Sanctions

What are sanctions?

The United Nations Security Council (UNSC) established the first sanctions regime on Southern Rhodesia (now Zimbabwe) more than 50 years ago. Since then, the global organisation has enacted 30 sanctions regimes; 14 of those are still in effect today. The sanctions regimes aim to

  • prevent escalation of or settle conflicts
  • curtail nuclear proliferation
  • counter terrorism and human-rights violations

Today, the UNSC’s Consolidated Sanctions List includes all individuals and entities subject to UNSC sanctions measures. Many international bodies – such as Her Majesty’s Treasury in the UK, the FBI and the Office of Foreign Assets Control (OFAC) in the US, and Interpol – or individual nations also follow the UNSC’s regimes. Some may also enact their own sanctions lists related to specific regional threats or other national security considerations.

Individuals or organisations engaging in illegal activities can end up on these sanctions lists or watchlists. Such activities can include:

  • money laundering
  • terrorism and terrorist financing
  • drug trafficking
  • human-rights violations
  • arms proliferation
  • violation of international treaties

In today’s global landscape, organisations must navigate this complex network of sanctions. And it’s not just banks and financial institutions that face this challenge. Companies spanning a range of industries have been the target of these enforcement actions. Failing to comply with sanctions laws can open up your business to significant legal, financial and reputational ramifications.

Types of sanctions

Sanctions fall into a number of categories.

Economic sanctions

Economic sanctions are commercial and financial penalties that typically ban customary trade and financial relations. These penalties can include:

  • levying import duties on goods to the sanctioned country
  • restricting the export of particular goods from the country
  • blocking the sanctioned country’s ports

Diplomatic sanctions

Diplomatic sanctions are political measures that aim to demonstrate displeasure with or disapproval of certain actions, stopping short of taking economic or military steps. Such sanctions generally involve reducing or removing diplomatic ties, such as eliminating embassies or cancelling high-level government meetings.

Military sanctions

Military sanctions – called on only in extraordinary circumstances – involve the intervention of armed forces. Such sanctions can vary, for example, from arms embargoes to targeted military strikes.

Sport sanctions

Sports sanctions are restrictions that prevent a country’s athletes from competing in international events. The idea behind these types of sanctions is to draw the world’s attention to the sanctioned entity and to hurt the spirit and morale of the country and its people.

Sanctions on individuals

The UNSC can establish sanctions on political leaders or economic individuals. Sanctions against individuals might include freezing the person’s assets or imposing travel bans on them.

Sanctions on environment

Sanctions regarding the environment are reasonably new, but international environmental protection cooperation and efforts are ongoing given recent concerns over environmental issues. Such issues typically might apply to endangered species, environmental laws and ozone-depleting chemicals.

UNSC Sanctions and OFAC

UNSC sanctions comprise these types and address a number of objectives. Measures range from comprehensive economic and trade sanctions to more targeted actions, including arms embargoes, travel bans, and financial or commodity restrictions. Additionally, the UN applies sanctions to

  • support, maintain or restore international peace and security
  • deter nonconstitutional changes
  • hinder terrorism
  • protect human rights
  • promote nonproliferation

OFAC oversees and enforces economic and trade sanctions based on US foreign policy and national security objectives against targeted:

  • foreign countries and regimes
  • terrorists
  • international narcotics traffickers
  • persons or groups engaged in activities related to the proliferation of weapons of mass destruction (WMDs) and other threats to the national security, foreign policy or economy of the US

OFAC publishes lists of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups and entities such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, the agency refers to such individuals and companies as specially designated nationals (SDNs). OFAC blocks their assets, and Americans are generally prohibited from dealing with them.

Mitigating your sanctions compliance risk

If you’re doing business internationally, one thing your company doesn’t need is costly sanctions violations. To help protect your organisation from conducting business with sanctioned entities, it’s essential to have a robust sanctions compliance program, including national and international screening and monitoring, in place. This involves conducting specialised searches through global, government and regulatory databases to identify entities that are barred from participating in certain activities or industries.

What’s more, because the global sanctions landscape is ever-evolving and more complex than ever before, you need to make sure these compliance processes are equally agile, too.

To ensure compliance with worldwide (and wide-ranging) sanctions, there are some best practices that organisations can follow for implementing a sanctions program. Such considerations include:

  • making sure senior management understands your organisation’s sanctions obligations and endorses policy processes
  • preparing company policies and procedures
  • communicating policies and procedures to staff and third parties
  • providing regular training to make sure staff and third parties fully understand requirements and procedures
  • ensuring that the organisation’s screening process adequately covers the nature, size and risk of its business
  • ensuring that the sanctions screening process aligns with associated third-party due-diligence procedures
  • making sure procedures provide escalation contacts for sanctions enquiries and to report violations
  • auditing and regularly reviewing the sanctions compliance program, including policies, procedures, training and screening
  • conducting independent auditing and testing to reinforce policy and procedures
  • not waiting for enforcement to trigger the implementation of the other above actions

Lexis Diligence®

Lexis Diligence® is a due-diligence solution that helps mitigate risk in navigating the world of sanctions, protects your reputation and ensures that your business meets regulatory requirements. This easy-to-use tool gathers all the international and business intelligence you need to conduct consistent sanctions checks in one place.

With Diligence®, you can:

  • thoroughly screen potential clients, business partners, suppliers and other third parties
  • generate due-diligence reports that make sure you maintain a clear, verifiable, auditable trail of your research with a custom report builder so you can easily demonstrate your compliance efforts
  • monitor more than 1000 government sanctions lists, watchlists and politically exposed person (PEP) lists

LexisNexis Diligence Spotter®

As the international regulatory landscape continues to evolve, it’s critical to establish an effective and agile third-party risk-management and compliance process. To help, LexisNexis Diligence Spotter® software combines

  • third-party screening for identifying and assessing new clients, partners and organisations and checking them against sanctions lists
  • daily, real-time risk assessment
  • ongoing monitoring and case management

This robust regulatory compliance tool helps ensure that your business continues to meet regulatory expectations, that your due-diligence processes are up to speed and that you can focus on growing your business.