RBI and FEMA

Can an Indian exporter accept payment from a client in a sanctioned country?

Author:: Editorial team, serviceexportguide.com
Verified by:: Editorial team
Published: 28 October 2026
Last modified: 30 October 2026
Reading time: 6 min read

Short answer

UN member states must implement the measures on the UN Security Council Consolidated List.¹ US OFAC sanctions bind all US persons.⁵ EU restrictive measures bind persons under EU jurisdiction.⁶ RBI's KYC Directions for commercial banks require Indian banks to verify UNSC lists daily.² Indian banks credit export proceeds only after satisfying themselves the transaction is genuine.⁷

Applies to	Governed by	Deadline	Penalty	Last verified
Indian exporters with clients, owners or banks in sanctioned jurisdictions; Indian banks screening payments	RBI KYC Directions for commercial banks, 2025, paragraphs 56 to 62; FEMA 2026 Regulations, regulations 4 and 8; UN, OFAC and EU programs¹²⁴⁶⁷	Banks verify UNSC lists daily²	Not applicable (a blocked payment may not be released)	28 October 2026

A service exporter rarely sets out to work for a sanctioned party. It usually happens indirectly: a translator's client turns out to be owned by a listed company, an app developer's customer pays from a bank in a restricted country, or an agency is paid by a third party it has never heard of. This page explains, using official sources only, what "sanctions" means for an Indian exporter, how banks screen payments, and what to check. It does not give legal advice; where a sanctions question arises, consult a lawyer.

What are sanctioned countries for an Indian exporter?

For an Indian exporter, "sanctioned countries" means the countries, entities and people covered by three separate sets of measures: the UN Security Council's, OFAC's in the US, and the EU's. No single list exists.¹⁴⁵⁶

Source	What it covers	Who must comply	Best for
UN Security Council Consolidated List	Individuals and entities subject to measures imposed by the Security Council	UN member states are obliged to implement the measures	Every exporter, as the baseline check
US Office of Foreign Assets Control (OFAC) programs	Comprehensive or selective sanctions, using asset blocking and trade restrictions	All US persons, including US entities and their foreign branches	Payments in US dollars or via US banks
EU restrictive measures	EU sanctions regimes and the EU consolidated financial sanctions list	Persons under EU jurisdiction	Payments in euros or via EU banks

The table draws on each body's own description of its measures.¹⁴⁵⁶ The UN list was last updated on 26 October 2026 and contained 733 individuals and 274 entities on the day we checked.¹ OFAC runs country programs including Iran, North Korea, Cuba, Venezuela-related, Belarus, Burma-related and Russia-related sanctions, alongside programs aimed at activities rather than countries.⁴

Who do sanctions rules apply to in a payment to India?

Sanctions rules apply to every bank on the payment's route, as well as to the exporter's own Indian bank, so a payment can be stopped at more than one point.²⁵⁶⁷

Party	Applicable	Why	Best for
Indian bank	Yes	RBI's KYC Directions for commercial banks require daily screening against UNSC lists²	The exporter's first check
US bank or US person on the route	Yes, OFAC	OFAC says all US persons must comply⁵	Dollar payments
EU bank or person on the route	Yes, EU measures	EU measures bind EU nationals and people in or doing business in the EU⁶	Euro payments
Indian exporter	Through the bank	The bank credits export proceeds only after satisfying itself the transaction is genuine⁷	Checking before accepting work

A payment to you may be blocked or rejected by any such bank on its route, even when Indian rules would allow the receipt.⁵⁶

How do you check a client against sanctions lists before accepting work?

You check a client by identifying exactly who they are, searching the official lists for the client, its owners and its bank, and talking to your bank before the work starts.¹⁶⁸

Client identity: get the full legal name, registration number, address and, for companies, the owners.
Official lists: use the UN Consolidated List, OFAC Sanctions List Search and the EU Sanctions Map.¹⁸⁶ Search the client, its owners and its bank.
Country: check whether the client's or bank's country is the subject of a UN, OFAC or EU program.¹⁴⁶
The work: some programs restrict particular sectors or services, not whole countries. If the work could fall within one, get legal advice.
The payer: a payment from someone other than the client is a third-party receipt, which your bank must be satisfied about.⁷
Your bank: ask whether it can receive from that country and currency, and what documents it will need.

Keep a dated record of every search you ran and what you found.

How does India implement UN sanctions through banks?

