INDIA: An Introduction to White-Collar Crime & Corporate Investigations

Background

Countries around the world impose export controls and economic sanctions as part of their foreign policy and national security strategies. These measures are designed to influence the behaviour of foreign states, entities and individuals, often in response to geopolitical developments, violations of international law, or threats to global peace and security. Sanctions may be imposed unilaterally by individual countries, multilaterally by alliances, or through international bodies such as the United Nations Security Council (UNSC). Their scope can vary, ranging from comprehensive sanctions that restrict economic engagement with an entire country to targeted measures aimed at specific individuals or entities.

Export controls, on the other hand, regulate the transfer of goods, technology and sensitive information across borders. These controls are implemented to prevent the proliferation of weapons, restrict access to critical technologies, and ensure that sensitive materials do not fall into the hands of entities that may use them for military or other unauthorised purposes. Export control regulations may apply not only to cross-border transactions but also to transfers within a country, particularly when involving foreign nationals or companies.

Regulatory Regime in India

India adheres to UNSC-imposed sanctions and enforces its own autonomous sanctions under domestic laws such as the Unlawful Activities (Prevention) Act, 1967. Additionally, export restrictions in India are governed by multiple pieces of legislation, including:

• the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005;
• the Foreign Trade (Development & Regulation) Act 1992 (the “FTDR Act”); and
• the Customs Act, 1962.

The Directorate General of Foreign Trade (DGFT) plays a crucial role in enforcing these regulations, ensuring compliance with international commitments while safeguarding India’s national security and economic interests.

International Regulatory Regime

Beyond domestic compliance, Indian companies must also navigate the complex landscape of foreign sanctions and export control laws, particularly those of the United States. Given the extraterritorial reach of US laws, businesses operating out of India can face significant exposure if they engage in transactions that violate US sanctions or export control regulations. In recent years, this has become a pressing concern, as multiple Indian companies have faced penalties for non-compliance with US laws.

For instance, in October 2024, the US Department of the Treasury imposed sanctions on 19 Indian companies and two Indian individuals for their involvement in transactions linked to Russia. These entities were accused of exporting goods classified under the Common High Priority List (CHPL) maintained by the US Bureau of Industry and Security (BIS). The CHPL includes dual-use items such as computer numerically controlled machines, electronic components related to wireless communications, and weapons-related technologies – items considered critical to Russia’s military efforts in Ukraine. As a result of these transactions, the sanctioned Indian entities were added to the Specially Designated Nationals (SDN) List, significantly restricting their ability to conduct international business.

In December 2024, the USA expanded its sanctions to include Iran’s petroleum and petrochemicals sector. This led to penalties being levied against several shipping companies involved in transporting Iranian oil and petroleum products. A month later, in January 2025, Russia’s energy sector was also the target of US sanctions, further broadening the scope of potential enforcement actions. When an entire sector is sanctioned, any individual or entity operating within or having past business ties to that sector becomes vulnerable and exposed to US enforcement measures.

One of the most significant aspects of US sanctions is the concept of secondary sanctions. Unlike primary sanctions, which apply directly to US persons and entities, secondary sanctions target non-US actors who engage in activities that the US government seeks to curtail. These measures allow the Office of Foreign Assets Control (OFAC) to penalise third-country businesses without requiring any direct US nexus. The consequences of being subjected to secondary sanctions can be severe – assets may be frozen, business dealings with US persons can be prohibited, and access to the US financial system can be cut off. For individuals subjected to sanctions, travel restrictions to the USA may be imposed as part of enforcement measures.

Beyond legal and financial repercussions, inclusion on the SDN List carries a profound reputational impact. Companies and individuals sanctioned by the USA often face reluctance from banks, financial institutions and business partners, even if those entities are not directly subject to US jurisdiction. The fear of inadvertently violating US sanctions laws leads many multinational corporations to steer clear of engaging with SDN-Listed entities. As a result, sanctioned businesses often struggle with operational continuity, loss of investor confidence and financial distress.

Sanctions and export controls are highly dynamic, frequently evolving in response to shifting geopolitical landscapes. This presents a unique challenge for Indian businesses, many of which lack awareness of the full extent to which these laws can affect their operations. Indian companies are often unaware of how certain transactions or business relationships can expose them to regulatory risks under foreign laws. The complexity of these legal frameworks further complicates compliance efforts, making it essential for companies to adopt a proactive approach to risk management.

To mitigate exposure, it is highly recommended that businesses strengthen their compliance mechanisms by thoroughly reviewing their operational structures and supply chains. A comprehensive assessment of potential risk areas is crucial, particularly in transactions involving sanctioned jurisdictions or sensitive goods. If red flags are identified, companies should seek legal counsel to develop risk mitigation strategies that align with US and international laws. Compliance frameworks should be regularly updated to reflect changes in both domestic and foreign regulations. Establishing internal policies on sanctions and export controls is a critical step towards safeguarding business interests. Companies should implement stringent due diligence procedures to vet clients, suppliers and business partners, ensuring that they are not engaging with sanctioned entities. Employee training programmes can further enhance compliance by educating personnel on the importance of adhering to these regulations and identifying potential red flags before transactions are finalised.

Summary

Continuous monitoring is essential in this fast-evolving regulatory environment. Businesses must stay informed about new developments in sanctions laws and export control policies to avoid unexpected compliance risks. Regular audits and risk assessments can help detect vulnerabilities before they escalate into legal liabilities. By fostering a culture of compliance and vigilance, Indian companies can navigate the complexities of international trade while minimising the risk of regulatory enforcement actions.

Ultimately, awareness and preparedness are key. As sanctions regimes continue to expand in response to global political tensions, Indian businesses must take proactive measures to ensure that they remain compliant and resilient. Failure to do so could not only result in severe financial penalties but could also jeopardise long-term business prospects and international partnerships. Given the far-reaching implications of sanctions and export controls, companies must prioritise legal compliance as an integral part of their global trade strategy.