GPT-40
Counterparty Checks in OTC Deals: How to Avoid a Pig in a Poke and Stay Off the Sanctions Radar
The OTC market attracts investors with its freedom and high returns — but it also hides traps. Follow this safety checklist to keep your money safe.
The over-the-counter market is a space of freedom and big opportunities. Without the strict filters of an exchange, you can find unique assets and negotiate custom terms. But that same freedom brings high reputational and financial risks.
Let's break down the three main traps in OTC deals, define a minimum safety standard, and build a checklist for the ideal counterparty.
What Hidden Threats Are There?
Before diving into statements and registries, you need to understand exactly what risks you're looking for. The classic "existence check" no longer works. Fraudsters have learned how to dress up shell companies.
Beneficiary Substitution
The documents show a modest director named Ivanov, holding 100% of the shares. But the real negotiations are conducted by someone else — the person making all key decisions. This is the classic nominee director scheme: a figurehead who bears no responsibility and will sign anything.
Risks:Your money goes to a company controlled by an unknown person. If the deal falls through or goods aren't delivered, the court deals with Ivanov — who has zero assets and charter capital of 10,000 rubles. The real asset stays under the control of the actual owner, untouched.
Sanctions Matches
Your counterparty may be clean, but its ultimate beneficiary or partners could be on the SDN List (Specially Designated Nationals). Even if you just bought securities or metals from them, your bank may block the transaction — and you could end up on blacklists for financing terrorism or sanctions evasion.
Risks:Reputation damage, account freezes, losing the ability to work with foreign currency, and secondary sanctions.
Fake Performance History
The counterparty shows a thick portfolio of contracts and deeds. But on closer inspection, all those deals were either "paper transactions" or happened within a single corporate group (technical transit). Such a company may show billions in turnover — but zero tax burden and no real logistics.
Risks:The company could be a fly-by-night set up for money laundering. By dealing with it, you become a link in the chain, and the tax authorities will come after you (corporate profit tax and VAT will be debited from your account as the beneficiary).
Minimum Safety Standard: 5 Layers of Protection
To weed out 99% of problems, simply running the TIN through the tax service website isn't enough. You need a systematic approach.
Legal Structure (Legal Entity and Beneficiaries).
Check not only the director, but the entire chain of owners down to individuals. Compare the company's registration date to the deal size. A "fresh" company (under 1 year) shouldn't be handling hundreds of millions of rubles.
Sanctions Filter.
Screen the full company name, director, and beneficiaries against the OFAC SDN List and EU Consolidated List. Use paid aggregators like SPARK or Kontur-Fokus — they have updated sanctions modules.
Court and Enforcement Risks.
Check the arbitration case registry — is the counterparty a "professional defendant"? Also check the FSSP website for active enforcement proceedings. Debts indicate a cash gap — the counterparty may use your money to patch its own holes.
Reputation and Compliance.
Look for reviews on forums and investor Telegram channels. Check the director against the FNS disqualification registry. See if the company is on the register of bad-faith suppliers (RNP).
Payment History.
Request payment orders from previous deals (with sensitive data redacted, but with visible amounts and purposes). Ask for references and contact them directly.
Red Flags: When to Walk Away
If you come across even one of the following during your check, abort the deal immediately:
Refusal to disclose beneficiary documents. "It's a trade secret" in response to a request about the ownership chain means there's something to hide.
Mass registration address or director. An address with over 100 legal entities registered (excluding business centers).
Direct or indirect match with sanctions lists. Even a 5% name match is grounds for deeper checks.
An active enforcement order exceeding the company's net assets.
No online presence at all. In today's world, even the smallest company leaves traces (website, listings, mentions). If a counterparty has no digital footprint, it's artificially created.
Checklist: 10 Signs of a Reliable Counterparty
If the counterparty passes the initial screening, evaluate it using the following scale. The more points match, the safer the deal.
Transparent structure. Beneficiaries are known and not hiding behind anonymous offshore owners.
Company age. The company has been on the market for 3–5+ years (depending on the industry).
Real office. A physical address where they're ready to receive you, and the secretary knows why you've come.
Zero debt load. No major lawsuits or enforcement proceedings.
Bank loyalty. Accounts with systemically important banks, no frequent switching (a red flag for suspicious activity).
Website and corporate email. A properly filled website with contact information.
Documentation readiness. The counterparty readily provides scans of charters, director appointment decisions, and licenses (if required).
Clean tax history. No signs of liquidation or reorganization through mergers (a common pre-bankruptcy scheme).
Reference list. Contacts of 2–3 real partners who can vouch for them.
Scale alignment. Charter capital, fixed assets, and headcount match the deal size. (A one-person company trading billions in oil makes no sense.)
Checking a counterparty in an OTC deal isn't an act of distrust — it's a sign of maturity. It's the tedious, routine work that separates a professional market player from a reckless amateur.
Remember: if you don't want to spend three hours checking a partner, be prepared to spend three years in court and another ten trying to scrub your reputation clean of sanctions taint. A counterparty's reliability is the one asset you can't check with an exchange order book.