India implements UN Security Council measures through Government orders and RBI's directions to banks.² The Reserve Bank of India (Commercial Banks, Know Your Customer) Directions, 2025 require banks to:

ISIL and Al-Qaida lists: ensure they hold no account for individuals or entities on the UNSC ISIL (Da'esh) and Al-Qaida and Taliban sanctions lists, under section 51A of the Unlawful Activities (Prevention) Act, 1967.²
Daily checks: verify these lists daily and take any additions or deletions into account.²
DPRK list: verify daily the UNSCR 1718 list on North Korea (DPRK) published by the Ministry of External Affairs.²³
Other resolutions: take into account other UNSC resolutions and the lists in the First and Fourth Schedules of the Unlawful Activities (Prevention) Act, for compliance with Government orders under its section 51A and section 12A of the Weapons of Mass Destruction Act.²
FATF jurisdictions: apply enhanced due diligence to transactions with persons from countries for which the Financial Action Task Force (FATF) has called for it.²

RBI also encourages banks to use technology for name screening to meet sanctions requirements.²

What happens if a payment is blocked or returned for sanctions reasons?

If a payment is blocked for sanctions reasons, the bank may not be able to release it, and may not explain much. Ask your bank for the reason in writing and keep the record.

No re-routing: do not ask the client to send the same money through a different bank, a wallet or a third party to get around a block; that can create a far larger problem than the unpaid invoice.
Export records: if the invoice stays unpaid, speak to your bank about your export records.
Further help: see inward remittance returned and international payment stuck.

Take legal advice before doing anything further with the client.

Which RBI rule says this?

The Indian rules are in RBI's KYC Directions for commercial banks for screening and the FEMA 2026 Regulations for crediting export proceeds.²⁷

Rule	Clause	Date	Plain meaning
RBI (Commercial Banks, Know Your Customer) Directions, 2025	Paragraphs 56 to 62	Updated as on 1 October 2026	Banks screen customers against UNSC lists daily and apply enhanced checks for FATF-listed jurisdictions²
FEMA (Export and Import of Goods and Services) Regulations, 2026	Regulation 4	Amended up to 22 September 2026	The bank credits export proceeds only after satisfying itself the transaction is genuine⁷
Same	Regulation 8	Amended up to 22 September 2026	Third-party receipts need the bank's approval⁷
Unlawful Activities (Prevention) Act, 1967	Section 51A	As referred to in the KYC Directions	Basis for the ISIL and Al-Qaida list checks²

The KYC Directions also refer to section 12A of the Weapons of Mass Destruction Act for compliance with Government orders.²

What are the common mistakes with payments from sanctioned countries?

The common mistakes are checking only the country, ignoring the payer and the bank, and trying to re-route a blocked payment.¹⁷

Country only: some programs target entities and people anywhere, so search the client, its owners and its bank.¹⁴
Ignoring the payer: a payment from someone other than the client is a third-party receipt.⁷
Re-routing a blocked payment: sending the same money through another channel can create a far larger problem.
One-off checks: sanctions lists and programs change frequently, so check on the day you take on a client and again before each large invoice.¹

Exporters with clients in or near sanctioned jurisdictions face this most often: translators and interpreters, engineering and energy consultants, software developers selling to small businesses worldwide, education providers with international students, and agencies working through intermediaries. For Russia specifically, see receiving payment from Russia.

Note: This page is general information, not legal advice.

How did we verify this?

We checked this page against the sources below on 30 October 2026. Read our methodology or report an error.

Frequently asked questions

Is there one list of countries sanctioned for Indian exporters?+

No. There is no single Indian list of sanctioned countries. UN Security Council measures apply to all UN member states, and the US and the EU run separate programs for persons under their own jurisdictions. What matters is who your client is, what the work is and which banks the payment passes through.¹⁵⁶

Do Indian banks check sanctions lists on incoming payments?+

Yes. RBI's KYC Directions for commercial banks require banks to make sure they hold no account for persons on the relevant UNSC lists, to verify those lists daily, and to give special attention to jurisdictions named in FATF statements. RBI also encourages banks to use technology for name screening.²

Does OFAC apply to an Indian freelancer?+

OFAC says all US persons must comply with its sanctions, including US citizens, permanent residents and US-incorporated entities and their foreign branches. An Indian freelancer is not usually a US person, but a payment routed through a bank subject to OFAC can be blocked there. Take legal advice about your own position.⁵

Can an Indian exporter work for a client in a country on the FATF list?+

RBI's KYC Directions for commercial banks say their enhanced checks for FATF-listed jurisdictions do not preclude legitimate trade and business transactions with those countries. Banks will, however, examine the background and purpose of such transactions, so expect questions and document requests before the payment is credited to your account.²

What should an exporter do if a bank returns a payment for sanctions reasons?+

Ask the bank for the reason in writing and keep the record. Do not ask the client to re-route the same payment through another bank, a wallet or a third party, because that can create a larger problem than the unpaid invoice. Take legal advice before proceeding with the client.

How large is the UN Security Council Consolidated List?+

The UN Security Council Consolidated List was last updated on 26 October 2026 and contained 733 individuals and 274 entities on the day it was checked for this page. The list changes often, so search it on the day you take on a client and again before each large invoice.¹

This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.

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