. I work as a financial crime compliance expert with LexisNexis Risk Solutions. In today's episode, we are going to be looking at a sector that is particularly concerned by sanctions and the broader geopolitical landscape, and that's the energy sector. More particularly, we're going to discuss sanctions as they apply to oil and petroleum products. To discuss this quite burning topic, I'm particularly pleased to be joined by George Voloshin, an outstanding expert in all things related to financial crime and prolific contributors to sanctions compliance discussions. Welcome, George, and thank you for being with us today. Do you want to share a few words about your background with the audience today before we start?

George Voloshin 1:01

Yes, thank you for having me, Vincent. It's a pleasure to be here on this podcast. So my background is in political risk analysis and corporate intelligence as well as anti-financial crime compliance. I've been doing uh work around geopolitics for many, many years, looking at the impacts of geopolitical developments around the world, in particular in the former Soviet space on economics, finance, business, energy, etc. And I think it's it's actually a very propitious time right now to look in more detail what's happening around the world, especially the Middle East, and how this is impacting all of us in different parts of the globe.

Oil Prices And Sanctions Fragmentation

2026 Hotspots Venezuela Russia Iran

Vincent Gaudel 1:36

Excellent. Thanks, George. It's really, really great to have you uh with us today. And yeah, indeed it's quite a timely topic for the discussion today. And maybe we start with a little bit of context. So we checked just before starting the recording. We are recording in early April 2026 this podcast episode. Currently, the market prices for brand crude oil are back slightly below the $100 mark. But what we have seen in terms of swings in oil prices recently, those are quite significant uh swings. They took us back to levels not seen before early 2022 and the start of the war in Ukraine. And I think it's fair to say that together with geopolitical developments, sanctions have a direct impact on energy prices. And as we have clearly seen in the recent, the most recent developments, really disrupting the ability for a target country to export its oil is often a priority objective pursued through a range of restrictive measures and sanctions. One particular element that stood out from our latest sanctions plus report is the number of Russian shadow fleet vessels being sanctioned by the EU and UK. In 2025 alone, each of these two regulators has designated around 500 shadow fleet vessels. While the US did not follow quite the same route as the new US administration shifted to other sanctions priorities and actually focused their sanctions on Iran throughout 2025. That development is a good illustration of the increasing sanctions fragmentation that we have seen in 2025 and are continuing to observe in 2026. And George, when you look at 2026 so far, what were the key or the major sanctions development that particularly caught your attention? What really stood out?

George Voloshin 3:17

Yes, thank you for the question. I think that looking at 2026, we have a number of geopolitical hotspots, as they as I like to call them, that have been really drawing a lot of attention from policymakers and regulators. I think we started with uh General License 46A, and we've now progressed to GL55. So we have a long stream of different authorizations that allow engagement with Venezuela's oil and gas sector as well as with its mining sector separately. And you have a wave of exemptions one upon the other that kind of allow American companies to invest, conduct negotiations, enter into uh contingent contracts, supply services and goods to support infrastructure, uh, as well as to evacuate to products from the country for export. This has been a major change, and I think this has not been actually mirrored anywhere else. Recently, the US government unsanctioned interim president Delcy Rodriguez, uh, who's still sanctioned by the European Union. So I think this is kind of a gap that we've seen widening between the US and its European allies with regard to Venezuela. So there is a different kind of level of approach. Americans are very much engaged in trying to make Venezuela a very friendly environment for their companies. In terms of Russia, I think you're right that the American government has not been very active sanctioning shadow fleet vessels used by Russia since last year. And um they turned the attention to Iran instead, but Russia is still very much sanctioned in terms of how much reliance it can put on its shadow fleet. It's sanctioned in UK, EU main vessels are sanctioned in the US from before the Trump administration by the Biden administration. And um Russia is still relying a lot on intermediaries uh from third countries, on non-Western currency, so still continuing to kind of bypass the Western financial system for ease of doing business with um its um key customers in Asia in particular. In terms of Iran, I think Iran has been really the focus of everyone's attention because of the war. And um there was a maximum pressure campaign uh that lasted for a very long time, began in January 2025 when Trump became president, and committed with um these strikes in June 25, and then another round of strikes in February by Israel and the US. And we've seen actually, we haven't seen any change of posture in Iran in terms of sanctions because it's heavily sanctioned uh already, quite a lot. It's comprehensive was sanctioned by the US Treasury, it's state sponsored of terrorism under the State Department designation. Uh, but we've seen some waivers and exemptions, which I think we can talk about later on, allowing the uh purchase of some oil from both Iran and Russia in the context of uh unprecedentedly high oil prices, which have calmed down a bit but still very high compared with last year. So I think these three hotspots. Um, Russia, not really a hotspot, but the war in Ukraine is still underway. Uh, we still have hostilities there. We don't have any progress on the peace uh negotiation front, unfortunately. It's all been stalled, mostly because of the war in the Middle East. But Russia is still uh heavily sanctioned. Uh, export controls are very stringent, they apply to Russian access to goods and services, especially battlefield goods. And uh it's still for Russia, it's a very difficult picture. Its budget is in a huge deficit, but it's been still able to sell oil at much higher prices than it used to in January, February.

