What Happened
The facts are straightforward and, frankly, cautionary in their familiarity.
In late 2018, a global law firm engaged FTI to provide expert economic consulting services in support of litigation in Singapore on behalf of the law firm’s client — VTB Bank, a Russian state-owned financial institution that had been placed on OFAC’s Sectoral Sanctions Identification list since 2014. Under Directive 1 of Executive Order 13662, U.S. persons were prohibited from dealing in new debt of more than 14 days maturity issued to VTB.
FTI’s compliance team recognized the risk from the outset. To navigate it, FTI structured the engagement so that its contractual relationship ran to the law firm — not directly to VTB. FTI would invoice the law firm; the law firm would collect from VTB; the law firm would then pay FTI. On paper, FTI had no direct relationship with VTB.
OFAC was unimpressed.
Between April 2019 and May 2021, FTI issued six invoices with a total value of approximately $353,862. VTB was responsible for paying those invoices and was the ultimate beneficiary of FTI’s services. When VTB failed to pay — sometimes leaving invoices outstanding for 90, 99, even 198 days — FTI continued working and continued issuing new invoices. FTI joined calls with VTB directly to discuss overdue payments. The economic reality of the arrangement was transparent: FTI was extending credit to VTB. The law firm intermediary was a structural formality, not a meaningful insulator.
OFAC concluded that FTI had dealt in prohibited debt of VTB on six occasions in violation of the Ukraine/Russia-Related Sanctions Regulations, and assessed a settlement of $1,050,000 — double the base penalty of $525,000.
The Core Principle: Substance Over Form
The headline compliance lesson from this case is one that OFAC has articulated repeatedly but that professional services firms continue to underestimate: it is prohibited to do indirectly what one cannot do directly.
Structuring a transaction through an intermediary does not launder a sanctions violation into a permissible arrangement. OFAC looks through the formal structure of a transaction to its underlying economic and practical reality. In FTI’s case, that reality was unmistakable. VTB was the client. VTB approved the scope and budget. VTB was the source of payment. FTI’s recourse ran entirely to VTB’s willingness to pay. The law firm was a conduit, not a principal.
The moment FTI’s invoices went unpaid past 14 days — and FTI continued working and continued extending credit — the violation was occurring regardless of whose name appeared on the engagement letter.
Aggravating Factors: A Roadmap of Missed Warnings
What makes this settlement particularly instructive is OFAC’s detailed articulation of the aggravating factors. They read as a roadmap of the warning signs FTI encountered and ignored.
FTI knew VTB was sanctioned from the very beginning. Its compliance officials discussed the risks before the engagement commenced. That initial awareness, rather than mitigating FTI’s exposure, heightened it — because it established that FTI understood the legal landscape and chose to proceed on the assumption that its intermediary structure provided adequate protection.
The warning signs only multiplied from there. VTB failed to pay invoices for months. FTI joined direct calls with VTB to chase payment. The law firm explicitly told FTI it had not assumed VTB’s credit risk — confirming that FTI’s economic exposure ran directly to VTB. At each of these junctures, a robust sanctions compliance program should have triggered a halt, an escalation, or a formal reassessment of whether the engagement remained permissible. Instead, FTI continued working and continued invoicing.
OFAC also noted FTI’s sophistication as an aggravating factor. A firm of FTI’s size, global reach, and professional expertise is held to a higher standard of sanctions awareness. Recklessness in that context carries greater weight than it might for a smaller or less experienced organization.
Mitigating Factors: What Saved FTI from Worse
The settlement was classified as non-egregious, and OFAC credited several meaningful mitigating factors that prevented a more severe outcome.
FTI cooperated extensively with OFAC’s investigation, provided comprehensive contemporaneous documentation, and waived privilege in doing so — a significant step that OFAC explicitly recognized. The transaction volume was small relative to FTI’s overall business. FTI had no prior OFAC violations in the preceding five years. And after the conduct was identified, FTI implemented meaningful compliance enhancements, including updated sanctions training, revised screening policies, additional compliance resources, and enhanced risk assessments tied to the Russia sanctions regime.
Notably, however, FTI did not receive voluntary self-disclosure credit. Although FTI submitted a notification to OFAC after investigating the matter, OFAC determined this did not constitute voluntary self-disclosure under its guidelines — a distinction that contributed directly to the penalty being set above the base amount.
Compliance Lessons for Professional Services Firms
This settlement carries specific and urgent implications for professional services firms — consulting companies, advisory firms, expert witness practices, and law firms — that routinely engage through multi-party structures involving international clients.
First, intermediary structures do not neutralize sanctions exposure. If your fees are ultimately funded by a sanctioned entity, if that entity approves the scope and budget of your work, and if your economic recourse depends on that entity’s payment, you are dealing with that entity regardless of who signs your engagement letter.
Second, invoice aging is a sanctions risk indicator. Unpaid invoices from arrangements involving sanctioned entities are not merely collection problems — they are potential debt extension violations. Compliance programs must include controls that flag aging receivables in sanctions-sensitive engagements before they ripen into violations.
Third, the moment you recognize a warning sign, escalation is mandatory. FTI’s compliance officials were involved from the beginning. That engagement needs to continue actively throughout the life of a sensitive matter — not just at onboarding. Joining a call with a sanctioned entity to discuss late payments is precisely the kind of event that should trigger an immediate compliance review.
Fourth, less-than-full blocking measures still carry serious compliance obligations. VTB was subject to sectoral sanctions — not a full blocking designation. Companies sometimes treat sectoral sanctions as a lesser concern. This settlement makes clear that sectoral sanctions restrictions are expansive, that each transaction must be independently evaluated, and that the 14-day debt maturity prohibition applies with full force to invoices, retainers, and any other credit arrangement.
Finally, cooperation and remediation matter — but they are not a substitute for getting it right the first time. FTI’s cooperation reduced its exposure. It did not eliminate the penalty or the reputational cost of a public enforcement action.
Conclusion
The FTI settlement is a case study in how sophisticated, compliance-aware organizations can still find themselves on the wrong side of OFAC enforcement — not through bad faith, but through over-reliance on structural arrangements that cannot bear the compliance weight placed on them.
OFAC will always look past the form of a transaction to its economic substance. Professional services firms that engage with sanctioned entities through intermediaries need to ask themselves a direct question: who is really the client, who is really paying, and who is really bearing the credit risk?
If the honest answer points to a sanctioned entity, the engagement requires far more than a clever payment structure. It requires a careful legal analysis, a documented compliance decision, and ongoing monitoring that does not stop when the first invoice goes out.
The principle could not be stated more plainly. You cannot do indirectly what you cannot do directly.