Frozen Assets: Unpacking The Hidden Ripple Effects On International Deals

When governments freeze money, the headlines usually focus on the targeted oligarch, the sanctioned state entity, or the eye-watering figure attached to a blocked account. Yet in today’s deal-making, frozen assets have become a structural risk that can surface long after the press conference, derailing acquisitions, stalling infrastructure contracts, and chilling cross-border lending, sometimes even when the “real” counterparty insists it has nothing to do with sanctions. The ripple effects are increasingly visible across compliance teams, arbitral tribunals, and trading floors, where the same question keeps returning: who can still pay, deliver, and close?

Frozen funds: The dealbreaker nobody priced

It rarely starts with a dramatic seizure, and that is precisely the problem. A bank flags a payment for additional screening, a correspondent bank requests extra documentation, and suddenly a routine milestone transfer turns into a week of silence, then a request to “pause” while legal teams assess whether any party is directly or indirectly designated. In fast-moving transactions, that pause can be fatal, because closing windows are tight, financing commitments have conditions precedent, and sellers are often juggling multiple bidders. If the money is frozen, the buyer may be ready, the seller may be willing, and the contract may be signed, yet performance stalls at the plumbing of the international financial system.

Data points underline why this risk is no longer niche. After Russia’s full-scale invasion of Ukraine in 2022, the European Union, the United States, the United Kingdom, and partners rolled out waves of sanctions that expanded both the number of designated persons and the complexity of ownership and control analysis, with knock-on effects for banks and corporates. The EU has repeatedly stated that roughly €300 billion of the Russian Central Bank’s assets are immobilised in the bloc, alongside significant volumes of private assets that have also been frozen, and while that figure is often cited in geopolitical debates, on the ground it translates into heightened screening and heightened fear of “touching” anything that could be connected. In the US, the Treasury’s Office of Foreign Assets Control has reported administering tens of thousands of blocked property reports over the years, and compliance professionals say the operational burden rises sharply whenever sanctions programmes expand quickly.

For deal teams, the most dangerous mispricing is assuming that a freeze affects only the sanctioned person, rather than the transaction chain. A target company may not appear on any list, but if its minority shareholder is designated, if its lender is linked to a blocked bank, or if its key supplier receives payments through a high-risk corridor, the deal can be caught in the undertow. Even escrow arrangements can fail if the escrow bank declines the relationship, and insurance products can become harder to place if underwriters suspect that a claim payout could be blocked. The result is a new form of transaction friction: not a classic legal prohibition that is clearly drafted and easily identified, but a practical inability to move funds and perform, driven by de-risking and uncertainty.

Compliance becomes a negotiation table issue

Who thought KYC would shape price? It now does, because counterparties increasingly demand contractual protections that look, read, and feel like commercial terms. Sanctions representations have become longer, “change in law” clauses more aggressive, and termination rights more asymmetrical, with buyers and lenders seeking broad walk-away provisions if a sanctions risk “may” arise, not only if it has arisen. On paper, this looks like prudent compliance, but in negotiations it becomes leverage, because the party with better banking access can demand concessions from the party exposed to higher screening intensity.

One reason is that screening has moved beyond names into networks. Major regimes, including US and EU measures, treat ownership and control as central, meaning companies can become effectively off-limits if they are owned above certain thresholds by designated persons, or if control is exercised through less obvious mechanisms. That reality forces due diligence to widen, from direct counterparties to beneficial owners, directors, key financiers, and sometimes even principal subcontractors. The compliance function, once an internal checkpoint, increasingly sits in the room with the commercial leads, because a “no” from a bank’s sanctions team can negate months of negotiations.

