Managing Supplier Risk: Why Sanctions Regimes Should Be On Your Radar

20 Apr 2015 10:34 am by Mark Dunn

Mark Dunn, due diligence segment leader for Risk and Compliance at LexisNexis, offered his insights during an ISM Webinar; Mitigating Risks and Impact of Sanctions Regimes on Your Supply Chain. It's a growing area of concern, but as Kelly Barner noted in the Buyers Meeting Point blog, the risks "are outside of the norm for most supply chain and procurement professionals: money laundering, bribery, corruption and diplomatic or economic sanctions." Yet, as organisations and their supplier networks become increasingly global, these considerations pose a tremendous financial and reputational threat.

How to build a robust sanctions compliance program

We’ve done the research so you don’t have to and given you ten steps to support sanctions compliance. Download our ebook today to understand how customers face ongoing sanctions risk & how to comply with sanctions regimes.

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Let's Talk Sanctions and Regulatory Compliance

You hear about sanctions in the news regularly. Just in the last few weeks sanctions against Cuba and Iran have dominated headlines as the current US administration considers easing its regulations in the light of changing relationships with these countries. While international sanctions against Russia have featured heavily since the Ukrainian crisis. The list of sanctions regimes however, is far more comprehensive than these 2 examples alone.

  • Sanctions are intended to change activity that is considered a violation of international law, human rights or other policies that go against democratic principles
  • Sanctions can be leveled against whole countries, specific organisations and individuals
  • Sanctions are coercive or restrictive in nature and may include travel bans, asset freezes, trade embargoes and more.

Governments regularly publish and make changes to lists of sanctions. This makes the management of risk and compliance complex, as business have to verify against multiple and fragmented sources of information including the; UN Security Council Sanctions Committee, US Office of Foreign Assets Control (OFAC), European Union's Common Foreign and Security Policy (CFSP), and the UK HM Treasury lists. OFAC alone has 28 sanctions programs covering everything from rough diamond trade and cyber-related sanctions to sanctions in response to on-going conflicts around the world.  So, how can you ensure that your organisation and the suppliers you rely on rigorously adhere to sanctions?

Without enhanced due diligence you pay the price

During the recent Webinar, Mark pointed out that while financial service organisations have historically been the primary target of enforcement actions, agencies like the US Department of Justice (DOJ) and the UK's Financial Conduct Authority (FCA) are stepping up their actions against corporate entities.

  • In 2014, Dutch aerospace company Fokker accepted a deferred prosecution agreement and $21 million fine for violating trade sanctions by selling U.S. manufactured goods to Iran, Sudan and Burma.
  • In March this year, oil service company Schlumberger pled guilty and agreed to pay a $232 million fine for similarly violating trade sanctions.

The cost goes beyond fines. Most deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs) come with costly strings attached including; probation, restrictions on operations in certain countries, more rigorous regulatory compliance reporting and independent audits for sanctions compliance. Also, organisations face irreparable reputational damage.

Is your compliance process robust enough to help mitigate this risk?

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3 Ways to Apply This Information Now

  1. An enhanced due diligence process in place can help you protect against supplier risk given the more aggressive sanctions compliance taking place today. Check out our solution.
  2. View the ISM Webinar "Mitigating Risks and Impact of Sanctions Regimes on Your Supply Chain" to dive deeper into the topic.
  3. Share this blog on LinkedIn to keep the dialogue going with your colleagues and contacts.

How to build a robust sanctions compliance program

We’ve done the research so you don’t have to and given you ten steps to support sanctions compliance. Download our ebook today to understand how customers face ongoing sanctions risk & how to comply with sanctions regimes.

Download today