The Case: What FTI Did

On June 1, 2026, the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) released an enforcement action against FTI Consulting, Inc. (FTI), a Washington, D.C.-based international advisory firm. FTI agreed to pay $1,050,000 to resolve its potential civil liability for apparent violations of U.S. sanctions targeting Russia’s financial sector.

The core of the case is straightforward. Between April 2019 and May 2021, FTI indirectly dealt in prohibited debt of VTB Bank (VTB), a Russian state-owned bank on OFAC’s Sectoral Sanctions Identification List (SSI List). VTB was subject to Directive 1 under Executive Order 13662 (EO 13662), which bars U.S. persons from dealing in new debt of more than 14 days maturity of any SSI-listed entity.

FTI’s exposure arose from invoices that VTB was ultimately responsible for paying. By issuing those invoices, even indirectly, FTI extended new debt to VTB with a maturity well beyond the 14-day limit. The word “indirectly” is where the legal analysis turns: it was the foundation of FTI’s compliance argument, and it is exactly what OFAC rejected.

The Law Firm Structure: Why OFAC Did Not Buy It

FTI’s compliance team recognized VTB’s sanctions exposure from the outset. Their solution was a payment structure designed to keep FTI at arm’s length from VTB: FTI would contract with the international law firm representing VTB in Singapore arbitration, not with VTB directly. Under the engagement letter, FTI invoiced the law firm, and the law firm would pay FTI only after receiving payment from VTB. FTI had no direct recourse against VTB and no claim against the law firm until the law firm received VTB’s funds.

On paper, this looked like a clean separation. In practice, OFAC found it was an indirect OFAC sanctions violation and the agency’s reasoning goes back to its own published guidance on Directive 1: issuing an invoice is an example of new debt subject to Directive 1 restrictions; U.S. persons are prohibited from extending debt with an impermissible maturity if an SSI-listed entity is the indirect borrower; and such debt cannot be issued “for the benefit of” an SSI entity, regardless of the intermediary structure. The economic reality was unambiguous: VTB was the end obligor, VTB was the beneficiary of FTI’s work, and VTB controlled whether and when the invoices would be paid.

FTI’s conduct after the first invoices went unpaid made the analysis worse. Despite not receiving payment on April 2019 invoices totaling around $54,000, FTI continued working, issued four more invoices, and joined calls with the law firm and VTB to chase late payments. By July 2019, three outstanding invoices had been unpaid for 99, 92, and 35 days, respectively. FTI kept billing. Participating in payment negotiations directly with VTB was itself evidence that VTB was the real party to the debt obligation, a textbook indirect OFAC sanctions violation.

How OFAC Calculated the Penalty

OFAC classified the violations as non-egregious and found that FTI did not voluntarily self-disclose, despite having submitted a notification of a potential violation after conducting an internal investigation. The distinction matters: voluntary self-disclosure typically cuts the base penalty in half. A notification filed after the company investigates its own conduct does not qualify.

The base civil monetary penalty for a non-egregious, non-voluntarily-disclosed case was $525,000. The final settlement of $1,050,000 doubled that figure, driven by aggravating factors that OFAC weighed against the mitigating ones.

Aggravating and Mitigating Factors

OFAC identified three aggravating factors.

First, FTI, with the involvement of senior managers, recklessly overlooked multiple warning signs. The compliance team knew about VTB’s sanctions exposure at the outset; that awareness drove the payment structure. Yet FTI failed to connect the dots when invoices sat unpaid for months, when it joined calls with VTB to discuss late payments, and when the law firm explicitly told FTI it was not absorbing VTB’s credit risk. Each of those moments was a red flag that the structure was not functioning as a compliance shield.

Second, FTI harmed the objectives of the sanctions program. Extending impermissibly long credit to VTB ran directly counter to the aim of U.S. sanctions policy. The indirect payment structure also obscured the transaction from compliance screening that might otherwise have caught it.

Third, FTI is a large, commercially sophisticated firm operating globally across multiple industries and jurisdictions. OFAC held it to a correspondingly high compliance standard.

On the mitigating side: FTI cooperated fully with OFAC’s investigation, producing contemporaneous documentation and waiving privilege. The dollar volume of the transactions was small relative to FTI’s overall business. FTI enhanced its sanctions compliance program, adding training on sectoral sanctions, updating screening procedures, and bolstering risk controls after Russia’s full-scale invasion of Ukraine. And FTI had no prior OFAC findings of violation or penalty notices in the preceding five years.

Three Takeaways for Business

The FTI case delivers three compliance messages that OFAC articulates directly.

First: you cannot do indirectly what you cannot do directly. Routing a transaction through an intermediary does not sanitize it. This principle is embedded in OFAC’s regulations and has appeared repeatedly in enforcement releases. Structuring payments so that a third party contracts with a sanctioned entity on your behalf is an indirect OFAC sanctions violation, regardless of how cleanly the contracts are drafted.

Second: sectoral sanctions are not a softer version of full blocking. SSI-listed entities are not comprehensively blocked, but the restrictions that apply to them can be broad and fact-specific. Every dealing with such an entity requires independent analysis against the specific prohibitions of the applicable directive.

Third: a sanctioned counterparty’s failure to pay is itself a compliance signal. When the entity ultimately responsible for payment consistently delays or defaults, that is not just a commercial problem; it is evidence that a prohibited debt instrument with an impermissible maturity is accumulating. The longer the non-payment continues and the more work the U.S. person performs without payment, the clearer the violation becomes.

Indirect OFAC Sanctions Violations: Practical Guidance

The FTI enforcement action points to several concrete steps for firms engaged in cross-border work involving intermediaries.

When structuring any engagement that touches an SSI-listed or SDN-listed entity, analyze economic reality, not merely contractual form. Who is the ultimate obligor? Who benefits from the services? Who controls payment? If any of those answers point to a sanctioned person, the structure carries indirect OFAC sanctions violation risk.

Compliance analysis cannot stop at contract signing. Extended invoice delays, direct communication with the end payer about outstanding balances, and an intermediary’s express disclaimer of credit risk are all triggers for a fresh sanctions review, even mid-engagement.

Voluntary self-disclosure is a risk management tool, not an admission of guilt. In FTI’s case, timely voluntary disclosure could have halved the base penalty. A notification submitted after an internal investigation did not get that treatment.

Finally, cooperation with OFAC, including producing documentation and, where appropriate, waiving privilege, is a meaningful mitigating factor. The FTI settlement confirms it.

If you have any questions regarding proposed transactions from an OFAC sanctions compliance perspective, please contact us. We will promptly assess your situation and propose an appropriate solution.