Red lines in sanctions risk management: why are they important and how to define them?

Sanctions regimes have recently become increasingly complex and fluid, posing serious risks for businesses operating in an international environment. To help companies better manage these risks, the Financial Intelligence Service (FIU) has published guidance on “Managing sanctions risks when dealing with high risk countries“.

This guidance helps companies to design and implement an internal control system (ICS) to ensure compliance with sanctions regulation. One of the key innovations in this guidance is the concept of “red lines” – a clear and strict set of restrictions that define which transactions, customers or activities a company does not fully tolerate.

What are “red lines”?

“Red lines” are clearly defined conditions that help a company to exclude completely certain jurisdictions, partners, types of transactions or goods/services that carry unacceptable sanctions risk. They are like border lines – if a transaction crosses these boundaries, it is immediately rejected, even if it would otherwise appear commercially viable.

How to define “red lines”?

For a company to effectively identify and respect these boundaries, it is necessary to:

1. Assess the company’s own scope and customer base.
2. Determine the risk appetite – how much sanction risk is the company willing to take (or not take at all).
3. Develop clear, documented criteria, such as:
   • Countries or territories with which no business is done,
   • Categories of goods or services where there is a high risk of dual use or sanctioned items,
   • Non-cooperation with legal or natural persons who cannot be fully identified or whose ownership structure is unclear.

Examples from practice

• A logistics company sets a “red line” that it will never transport cargo to or through North Korea, Syria or Iran.
• A financial institution imposes a rule that it will never open accounts for customers for whom the beneficial owners cannot be identified.
• The export company will refuse to do business with partner countries on the EU or US sanctions lists, regardless of the type of product.

Why is this important?

“Red lines” are not just a formal document – they are a tool to help protect a company from:

• Potential legal consequences (fines, criminal liability),
• Reputational damage,
• Refusal by banks to cooperate or provide services,
• Financial losses as a result of a breach of sanctions.

Need help with ICS?

The amp.plus team is ready to help you design or improve your internal control system, including defining the appropriate red lines for your business. We work on the basis of FIU guidelines, international best practices and your specific needs.

Contact us to ensure your company is one step ahead of the risks.

aml.plus team
[email protected]