By Pawneet Abramowski
Trade/ Economic sanctions are a powerful tool. The rules and regulations dictated by governments for various reasons can majorly impact national economies and affect businesses of all sizes. The war in Ukraine unsurprisingly prompted the President, the US. Treasury department and other nations to increase sanctions against doing business with Russia.
Sanctions have long been a part of the United States’ foreign policy and trade negotiations. They are the big sticks governments wave to further humanitarian and other efforts. The nature of some businesses, like finance, lends itself to more inherent risks of violating sanction rules. With increasingly easier access to internationally based customers, every business and organization should know the basics and have a preventive contingency plan that align with three R’s – Regulations, Risk and Reputation.
As of November 30, 2022, 12,902 international sanctions were issued worldwide, with Russia receiving the bulk of them after February 2022. Other top-sanctioned countries include Iran, Syria, North Korea, Belarus, Myanmar and Venezuela. These sanctions are applicable to every kind of business industry.
Companies that sell to or interact with international customers need to regularly understand the changes in sanctions as they occur. Typically, companies will employ a sanctions compliance officer or personnel that regularly review transactions and compare those against the regulations of the Office of Foreign Assets Control (OFAC) and other regulating bodies to identify and address potential threats.
Business inherently involves a lot of risks. You need to make the bottom line. You need to provide your workers with an environment to grow and thrive. Your business or service might also provide an essential tool or resource that customers depend on for their livelihood. One risk you shouldn’t take is opening your business up to sanction violations.
Making the job of mitigating these violations harder is that there is no set schedule for sanctions. The rules can change very quickly in response to threats or foreign policy concerns. . Rather than refreshing regulation pages every day, businesses are increasingly turning to digital tools to help monitor these changes and set up alarms and risk indicators that will let you know when you need to take a closer look.
Once a potential violation is recognized by your company, it is your responsibility to report it. That’s not to say that OFAC and other agencies won’t be investigating you beforehand. Unless it’s an egregious or outright violation of the law, your first violation shouldn’t halt business or result in major penalties. However, you will be expected to show risk based steps taken and implemented to decrease the likelihood of future violations. Failure to do so leads to harsh punishments and stops your business entirely in the process. Most of all, it damages your company’s reputation on a large scale.
As a rule of thumb, you must disclose sanction threats immediately. There is a timeline of ten days for you to determine where you might have violated U.S. sanctions. Repeat threats are seen as neglectful.
So, what can you do to prevent potential sanctions violation risks? Invest in tools or develop systems to regularly monitor changes in sanctions. To best understand your business’s customers and vendor relationships, access and assign a system or risk level to all transactions (red-stop, yellow-further assessment, green-go!, etc.).
As we approach the one-year anniversary of sanctions leveled against Russia by the EU, US and several other nations, the issues surrounding its implementation are no less complex and likely to continue in that direction. As collective participants in a global economy, we will all need to stay informed and prepared.
Pawneet Abramowski is a recognized Compliance and Risk Management Executive with over 25 years of comprehensive public and private sector experience, offering knowledge in shaping the institution’s risk and compliance ecosystem to achieve strong business outcomes with a digital transformation. Abramowski is a Senior Advisor Global Sanctions & AML Practice with Global Data Risk and has held roles as a Head of Financial Crimes Risk & Chief Compliance Officer at The Bancorp Inc. and banks focused on payments and FinTech sector. Previously, she also held Compliance leadership roles at CIT Group Inc., RBC Capital Markets & Morgan Stanley. Prior to private sector roles Ms. Abramowski spent several years in investigative and intelligence capacity with government agencies ending with the Federal Bureau of Investigation.
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