Navigating the crossroads: Sanctions compliance for international banks in a fragmented regulatory landscape

Abstract

This paper critically examines how international banks can navigate the increasingly complex and fragmented landscape of sanctions compliance, shaped by the expanding extraterritorial reach of US and EU regimes. It analyses the operational and legal challenges arising from overlapping obligations, such as the EU’s ‘best efforts’ requirement under Council Regulation (EU) No 833/2014 of 31st July, 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine [2014] OJ L229/1, and the proliferation of secondary sanctions. Drawing on recent regulatory developments and enforcement trends, the paper identifies key risks such as conflicting legal duties and exposure to strategic sanctions risk. It presents a framework for managing extraterritorial risks, integrating scenario analysis, strategic exposure mapping, and the alignment of legal, compliance, and business functions. The findings highlight the necessity for banks to move beyond reactive compliance, embedding sanctions risk into strategic decision making and governance. The paper concludes that operational resilience and regulatory credibility depend on proactive, documented approaches that anticipate evolving supervisory expectations and enforcement pressures. This article is also included in The Business & Management Collection which can be accessed at http://hstalks.com.business/.