Sanctions tracker: New Australian sanctions guidance released by Australian Sanctions Office

The Australian Sanctions Office (ASO) has released a package of materials to assist Australians and Australian businesses to comply with certain aspects of Australian sanctions laws.

This update provides a brief overview of some key developments from the package, which includes:

• a Sanctions Compliance Toolkit; 
• a Sanctions Risk Assessment Tool; and
• new and updated guidance and advisory notes.

In 2024, we saw a flow of judicial guidance on Australia’s autonomous sanctions regime, which has been increasingly expanded since Russia’s invasion of Ukraine in 2022: see our updates Federal Court Decisions prompt legislative changes,  Tigers Realm Coal Limited and the ongoing litigation in Alumina and Bauxite Company Ltd v Queensland Alumina Ltd.

The ASO’s materials aim to provide practical guidance and actionable steps that can be taken to operationalise sanctions compliance.

The role of the Australian Sanctions Office

The ASO is the Australian Government’s sanctions regulator.

In addition to its regulatory functions, the ASO frames its role as one of cooperation with the regulated community, aiming to uphold Australia’s autonomous and United Nations Security Council (UNSC) sanctions frameworks, without unduly impeding legitimate activities.

The new guidance released by the ASO forms part of the ASO’s outreach function to enhance awareness of sanctions to foster voluntary compliance with sanctions laws. Steps identified in the guidance may also assist entities to understand what is expected by the ASO in relation to their approach to sanctions due diligence.

The new guidance consistently reiterates that it is a guide only and the importance of seeking independent legal advice to accurately identify and assess sanctions risks.

Sanctions Compliance Toolkit and Risk Assessment Tool

The ASO has indicated that the Sanctions Compliance Toolkit and Sanctions Risk Assessment Tool are aimed at helping regulated entities and legal professionals navigate the complexities of Australian sanctions laws. These materials offer a structured approach to compliance by outlining key principles, risk management strategies, and best practices that regulated entities can adopt.

In the Sanctions Compliance Toolkit, the ASO outlines how to identify sanctions risk by reference to a summary of:

• the UNSC and Australian autonomous sanctions;
• concepts underpinning sanctions prohibitions via activities associated with designated persons and entities and activities associated with sanctioned countries, regions or terrorist groups; and
• a structured approach to identifying sanctions risks.

The Toolkit then sets out recommendations for managing sanctions risks by sanctions compliance programs at an organisational level, as well as activity-based compliance. The Toolkit particularly emphasises how regulated entities can take reasonable precautions and exercise due diligence to avoid sanctions contraventions.

It will be important for regulated entities to carefully consider this guidance against their current approach to sanctions due diligence, noting that the Toolkit emphasises that compliance programs must always be tailored to the specific risks and activities of the entity. Nonetheless, the Toolkit indicates that an effective compliance program should typically include the following elements:

• senior management commitment;
• continual risk assessment;
• a sanctions screening program, including screening of customers, transactions and third-party service providers;
• ongoing training;
• monitoring and enforcement to ensure the sanctions compliance program is effective; and
• independent audit of the sanctions compliance program on a regular basis.

The Toolkit also explores the availability and appropriateness of sanctions permits.

There are also a series of flowcharts in Annexure B to the Toolkit, which we encourage clients to consider against their current decision-making processes.

Relatedly, the Sanctions Risk Assessment Tool can be used as a guide to assessing sanctions risks by way of a structured questionnaire, which can be used by regulated entities to inform a preliminary assessment of sanctions risks. Nonetheless, the dynamic and ongoing nature of the sanctions risk assessment process is highlighted to encourage entities to continuously monitor and reassess their compliance strategies, with reference to independent legal advice if necessary.

Guidance notes

The ASO has also released a range of detailed guidance notes summarising obligations for complying with Australian sanctions laws. The guidance notes relate to the following topics:

• Digital Currency Exchange Sector
• Sanctions compliance for Australian Government Agencies
• Dealing with Controlled Assets
• Financial transactions involving designated persons and entities
• Import sanctions – firearms and arms material from sanctioned countries
• Reporting a sanctions contravention
• Sanctions compliance for universities
• Cyber sanctions

Of particular note is the guidance provided in relation to the following:

Dealing with Controlled Assets and designated persons

One of the key areas where we see requests for assistance from corporate clients relates to the scope and application of the prohibition on dealing with assets owned or controlled by designated persons or entities (otherwise known as “Controlled Assets”).

The guidance note on dealing with Controlled Assets focuses on the obligation to freeze such assets, mandatory reporting to the ASO and Australian Federal Police, and procedures for unfreezing assets upon de-listing.

In explaining the concepts of “ownership” and “control”, there are some useful nuances drawn out in the guidance. For example:

• indicators of ownership include not only legal title, but can also be indicated by a designated person or entity’s rights to exclusively enjoy, destroy, alter, alienate or dispose of, or maintain and recover possession of the asset; and
• in contrast, control can be indicated by a designated person or entity’s command or direction over the asset. This may be established by possession of the asset or the ability to dictate how it may be dealt with in comparison to other persons or entities. This becomes important where shell companies with complex ownership structures, and several layers of intermediaries, are often used to obscure these questions.

Notably, the guidance is silent on whether a particular percentage ownership of an entity is indicative of ownership or control.

The guidance notes that, when faced with ambiguity, assistance can be sought from the ASO to determine whether an asset is owned or controlled by a designated person or entity.

Financial transactions involving designated persons and entities

Tying in to the above guidance note, and relating to another key area where legal advice is often sought, the guidance on financial transactions involving designated persons and entities reaffirms the restrictions on making financial assets available to a designated person or entity, including indirectly.

The guidance notes that this is a particular risk where the designated person or entity has someone acting at their direction, where dealings with that person are also restricted. Making financial assets available for a designated person or entity’s benefit is also an offence, such as paying off a designated person’s debt.

Notably however, the guidance is silent on whether there is a limit on the concept of providing a benefit “indirectly” and how this applies where a designated person or entity may hold an indirect minority interest in a potential counterparty.

The importance of robust due diligence and know-your-customer procedures is underscored to capture arrangements that are not always visible at first glance.

Advisory notes

The ASO has also released a range of advisory notes to provide information on potential sanctions threats. The advisory notes relate to the following topics:

• Common High Priority Items for Russia
• Australian export sector, Russian evasion methods
• DPRK IT Workers
• Advisory from the Russian Elites, Proxies and Oligarchs Taskforce – Russian Sanctions Evasion
• Oil Price Cap Compliance and Enforcement Alert

Of particular note is the advice provided in relation to the following:

Common high priority items for Russia

Other jurisdictions have identified “common high priority items” that are targeted by Russia for procurement. This list of goods provides some clear examples for exporters and service providers, including banks and freight companies, to be aware of when considering sanctions risks.

The advisory note reiterates that, without proper due diligence, a sanctions breach can occur when, for example, an end-user who conceals their participation in Russian procurement forwards on or diverts goods which the intermediary intended to reach a legitimate end-user.

Australian export sector, Russian evasion methods

An update has also been published to the previous advisory note on third party transshipment hubs, shell companies and end-users. A useful list of common red flags to indicate when a transaction might be intended to evade sanctions can be integrated into entities’ procurement compliance frameworks.

Further updates

Across the coming weeks, we will be publishing several spotlight notes on some of the guidance that requires a closer look, and how you can leverage it in your compliance practices.