INDIA Law and Practice Contributed by: Alina Arora, Samarth Gupta and Parth Singh, Shardul Amarchand Mangaldas & Co
given that prohibitions on dealings with designated persons apply to all persons, screening is the practical means of compliance. India does not maintain a consolidated sanctions list. There is no statutory ownership-and-control test com - parable to the US 50% rule. 4.4 Licences, Derogations and Exceptions India does not have a general sanctions licensing regime. Relief (where available) is limited to excep - tions in the relevant UNSC resolution and correspond - ing domestic order (eg, for basic expenses and legal fees), invoked by notification through the MEA to the relevant UN committee of the intention to: • authorise access to frozen funds for basic expens - es or legal fees; and • access proceeds in the absence of a negative decision within 48 hours of such notification. Applications of this nature, if any, in the defence con - text are not publicly reported. 4.5 Extraterritorial Sanctions and Secondary Sanctions Risk Sanctions imposed by foreign governments have no legal effect in India. Commercial exposure nevertheless remains, particu - larly from US secondary sanctions’ authority over for - eign financial institutions dealing with Russia’s military industrial base, which has made Indian banks cau - tious in processing Russia-linked defence payments. Countering America’s Adversaries Through Sanctions Act (CAATSA) exposure (whereby sanctions may be imposed on countries purchasing major defence equipment from Russia) occasioned by India’s pur - chase of S-400 air defence system from Russia – as well as the December 2023 US executive order authorising secondary sanctions on foreign financial institutions dealing with Russia’s military-industrial base – are illustrative of this tension. Indian defence-sector participants typically manage such exposure through: • sanctions clauses in contracts;
• payment structuring; and • assessment of US/EU touchpoints in components, financing and logistics. 4.6 Sanctions Compliance Programmes The DGFT’s ICP framework for strategic trade is the only regulator-issued guidance on compliance pro - grammes. A certified/approved ICP is a pre-condition for the GAICT and is treated as a mitigating factor in enforcement. RBI directions prescribe the screen - ing standard for regulated financial entities. Beyond these, expectations are typically contractual. An effective ICP for a defence-sector participant would generally comprise: • management accountability and item classification; • screening against UN, UAPA and relevant foreign sanctions lists; • end-user and end-use verification; • payment channel review, training and record-keep - ing for at least five years; and • an escalation and disclosure protocol. 4.7 Enforcement, Penalties and Voluntary Disclosure Terrorism and terrorist financing offences under the UAPA are punishable with imprisonment extending to life. Contravention of a freezing order is separately punishable. Offences under the WMD Act attract imprisonment of five years to life. Contraventions of trade and export control measures attract the civil and criminal consequences. Customs offences attract confiscation and imprisonment. Contraventions of FEMA attract a penalty of up to three times the sum involved, with the option of com - pounding (ie, settlement of the contravention on pay - ment). India does not have an OFAC-style voluntary disclo - sure programme for sanctions violations; available mechanisms are the export control self-disclosure route and voluntary payment of customs duty. Co- operation, an effective compliance programme and
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