Top three tips to avoid your business breaching sanctions:
What does it mean to impose Sanctions and how does that affect my business?
As the media reports the action that has been taken by many of the G7 powers in the form of Sanctions. Let’s look at what that actually means and how it may affect your business. Obviously, this is all very political and may lead to using armed forces to deter the aggressors. However, fighting and counter-aggression is not the only solution and typically, countries also react with sanctions but what are they and how to do they operate?
Most importantly, if your business is trading internationally could you be unintentionally trading with sanctioned individuals, entities, or businesses? Have you checked that the countries that you are trading with are not subject to sanctions?
What are sanctions?
Sanctions are an essential tool in many countries’ foreign and security policy, through which a country can intervene where necessary, typically with the aim to prevent conflict or respond to emerging or current crises. They aim to
- bring about a change in policy or activity
- maintain and promote international peace and security, and
- prevent terrorism.
- preventing conflicts
- supporting democracy, the rule of law and human rights and
- defending the principles of international law
Why do countries impose sanctions?
Countries use sanctions as part of the process of targeting inappropriate behaviour albeit by an individual or business entity. This is often a warning to a state or country that the world is unhappy with the stance they are taking. It can be part of a two pronged approach to forcing a change of policy.
Who do they apply to?
Sanction measures can apply to action taken
- by anyone in a country (including its territorial waters)
- by a national outside the country.
They can also apply to companies incorporated in a country.
What measures are available to governments?
Sanctions come in many shapes and sizes but mainly:
- trade sanctions, including arms embargoes
- restrictions on dual-use items,
- financial sanctions, including asset freezes and
- immigration sanctions, known as travel bans.
The details and exact nature can vary from sanction by sanction.
What countries or issues are subject to sanctions?
Some regions or countries, like the EU or the UK, have over forty different sanctions regimes in place. Some are mandated by the United Nations Security Council, whereas others are adopted autonomously by the country/region. These lists are published and updated regularly. It is good practice to make sure that you check any new market or market you are uncertain of against the UN or US list.
Where do sanctions apply?
Sanctions are a foreign policy tool, and this means that the measures they contain apply with the jurisdiction of the country applying it. In other words, the obligations they impose are binding on nationals of that country or persons located in the country or doing business in it. So, a US business is subject to US sanctions. A US businessman travelling in Europe needs to respect EU sanctions, too.
How are sanctions implemented?
Implementation of the sanctions regimes are through legislation, for example, in the UK, it is the Sanctions and Anti-Money Laundering Act 2018 (the Sanctions Act). The Sanctions Act provides the legal basis for the United Kingdom to impose, update and lift sanctions.
In addition, there are many countries with issue-specific laws that are imposed.
Introduction to Sanctions Lists
Countries usually publish a consolidated list of persons, groups and entities subject to financial sanctions, which authorities manage and updates whenever necessary. They often reflect the officially adopted texts published in the Government Gazettes or Journals. Often, businesses can download a PDF version of the consolidated list of financial sanctions. If you are interested in the latest Sanctions Lists’ of your country or any other you are trading with, please get in touch,
What penalties exist for breaching sanctions rules?
Countries have in place effective, proportionate and dissuasive penalties, and enforce them when sanctions are breached. They go in the millions and can cripple a business.
Top three tips to avoid your business breaching sanctions
- Make sure you screen all your transactions against the latest restricted party list to avoid any compliance challenge.
- Ensure that you do not trade with undesired individuals, and you have processes and procedures in place to prevent this.
- Please refer to the detail of the legislation to understand which sanctions have been imposed, how they are implemented and how the new change affects your business
Please get in touch with your expert to discuss ways to identify if and how sanctions and restrictive measures impact your business, and how to screen against restricted parties efficiently and effectively.
Restricted Party Screening
You can do restricted party screening with automated software or use https://openborders.direct/service/due-diligence
If you want to stay up to date with Sanctions, this is a Category on Customs Manager’s Expert Blog with all the latest changes and updates on sanctions information