Iran Evasion Tactics And Proxies

Vincent Gaudel 6:55

Interesting. Uh thanks for the overview. And yeah, indeed, let's actually take a closer look at each of those three uh geopolitical hotspots, as you name it. And let's start maybe with Iran. And yeah, I think it's fair to say that it's really uh probably the biggest headline at the moment. And as you pointed out, Iran has long been subject to a range of far-reaching sanctions by different regulators, and for different reasons. To be fair, there are separate uh sanctions programs uh and are yeah, for different uh objectives and underlying reasons. And actually, an interesting number to illustrate that maximum pressure from the uh US Treasury on Iran, as part of our sanctions police report, we uh found out that in 2025 uh close to half of uh OFAC designations were actually related to Iran. So, yeah, but the situation and the war with Iran is really making the headlines. But when you look at the situation in the Middle East, uh George, like from a sanctions compliance perspective, how would you describe the sanctions risk landscape? What should really be top of mind for compliance teams when they are exposed to that region and yeah, broader uh oil trade?

Temporary Iran Oil Waivers Risk

George Voloshin 7:57

Exactly. So I think there are two things to mention here. So, first of all, I would just um reiterate my previous statement that Iran is still heavily sanctioned by the US government. There was also a United Nations snapback as of September last year, which introduced the pre-GCPA, pre-2016 sanctions on Iran at the level of the UN Security Council, so it's even more heavily sanctioned than it used to be before that uh snapback. So there is no real change of um sanctions in a policy vis-a-vis Iran from anyone in the world. What I think should be really cause for caution, at least, is that first there is still a lot of evasion happening, which is for the benefit of Iran. Iran is still procuring many things it needs for its economy, for its industrial base, for its military, through uh various proxy networks. It's relying on, as we know from press reports, by the way, very helpful to understand the full picture. It's relying on cryptocurrencies such as stable coins, it's relying on non-USD, non-euro or non-British pound payment channels, for example, using the Chinese Yuan to transact directly with Chinese customers. It's also been relying, interestingly, on so-called barter deals, which were described in detail in a number of media reports last year, whereby, for example, an Iranian company sells oil to China and in exchange receives some construction services from Chinese construction companies in Iran itself. So they do some work and they pay through this work for the oil, which Iran sells separately to uh refineries in China. So I think evasion is still the key area of concern for compliance professionals. Iran is very uh sophisticated in its evasion tactics. It knows how to use proxies, it knows how to use offshore companies, shell companies, front companies, nominee directors, and um alternative payment channels, including Havala's, many of which were based by the way in the UAE, and now the UAE is cracking down on many of those exchanges domestically because of the Iranian attacks on UAE itself. But Iran is still very proficient in this field, and I think evasion is something Iran can do very well. So everyone should be very careful. Whatever happens in the Middle East, whatever trade happens, it may evolve Iran somehow uh indirectly, and there is uh a need to be very vigilant in this respect. The second area I think I should stress is um very specific to this current crisis, which is the uh temporary oil waivers which were issued by the US Treasury uh last month concerning both Russian and Iranian. Well, I'll only talk about Iran now, so there was this general license U, which was issued by the US Treasury, that allows, on a temporary basis, the purchase of Iranian oil already on uh on the sea, already loaded on vessels, by any person in the world, so anyone can buy this oil without being in breach of US sanctions. And uh this GL actually suspends uh several uh Iranian sanction statutes that uh have been uh in place for many, many years, basically allowing companies to buy oil from sanctioned vessels, from sanctioned owners, including from people close to the Iranian government who was sanctioned for various reasons previously by the US administration. So this is temporarily allowed. If the price of oil stays high, I suppose that could be a temptation to renew this your license into the future, and we could maybe see, if not a permanent sanctions exemption, then something that will be more durable than the current one which uh will expire soon. So I think for compliance professionals, the risk really comes from their customers. If their customers are in the oil business or in the petrochemical business, or is somehow linked to the sale or purchase of petrochemicals, uh, crude oil, or anything relating to energy that Iran supplies, they may be tempted actually to re-engage with Iran and either restart uh supplies from Iran or begin them for the first time. And uh this creates, of course, a compliance headache for everyone involved with these trades, uh, from banks, from insurance companies, to traders, everyone who may be uh subject to certain sanctions regimes and may have to comply with them. And I think we've seen reports in the press, for example, that India bought uh a first cargo of Iranian LPG, liquor fight petroleum gas, in I think as many as 13 years. So there is appetite to go out there and engage in those high-risk trades because prices are just crazily high right now, and everyone wants to grab whatever is available on the market. But this creates compliance uh risks and uncertainty for everyone else, including banks in particular, because banks are very much exposed to their correspondent banking relationships, through the reliance on foreign currency exchange. So I think this is where attention should be right now.

