FTI Settlement Warns Against ‘Appearance of Compliance’ in Sanctions Work

The Treasury Department’s Office of Foreign Assets Control imposed a $1.05 million settlement on FTI Consulting Inc. in a Russia sanctions case that compliance practitioners say illustrates the danger of relying on formal deal structure when the underlying economics point to a prohibited transaction.

OFAC said FTI, a Washington-based global advisory firm, indirectly dealt in prohibited debt of VTB Bank OAO, a Russian state-owned bank, on six occasions between April 2019 and May 2021.

The transactions arose from expert consulting work FTI performed in support of VTB in Singapore litigation, through an engagement formally structured with a global law firm rather than VTB itself.

The problem, OFAC said, was that the law firm’s obligation to pay FTI depended on first receiving payment from VTB. FTI had no recourse to collect from the law firm unless VTB paid, and it had no recourse against VTB if the invoices went unpaid.

OFAC concluded that the arrangement caused FTI to extend new debt to VTB, which was subject to Directive 1 under Executive Order 13662, barring U.S. persons from dealings in new debt of more than 14 days’ maturity.

Sarah Beth Felix, of Palmera Consulting  said the case should be read as a warning that knowledge creates obligations. “If you have knowledge, you have burden,” she wrote in a LinkedIn post, adding that both the consulting firm and the recommending law firm “had knowledge of indirect debt being issued to a sanctioned Russian bank” and missed the sanctions implications.

The facts, as OFAC described them, show why the agency treated the matter as more than a paperwork failure. FTI issued six invoices totaling about $353,862.

By March 2020, it had received only one partial payment. One later payment of about $19,400 was made 198 days after the invoice was issued.

During that period, OFAC said, FTI continued to perform valuable services for VTB’s benefit while unpaid invoices remained outstanding.

OFAC said the settlement reinforces “the foundational principle” that a party may not do indirectly what it cannot do directly. The agency also said it will examine “the underlying economic and practical realities” of formal arrangements when evaluating sanctions exposure.

Felix drew the same lesson more bluntly: “Intentionally structuring a payment/invoice structure through a law firm does not shield any US person or company from complying with OFAC restrictions.” She also flagged OFAC’s treatment of invoices as new debt, writing that “invoice issuance = new debt” in sanctions programs where debt restrictions apply.

OFAC found the apparent violations non-egregious but not voluntarily self-disclosed. The agency set the base civil penalty at $525,000 but aggravated the settlement to $1.05 million, citing the need to promote future compliance by similarly situated firms.

It said FTI, with senior managers involved, “recklessly missed multiple warning signs,” including VTB’s role as ultimate payor, repeated late payments, continued work despite nonpayment, and the law firm’s statement that it did not bear VTB’s credit risk.

The case is also notable because the sanctioned party was not fully blocked at the relevant time. VTB was subject to sectoral sanctions, not a comprehensive asset freeze, but OFAC stressed that less-than-full-blocking restrictions can still be expansive. “U.S. persons must exercise caution when dealing with sanctioned persons who are subject to less-than-full-blocking measures,” the agency said.

Felix said the case shows that reliance on counsel is not itself a defense. “Just because a law firm suggests participation in something does not mean they understand or have fully vetted the opportunity presented to your firm,” she wrote. She summarized the compliance lesson as: “Appearance of compliance” is not compliance.

OFAC credited FTI for cooperating, tolling the statute of limitations, providing contemporaneous documentation, waiving privilege, and improving its sanctions compliance program. Those enhancements included training on sectoral sanctions, heightened awareness for law-firm engagements, updated screening policies, more compliance resources, and additional Russia-related controls after the full-scale invasion of Ukraine.

For professional-services firms, the settlement carries a practical message: sanctions risk cannot be resolved solely by inserting an intermediary between the U.S. person and a sanctioned party. When the sanctioned party remains the economic beneficiary, ultimate payor, or source of credit risk, OFAC may treat the arrangement as an indirect prohibited dealing. That is especially important for consulting, legal, expert-witness, investigations, restructuring and advisory work, where firms often serve clients through law-firm engagements and may view the law firm as their only contractual counterparty.

Felix also noted that a later notification to OFAC may not be treated as a voluntary self-disclosure if the conduct continued for years. OFAC reached that conclusion here despite FTI’s eventual notification, finding that the apparent violations were not voluntarily self-disclosed.

Compliance teams must test the real payment flow, credit exposure and beneficiary of services, not merely the contract caption. In OFAC’s view, an arrangement that creates only the appearance of compliance may still produce liability when it allows a sanctioned party to receive services or financing that U.S. sanctions were designed to restrict.

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For more information, please visit the following Enforcement Release.

06/05/2026 Update with Felix quotes