Under the United Nations, international sanctions have been around for about 50 years. They are restrictive measures aimed at countries, organisations and individuals intended to prevent or settle conflicts, stop nuclear proliferation, combat terrorism and prevent human rights violations.
Any person or organisation who operates internationally needs to make sure they aren’t violating the international sanctions regime by unwittingly doing business with sanctioned individuals or entities. Getting this wrong can have disastrous consequences.
Check your counterparties
Know who you’re dealing with and that they are who they say they are and not hiding behind an opaque company or shady representative. If you’re dealing with a company, make sure you get evidence as to who ultimately owns the company. Once you’ve gathered the information, check the deal makes sense.
Follow the money
Whether you’re sending or receiving money for goods or services, check where it’s ultimately coming from or going to. This information is vital to understand the potential sanctions risks involved.
Check the lists
Once the information has been collected on the counterparties and you understand the flow of funds, the names of any organisations and individuals involved can be checked against the sanctions lists. The main sanctions lists have been established by the UN, the UK (HM Treasury), the EU and the US (OFAC). However, any government can create sanctions lists.
Understand who’s on the list
Organisations and individuals on the sanctions lists are there because they engage in illegal activities. The types of activities include:
- Money laundering
- Drug trafficking
- Human rights violations
- Arms proliferation
- Violating international treaties
Know the main countries
Sanctioned organisations and individuals can be located anywhere in the world. However, there are also specific countries that have sanctions placed upon them. It is imperative when doing business internationally that you understand whether the goods, services and transactions are lawful to and from the countries you’re dealing with.
Consider the different types of sanctions
There are several categories of sanctions, some are applied at the individual or organisation level, such as: asset freezes and travel bans. Others are aimed at countries, such as: trade, immigration, diplomatic, environmental and military sanctions.
Reduce your sanctions risk
You can reduce the risk of violating sanctions laws by gathering all your information and checking it against the relevant sanctions lists, plus keeping clear records to evidence this. If you come across a sanctioned individual or organisation trying to do business with you, you must report it to your country’s relevant sanctions enforcement agency. In the UK, there are various agencies, including: the Office of Financial Sanctions Implementation (financial sanctions); and the Export Control Joint Unit (trade sanctions).
Understand the offences
There are certain criminal offences that have been created in relation to sanctions. In the UK, these make it a crime to make funds available to, or deal with the funds of, a sanctioned individual or organisation, directly or indirectly. In terms of trading in goods or services, if you supply or receive these in breach of sanctions rules, this is also a criminal offence.
Know the penalties
Depending on the category of sanctions breached, penalties can vary. In the case of financial sanctions breaches in the UK, a financial penalty of up to £1,000,000 or 50% of the sum in question, whichever is greater, may be imposed, as well as a prison sentence of up to 7 years. For trade sanctions, the prison sentence may be anywhere up to 10 years.
Seek specialist advice
International sanctions rules are complex and far-reaching, and the consequences for getting it wrong can cause catastrophic damage to organisations, both financially and reputationally. If you’re unsure whether you’re properly complying with the rules, always seek specialist advice.
Written by Corinna Venturi
Principal at My Inhouse Lawyer
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