Vincent Gaudel 12:34

Excellent. Thanks, uh Josh, for sharing. And yeah, I think it's fair to assume that uh it was not a sanctions objective to have uh a higher risk appetite for Iranian import, right?

George Voloshin 12:45

Not at all. It's just you know a kind of um a collateral effect of the war, which benefits Iran and Russia simultaneously uh in ways that may be hard to kind of uh mitigate for just ordinary people watching this from the outside. They don't know when the license will expire, we don't know whether there was any appetite to continue with this policy. So we lived in a climate of uncertainty and have to adapt every day.

Strait Of Hormuz Supply Shock

Vincent Gaudel 13:09

That's a great point because if you I mean the situation, the geopolitical situation in the Middle East has, well, regional and broader, actually global uh implications for oil supply chains, right? Because export of oils from non-sanctioned countries also need to pass through the Strait of Hormuz. We have uh seen heavy commentary, and now we realize how much of a critical shock point the Strait of Hormuz is. And so, yeah, many non-sanctioned countries are also feeling the feeling the impacts of the situation. But yeah, bottom line is many countries are highly dependent on oil imports, and that reduced oil flowing to the Strait of Hormuz that creates the need for alternative sources to be found. And here I want to maybe go back to what you mentioned on Venezuela. We are seeing some exports flowing again from Venezuela. So, do you think that the alternative oil supply might come from Venezuela to an extent? We've seen like some US shifts suggesting that it could be uh a potential alternative source.

Venezuela As Alternative Supply Limits

George Voloshin 14:11

Yes, definitely. Venezuela could be a potential alternative to, in a certain extent, to lost uh supplies from other regions. We've seen a resumption of supplies from Venezuela to countries like India. Again, India, there is a this big company called Reliance Industries, which operates the country's largest refinery. And it resumed supplies for Venezuela, which were stopped around 2019 because of sanctions against Pedweza, the state oil company. We've also seen uh purchases of uh Venezuelan oil by American companies. Well, there were previously also exemptions given to companies like Chevron, which is a major player in the Venezuelan oil sector, were able to evacuate their own oil to refineries that they control in the US. But uh the recent appetite from lots of trading companies like you know, mentioned in the press, typical giants that we know of, you know, Lenco, Trafigura, Vital, all been rushing to buy this oil because of the American policy change that's happened since February. In terms of whether Venezuela is a sufficient uh source of uh alternative supply, that's a big question because Venezuela has really lost a lot of its ability to produce oil. Under uh Chavez and Maduro, it was producing in better days around three million barrels per day, and now it's been producing under 700,000 barrels per day. So it's a major drop over time. And I've seen estimates by some you know industry people who say that to resurrect production, to restore production to the previous levels, you need to have at least five, six years of you know investments up to maybe $100 billion in total. So you need um some investments originally, like $10, $15 billion to restart some production, uh reinvest into uh infrastructure, modernize infrastructure, but you need to have a lot of investments over this whole period of time to really make Venezuela greater as an oil producer. So I think in terms of the current crisis, it's not really possible to imagine Venezuela being able to plug the holes left by Iran and by, as you mentioned, other countries in the region whose oil has been trapped in the street of hormones. Uh we're thinking about Saudi Arabia, the UE, Kuwait. There are alternative supplies through pipelines. There are two pipelines that um both Saudi and UAE use to evacuate oil uh to the other side of the Arabian Peninsula without the need to cross the street of hormones. But these uh pipelines have limited capacity. They're still a good alternative. They could provided a lot of security for customers of those countries, but they're not sufficient to compensate for the loss of supplies for the street of hormones. So I think um supplies are really constrained right now. That's why the price is so high.