The human consequence is delay, and delay has a price. In M&A, ticking fees can accumulate, bridge financing can extend, and market conditions can shift, turning a viable acquisition into a value-destructive one. In commodities and shipping, where margins can be thin and timing is critical, a delayed payment can stop a vessel from being released, disrupt supply, and trigger demurrage. In project finance, a frozen disbursement can cause contractors to suspend work, which then triggers disputes and claims, and the project’s risk profile deteriorates. Increasingly, advisers urge clients to map their “sanctions dependencies”, namely which banks, currencies, insurers, and logistics providers are essential to performance, because any one of them can refuse to proceed even without a formal legal ban, simply to avoid exposure.

Litigation, arbitration, and the frozen-asset trap

Can you sue your way out of a freeze? In many cases, not quickly. When funds are blocked, parties often find themselves in a procedural maze where contractual rights exist but practical enforcement is constrained by public law measures, bank risk policies, and licensing requirements. That tension is already visible in international arbitration, where tribunals may award damages, but payment can be impossible without an authorisation, and where respondents may argue that sanctions constitute force majeure or a supervening illegality, depending on the governing law and the contract language.

Courts and tribunals have been forced to engage with questions that used to sit at the margins of commercial disputes: what counts as “making funds available”, what level of ownership triggers restrictions, and whether a party acted reasonably when it refused to pay due to sanctions risk. Even when a sanctions regime technically allows performance under a licence, the process of obtaining that licence can be slow, and the outcome uncertain, which itself can be commercially equivalent to a prohibition. Legal teams therefore spend significant time documenting decision-making, because a refusal to perform may later be scrutinised for reasonableness, especially if the counterparty alleges that sanctions were used opportunistically as a pretext to renegotiate.

The other trap is reputational spillover. In sensitive sectors, banks and counterparties may treat any connection to blocked property as toxic, even if legal advice suggests a pathway exists. That is where a clear understanding of assets frozen under sanctions becomes more than a compliance detail, and instead a strategic necessity, because companies need to know whether the obstacle is a hard legal stop, a bank policy issue, or a fixable licensing problem. The distinction matters: a well-structured approach might unlock performance, whereas a misstep could escalate into enforcement exposure, or trigger defaults across financing documents that contain cross-default and material adverse change provisions.

How companies are redesigning international deals

The old playbook is gone. Companies still do cross-border deals, still finance projects, and still trade, but they are rebuilding structures to keep optionality when sanctions risks tighten. One visible shift is currency and payment-route diversification, with greater emphasis on banking corridors perceived as stable, and on contingency planning if a primary correspondent bank refuses to clear. Another is contractual “sanctions mechanics”: escrow alternatives, step-in rights, and pre-agreed procedures for applying for licences, including obligations to cooperate and share documentation quickly. These are not academic tweaks, because in a crisis the ability to act within days, not weeks, can decide whether a transaction survives.

There is also more granular due diligence earlier in the process. Rather than waiting for signing, advisers increasingly conduct sanctions screening and beneficial ownership analysis at the term-sheet stage, especially when bidders are competing and the seller wants certainty of closing. In parallel, boards are demanding clearer risk quantification: not just “low, medium, high”, but scenario-based assessments tied to revenue concentration, payment flows, and the company’s reliance on specific insurers or freight providers. For exporters and importers, supply-chain mapping has become a sanctions tool, because a single subcontractor with problematic ownership can disrupt deliveries and create contractual liability.

Finally, companies are investing in response capability. That means having counsel lined up for urgent licensing work, maintaining documentation that proves beneficial ownership and control, and training commercial teams to flag red flags before commitments are made. It also means understanding that over-compliance can be costly, and that not every risk requires abandoning a deal, but nearly every risk requires designing a route around payment, performance, and enforcement constraints. In a world where sanctions programmes can expand rapidly, the winners are often not those with the boldest strategy, but those with the most resilient execution.

Planning your next move, before signing

Build extra time into closing calendars, budget for enhanced due diligence and potential licensing, and choose banks and payment routes early, not at the last minute. Where exposure exists, negotiate clear cooperation clauses, and set aside reserves for delay costs such as ticking fees or demurrage. Public guidance and national helpdesks can inform next steps, but complex cases usually require tailored legal advice.