OFAC Fines FTI Consulting $1.05 Million Over Prohibited Dealings With Russian State-Owned Bank VTB

Key Takeaways

• $1.05 Million OFAC Settlement: FTI Consulting agreed to pay $1.05 million to settle potential civil liability for apparent violations of U.S. sanctions targeting Russia's financial sector.
• Indirect Dealings With VTB: OFAC found that FTI indirectly dealt in prohibited debt of Russian state-owned bank VTB on six occasions between April 2019 and May 2021 by continuing to provide services while invoices remained unpaid beyond the permissible 14-day tenor.
• Intermediary Structure Did Not Eliminate Risk: Although FTI invoiced a law firm rather than VTB directly, OFAC concluded the arrangement effectively extended credit to VTB because payment ultimately depended on the bank and the law firm did not assume the credit risk.
• Warning Signs Were Missed: OFAC said FTI continued issuing invoices and performing work despite prolonged payment delays, which the agency viewed as repeated indicators that the firm was extending prohibited debt to a sanctioned entity.

Deep Dive

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has reached a $1.05 million settlement with consulting giant FTI Consulting over apparent violations of U.S. sanctions targeting Russia's financial sector, concluding that the firm indirectly extended prohibited debt to Russian state-owned lender VTB Bank on multiple occasions.

According to an enforcement release issued Monday, OFAC found that between April 2019 and May 2021, FTI indirectly dealt in prohibited debt of VTB on six occasions through an arrangement that allowed the bank to delay payment for consulting services well beyond the 14-day maturity limit imposed under U.S. sanctions.

FTI agreed to pay $1,050,000 to resolve its potential civil liability. OFAC determined the apparent violations were non-egregious but were not voluntarily self-disclosed.

The case centers on economic consulting services that FTI provided in support of litigation involving VTB in Singapore. At the time, VTB was subject to Directive 1 under Executive Order 13662 and listed on OFAC's Sectoral Sanctions Identification (SSI) List, which prohibited U.S. persons from dealing in new debt of more than 14 days maturity issued by the bank.

To address sanctions concerns, FTI structured the engagement through a global law firm. Under the arrangement, FTI issued invoices to the law firm, which would in turn seek reimbursement from VTB before paying FTI. However, OFAC found that the law firm effectively served as an intermediary and did not assume the credit risk associated with VTB's non-payment. As a result, OFAC concluded that FTI was indirectly extending debt to VTB through invoices that remained unpaid well beyond the permitted tenor.

The agency said FTI continued performing work and issuing invoices despite significant payment delays. By July 2019, several invoices had remained unpaid for periods ranging from 35 to 99 days, and the firm continued working on the matter while seeking payment ultimately expected from VTB. One invoice was not partially paid until 90 days after issuance, while another payment arrived 198 days after invoicing.

By March 2020, FTI had issued six invoices totaling approximately $353,862 but had received only one partial payment. The firm continued pursuing payment through the law firm until May 2021, when the law firm informed FTI it was no longer representing VTB. FTI later notified OFAC after conducting an internal investigation into the matter.

OFAC Focuses on Indirect Dealings

A central theme of the enforcement action was OFAC's position that sanctions restrictions apply equally to indirect and direct dealings. The agency concluded that FTI's invoices constituted new debt under Directive 1 and that the firm effectively extended prohibited credit to VTB through the intermediary arrangement. OFAC also found that the structure risked obscuring transaction activity that might otherwise have been identified through sanctions screening processes.

In announcing the settlement, OFAC emphasized what it described as a foundational principle of sanctions compliance: parties cannot accomplish indirectly what sanctions rules prohibit them from doing directly.

The agency said firms should evaluate the underlying economic realities of transactions rather than relying solely on formal contractual arrangements when assessing sanctions risks.

Penalty Increased Above Base Amount

Under OFAC's Economic Sanctions Enforcement Guidelines, the agency calculated a base civil monetary penalty of $525,000 because the matter was deemed non-egregious and not voluntarily self-disclosed. OFAC ultimately doubled that amount, imposing a settlement of $1.05 million.

The agency cited several aggravating factors, including what it described as FTI's failure to recognize repeated warning signs that it was extending prohibited debt to VTB. OFAC pointed to the firm's awareness of sanctions restrictions at the outset of the engagement, its continued issuance of invoices despite prolonged non-payment, and its participation in discussions with VTB regarding overdue invoices.

OFAC also highlighted FTI's size, international footprint, and commercial sophistication, noting that the enforcement action was intended in part to promote compliance among similarly situated firms.

The agency credited FTI for cooperating with the investigation, including providing extensive documentation and waiving privilege over certain materials. OFAC also cited enhancements the company made to its sanctions compliance program, including updated policies, expanded training, additional compliance resources, and strengthened controls implemented following Russia's full-scale invasion of Ukraine.

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