Vincent Gaudel 16:45

Yeah, thanks. That's very striking. But just to finish up on Venezuela, just to clarify that. So we've seen easing from the US authorities. Do you view current sanctions from the EU and UK as an obstacle to uh imports of uh Venezuelan oil for the EU, for example?

George Voloshin 16:59

Yeah, no, these regimes have never been so drastic as the American regime. And um the Americans were really keen under Trump one to put maximum pressure on Pedivesa, on the stakehoffers of the reining of the Maduro government. The Europeans and Brits, they mostly have sanctioned government officials, companies um involved in repression, for example, of the population. They haven't really sanctioned um the country's economy as such, so there's still possibility. The expert controls as well on deal use goods, etc. But in terms of oil supplies, there is no constraints. Uh the problem is that, of course, Venezuela is a very unstable country, so it remains because its future is uncertain. We don't know what happens tomorrow. There is still a lot of corruption, the risk of organized crime is still present there. Uh so basically, under the previous um uh sanctions framework, under both Biden and Trump, there were several European companies drilling for oil and um exporting oil from Venezuela, like you know, Repsol from Spain or any from Italy. They had licenses to operate to be sure that they would not be in breach of American sanctions, though it all stopped when Trump uh rescinded this um executive order, uh this GL allowing companies to operate without fear of breaching sanctions, but now I think they can re-engage because GLs, the GLs we have currently in place, allow this. But then if there is enough appetite, I don't know. And then we also should remember that most of the oil has traditionally gone to places outside of Europe. So Venezuela exported most of its oil under the previous sanctions framework, which was uh much less friendly from the US to China. China used to be uh the major buyer back then when uh the oil was basically sanctioned. And before that, in good times, there were number of American refineries on the Gulf Coast in the US that were buying heavy Venezuelan crude because they were actually equipped to process it. Um so I think most of this oil will now go there as well. So Europeans are not really equipped to process this kind of oil, so they still need something else. Oil from, you know, from the Persian Gulf, oil from well, Russia, they're not buying oil from Russia, we know. So they need some kind of alternative oil from the US, again from American producers, but not for Europeans it's not really a very viable route.

Russia Oil Price Caps Multiply

Vincent Gaudel 19:11

Okay, thanks for that, George. And let's shift maybe to the situation for Russia. So speaking of a country that is subject to uh stringent sanctions in relation to oil exports, I think Russia continues to be probably one of the most severely sanctioned countries, particularly by the uh EU and UK. That's another takeaway from our sanctions policy report from last year. It's really like Russia-related designations absolutely dominated new measures implemented by the EU and UK. And what's really interesting to note is the range of measures that are applied in relation to the oil sector, from targeted designations to direct import bans. But one particular measure, I think, is pretty unique to Russian sanctions, that's the oil price cap. Or maybe I should say rather the oil price caps in the plural form, right? George, I know it's a mechanism that you've paid extensive attention to. Can you update us on how things stand uh with regards to the Russian oil price mechanism? What particular challenges does it pose for compliance teams?

