From Compliance Risk to Corporate Collapse

What Happens When an Entity Gets Sanctioned?

This is a question I hear often, especially when someone finds out what I do for a living. And more often than not, my answer is a bit broad: the sanctioned entity gets cut off from the U.S. dollar system, suffers reputational damage, and faces significant compliance hurdles.

But over the weekend, I came across a stark real-world example that puts those abstract consequences into very tangible terms.

A 400-person Singapore-based company was forced to wind down operations after being designated by the U.S. government for facilitating Iranian oil exports.

In this week’s note, I’d like to use CCIC Singapore (CCIC) as an example to bring more color to the question:

What really happens when sanctions hit? 

Why Was CCIC Singapore Sanctioned?

CCIC was accused by the U.S. Treasury of being part of a broader sanctions-evasion network that helped disguise the origin of Iranian crude oil.

The goal: funnel proceeds back to Iran’s Armed Forces General Staff (AFGS).

Specifically, CCIC allegedly provided false documentation, certifying Iranian oil as Malaysian crude, thereby making it appear compliant and ready for global markets.

In the words of the U.S. Treasury: CCIC was not an innocent bystander.

It was a “willing facilitator”.

What Happened Next?

Banking Services Disrupted

Almost immediately after the May 13 designation, the firm’s banking relationships collapsed. Any financial institution with exposure to the U.S. (which includes nearly all major banks) had to cut ties. That meant:

• No incoming payments

• No payroll processing

• No outgoing transactions

Effectively, operations ground to a halt overnight.

Clients Vanished

CCIC Singapore’s client list included Shell, BP, ExxonMobil, and Total. These contracts were terminated within hours.

With sanctions in place, no major client could risk non-compliance.

The clients opted for immediate exits, most citing sanctions clauses baked into their agreements.

Mass Layoffs and Liquidation

By May 30, less than three weeks after the designation, hundreds of employees were given one day’s notice. Their severance pay will likely depend on the outcome of the liquidation, which may take more than a year to resolve.

What This Teaches Us About U.S. Sanctions?

Each to his own, but here are a few takeaways that come to mind:

• Sanctions are not abstract. Once designated, an entity’s survival is immediately in question. The global financial system still runs on USD.

• Reputational risk becomes existential. Clients won’t wait to hear your side of the story. Sanctions clause provisions are key.

• Corporate consequences become personal. Behind every “entity” are real people. Hundreds of employees lost their jobs, many with no warning and delayed compensation.

Hopefully, the above example adds more color to the original question: what happens when the entity gets sanctioned?

Check out the links below if you’d like to learn more, and feel free to reach out if any questions. Thanks for reading!

Alexey

Links:

Sanctions Designation

Consequences