Indian firms ramp up checks to avoid deals with sanctioned entities

Mint spoke with, companies are increasingly hiring law firms and investigative agencies before closing deals to ensure that none of the parties involved, including subsidiaries, parents or suppliers, feature on sanctions lists.Clients are now required to sign sanctions standard operating procedures (SOPs) before finalising deals, which mandate disclosures such as ultimate beneficiaries, end-use certificates, and verification of licensed vendors.The purpose of such stringent due diligence is to ensure that companies do not deal with sanctioned entities, thus preventing frozen assets, blocked payments, or stalled deals amid geopolitical tensions.“With growing awareness, turbulent global environment and growing tariff and sanctions regime, sanction checks are carried out on large and key vendors at a pre-transaction stage. Further, post transactions, clients are asking us to implement third-party diligence programs in the acquired company and also have a real-time sanctions screening process,” said Tarun Bhatia, managing director and APAC co-head at financial risk and advisory firm Kroll.A sanctions control and ownership test determines whether an entity is “blocked” due to ownership by sanctioned individuals.

If a sanctioned person owns 50% or more of an entity, it is considered sanctioned. In certain jurisdictions, sanctions can apply even when ownership is below 50%, said Sara Sundaram, partner at Cyril Amarchand Mangaldas.

Sundaram is part of the white-collar crimes and dispute resolution practice at the law firm.According to Bhatia, a sanctions screening looks at the company, its holding structure, subsidiaries, associate companies, and key management personnel (KMP) among others. He noted that there is often a