George Voloshin 20:08

Yeah, it's a very complex picture right now for several reasons. So, first of all, people listen to us may know for the initial price cap, we're not going to talk about crude oil only because that's the focus of the recent policy measures, but we can also talk about petroleum products at some point. So initially in 2022, in December, there was this um initial uh restriction on the provision of services to the maritime transportation of Russian oil, and the price cap on crude oil was put at $60 per barrel. So above that, no G7 EU operator could provide services to ships or to companies in a buying or selling this product. Below that, yes, below or at the price cap, it was possible. So the price of Euros, the main Russian crude grade, was fluctuating quite a lot in 2023 when the measures uh took effect in 2024. There were some months in which the price of Russian oil was lower than the price cap, some months in which it was higher. There are also other Russian export grades like ESPO, which is exported from the from the Far East, mostly to China, which always trades at the premium to Euros and has always traded at premium to the price cap, so it was always been above the price cap. But there was still, you know, if everyone's kind of a peace of mind, there was still one price cap for everyone across the price cap coalition, uh involving the G7 countries, EU and Australia. And um, at some point, everyone in Europe at least began to understand that the price cap is not working as intended. It's doing some good work for European sanctions, but it's not sufficient. And they decided to lower the price cap to exercise even more pressure on Russian oil exports. And there were two waves of oil price cap revisions in the EU and the UK, um coordinated revisions, um, in September last year and in January this year. And um, these revisions actually brought the price cap. And Russian oil lower and lower. So there were two more price caps that were introduced back then. And now I think the lowest price cap you have is in the UK and Canada joined as well. It's around $44 per barrel, down from $60 initially. And the intermediate price cap was around $47.5 per barrel. But the problem is that other countries of the coalition have not necessarily joined the same new price cap uh revisions. So the US government, for example, has uh stuck to the $60 per barrel price cap. It's still the same as originally decided in 2022. Japan has revised it, but it stayed with the intermediate price cap as of now. Uh and we haven't seen movement from you know any other countries to maybe coordinate and rely on themselves. So we currently have three price caps, $60 per barrel, uh 46 and something, 44 and I think 1.1. So these three price caps create extra complexity for everyone. Another complication is that uh spoken about the GLs that we should buy the US Treasury to Iran and Russia, and as regards the Russian GLs, there were two, one of them has expired already. Uh one of them is still valid, so GL 134, which allows anyone to buy Russian oil on the seas uh until I think it's valid until the 11th of April, so it will expire in two days from the date of our recording. We'll see what happens then. And so this GL actually suspends the US price cap for its duration. So American service providers can participate in those transactions to help uh sell or buy uh Russian oil without being in breach of the price cap. Uh so this is kind of an extra level of complication. The price caps have always been very complex because you have to really make sure that you are compliant and this requires lots of work. You rely on attestations from uh various companies. If you're a CME or a bank or insurer company, you rely on attestations from these companies, proving that they have both the oil under the price cap. Uh you need to make sure these attestations are authentic, they're not a forgery. You need to make sure that they are dated properly, that they cover the right transactions. You need to make sure that they cover they relate to the right origin of oil, that it's not, you know, Russian oil disguised at something else, or vice versa. There have also been cases in the past where Russians have tried to sell premium petroleum products as discount petroleum products to just evade the price caps on those higher priced products. There are many complications around evasion in this space. So I think with three price caps, one of them is suspended by the US, and these complications around evasion, it's really a very difficult situation for everyone to stay compliant.

Shadow Fleet Detection Best Practices

Vincent Gaudel 24:43

Thanks. That's uh abundantly clear, and clearly the divergence between uh regulators is not uh helping. Continuing on these uh challenges, so we've uh talked about shadow fleets and the heavy focus that has been placed, particularly by uh EU and UK, on shadow fleet vessels. Let's discuss a little bit more about like the clear instrument for sanctions evasion. Shadow fleet have become really instrumental. In your view, how can firms detect exposure? What are some of the recommended best practices to prevent exposure to the shadow fleet vessels? How to detect those high-risk maritime activities?

George Voloshin 25:16

Okay, so yeah, it's a good question. So there is unfortunately no magical recipe that you can apply to this. There is no one single recommendation that I can give that will solve all the problems. So uh I think you just need to have, in general, a robust sanctious compliance program that is takes in this risk into account specifically. And this which implies uh the proper governance framework, of course, to escalate any concerns uh on time, to write decisions at the proper level of decision making, and you have proper policies in place and have proper technology and tools. Uh, so this requires a lot of technology actually to be able to track vessels, to track containers or container ships. We're talking about shadow fleet um transporting oil or also transporting dual-use goods or weapons. It's also possible that they can be used for this purpose. We should not forget about this non-energy dimension as well. So I think you should have a mixture of things which usually make up a good compliance program. So mentioned governance, I mentioned technology, tools, internal controls, custom due diligence, supply chain due diligence as well, training and awareness raising among uh relevant personnel, business making uh teams, as well as first line of defense, second line of defense, and pretty much everyone else who is involved in these transactions.

Vincent Gaudel 26:30

I think it's um And specifically on that, if I may interrupt you, like you just said, like every party involved in those transactions. Let's maybe take a moment to talk about the responsibility for financial institutions and insurance companies being involved in either trade finance or insuring those shipments. Can you elaborate more on the role for these entities maybe?

George Voloshin 26:49

Well, responsibility, it's a good question, but it's pretty clear just from the fact that sanctions create strict liability. So we should not forget about that. Strict liability, which is uh embedded in law, which is codified officially, there is no doubt about how it applies and how far in the US, in UK and in the EU, there's no such thing as strict liability in the regulations themselves. But at the member state level, sanctions evasion has now been criminalized. So all member states are supposed to have implemented this directive into domestic law, and basically if you violate sanctions against some you know uh sanctioned vessel, you will be liable. The responsibility is quite extensive. I think that whether an insurance company or a bank, for example, or a payment services provider, if you're involved in a deal, you need to really make sure that you're not violating sanctions and you're not helping anyone violate sanctions. Whether it's your customer or a sanctions evader who's trying just to do make good money off your back. So responsibility is especially true when you have an excess. So let's say uh if you are a European bank, you are liable for complying with European sanctions. If you are a UK bank, the same stands for UK sanctions, American bank, US sanctions. Uh so if there is an excess of currency that is based in transaction, dollars, euros, British pounds, anything else. Uh, if there is involvement of um any US EUK persons, if you are subject to this jurisdiction, you need to be very careful. But there is also risks uh for non-US persons, for example, facing secondary sanctions. For example, if you are a bank in India and you are trying to help your client buy a Russian or a Chinese or Iranian oil, then you will need to make sure that you're not um facilitating trade with a sanctioned vessel, part of the shadow fleet, used by Russia or Iran to uh sell their products. So you need to be careful around what licenses and waivers permit. Again, they exist, but it's very important to know when they end, what they authorize and don't authorize. So basically where your possibilities top in terms of what you can operationally and legally do. So uh your responsibility is pretty much extensive and can be serious if you break the rules and especially for big amounts of money. If there's the big transactions they're involved in and you break the rules, then you can really face very serious consequences.

Vincent Gaudel 29:08

Thanks for that. It's uh yeah, very clear. And as you said, there's also the time aspects to it, right? General licenses are temporary, but also those trades, typically those transactions, they take a long time to well complete.

George Voloshin 29:19

Absolutely. So you can imagine a situation which, for example, let's imagine a practical scenario. You have an oil importer, let's say refinery, trying to buy for a trader some oil from Iran or from Russia, and they are relying on the GLs to be able to do this. So you are a local bank, let's say you're a non-US bank, and you uh rely on this GL to actually facilitate the trade, and you may be actually relying on your correspondent bank in the US, which takes comfort from the GL to be able to process the trade in US dollars. But let's say that the trade has been performed partially, the cargo has been delivered, but the payment is still pending. And let's say the GL expires, or the US government may terminate the GL prematurely. If there is a change of policy, once again, maybe the Iran-US ceasefire or peace negotiation fails completely and the US government just pulls the GL without giving any prior notice. At this point, you need to understand your responsibility for what? And what are you doing now? Are you still able to make the payment? Are you required to freeze the funds? Will your correspondent bank reject the payment instruction because not allowed to process? How would you do this? What did you do to your client? How would you explain this to your client? How do you manage potential client liability risk as well? Because the client will kind of be very happy with this outcome. So it's very important to actually be careful around the GLs and especially if something changes mid-deal, midway, you need to be able to manage the consequences of that. So sometimes you can't do something that's no longer allowed, and the distraction may just be, you know, suspended for some time, and you never never know what will happen tomorrow. So you just maybe freeze the funds and keep them in custody until things clear up.

What Happens When A GL Ends

Vincent Gaudel 31:00

Thanks a lot, George. Well, I feel like we've covered a lot of ground here, and maybe it's time to try to conclude and share some closing thoughts and practical takeaways. Like there is huge complexity like never before. I think it's fairly uh obvious that now obviously uh robust sanctions compliance frameworks need to be in place. Their agility though and their ability to allow teams to adjust and uh exit tricky situations where it needs to be, that has never been more important than currently. But from your perspective, if you had to share a handful of like practical tips for sanctions compliance teams, what is really top of mind for you at the moment?

Practical Takeaways Real Time Monitoring

George Voloshin 31:41

Yes, I think first of all, I should have mentioned it previously, probably as well, is that when you think about the current situation, what you really need to do first, uh in the first instance before doing anything else, is to really try to understand your risk appetite. Maybe you need to recalibrate risk appetite and understand where your risk appetite actually matches what is currently happening. Let's say you have a resumption of some trade uh with Iran. Does the risk appetite actually allow this trade to resume on your end? Do your controls allow you to make sure that you mitigate risk sufficiently? Or maybe your risk appetite is such that this uh trade will still be off-limits to your institution. I think it's very important not to rush uh headlong into anything, but just think very carefully, twice and maybe four or five times before deciding on a course of action to take. This is probably at the level of you know, high uh senior decision makers, senior executives to decide what they are prepared to tolerate in terms of additional risk exposure. Or if you're prepared to take on the risk, then you need to make sure that your controls are fully in line with uh what the level of risk you are taking on. So I think that's uh in the current triple environment, it's very important to be able to track all the developments in kind of in real time. As much as banks, for example, track sanctions designations in real time because they rely on lists and they try to really anticipate and maybe be able to respond to those designations to the minute once they're rolled out. It's also important to understand, based on policy statements, including Donald Trump's social media posts, uh, anything that may come up from, come out of the industry of the financial services community in terms of research and what's where what situation is headed, where geopolitical situation is going right now, to be able to kind of anticipate a little bit uh the future. We can't forecast the future, but we can still anticipate next the next move. And just if something is really deteriorating, then maybe you should delay uh an approval today until tomorrow and just see whether tomorrow this approval still makes sense from a legal point of view. So just be very careful and um try to understand whether your current posture is aligned with the geopolitic situation as it evolves all the time. So you may have some kind of geopolitical task forces that follow specific developments. You may need people who work 24-7, let me be in shifts to track developments and escalate them across the entire world, global network of branch offices to make sure that no one is unaware of what's just happened just now and they are fully uh up to date on the situation. And then in terms of the compliance sync compliance framework, I think that a good synchronous compliance framework and program can really withstand these jubilitical shocks. If you have had a program that was good enough before 26, before the war in Iran, before Venezuela, before Russian Russian Shadow Fleet, you know, reversal, policy reversal. I think you can still withstand all these shocks with um dignity and um good performance. So, which I said again implies the standard requirements of having a good uh governance framework, good policies and procedures, proper due diligence on your customers and the supply chain, training and um you know awareness raising, as well as technology. Technology is very important as well, escalating concerns, escalating uh suspicions of any unusual, and being able to actually allocate resources where risk is highest. That's probably my advice to everyone.

Vincent Gaudel 35:02

Excellent. I think that's a fair uh list of uh good practices, and yeah, I'm particularly uh taking away the the aspect on the real-time monitoring of trade. So we were seeing that for a long time in the in the financial sector, like real-time monitoring on the actual flows of money, but that could also be uh a very uh advisable practice for flows of uh of goods, right? So just looking for something that stands out of the ordinary, and the the other, yeah, I think a very uh good tip is to look for risk signals across the board and try to anticipate uh important changes. I think it was you, you you mentioned the prediction markets as an interesting uh source of uh potential risk intelligence.

George Voloshin 35:40

Yeah, so there is kind of this uh interesting view among some people who follow these prediction markets that even if you don't participate in them at all as a better, you can still kind of derive some kind of collective wisdom from where people think things will go. So I know that many global banks and hedge funds actually following prediction markets very closely for any clues into what may happen tomorrow. Also because unfortunately, unfortunately, that's the thing I obviously deplore. Uh there is a very, very big suspicion now that some people are using insider information to trade on the prediction markets. And so basically, people are from outside looking for clues from those who may know something but uh cannot legally trade on this information. So it's a very complicated picture. You take information from anywhere you can uh at this moment.

Vincent Gaudel 36:28

Exactly. Well, thanks a lot for taking the time to share your insight with us, George. It was really great to have you. And to all of us, thank you all for listening, and we'll see you for another episode. Thank you. Thank you.