The sanctions world has experienced a significant shift over the last few years—from traditional jurisdiction and list-based sanctions to those that are more nuanced and thematic.
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This piece will explore recent developments in global sanctions regimes. It will also discuss the ongoing importance of complying with sanctions requirements and developing a robust sanctions framework.
Firms operating in multiple jurisdictions are always under pressure to review and assess the impact of new sanctions legislation and regulation.
To many organizations, this will be nothing new: It’s part of the perennial challenge of ensuring compliance with evolving sanctions regimes.
But the volume of emerging legislation is novel and something to which organizations must adapt.
In March, the U.K. government committed to introducing a global corruption sanctions framework. The program is aimed at “prevent[ing] those involved in corruption from freely entering the U.K. or channeling money through [the U.K.] financial system.”
A month later, the U.K.’s Foreign, Commonwealth & Development Office published sanctions against 22 individuals involved in corruption cases.
The new framework compliments the human rights sanctions regime in the United Kingdom, which itself was only introduced in July 2020.
The human rights regime enables the United Kingdom to take swift action; in March, the government joined the European Union, the United States, and Canada in announcing the introduction of new sanctions against perpetrators of human rights breaches in Xinjiang, China against Uyghurs and other minorities.
“We will continue to stand together to shine a spotlight on China’s human rights violations,” read a joint statement from leaders in the United Kingdom, United States, and Canada. “We stand united and call for justice for those suffering in Xinjiang.”
In December 2020, the European Council announced the EU Global Human Rights Sanctions Regime. The directive is similar to U.S. legislation, in that it establishes a “framework for targeted restrictive measures to address serious human rights violations and abuses worldwide.”
How to keep up and comply
Such sanctions regimes are a lot to keep up with but welcome. For firms, understanding and documenting risk exposure is key. While the guidance issued by regulators varies depending on jurisdiction, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) has published guidelines that are a useful starting point when designing a sanctions framework or program.
OFAC states a sanctions program can be the greatest mitigating factor (if there is one in place) or the most significant aggravating factor (if there is not one in place) in determining the penalties imposed on organizations.
A risk assessment is also a fundamental part of a sanctions program and an excellent starting point to encourage business areas to think proactively about the impact of sanctions on their operations (current and proposed) in all jurisdictions.
Consideration also needs to be given to human rights compliance when making key choices regarding onboarding suppliers and carrying out due diligence on supply chains.
Appropriate clauses need to be drafted for inclusion in legal agreements, considering the possible outcomes, including licensing requirements and termination.
Increasingly, organizations are moving away from the traditional approach of carrying out an overall money laundering, terrorist financing, and sanctions risk assessment. Instead, they are undertaking standalone risk assessments. This approach provides flexibility to tailor the overall sanctions program to specific risks.
It also facilitates the design of appropriate controls to mitigate the risks, with consideration given to the organization’s risk appetite.
When such measures are implemented, firms will find the ever-evolving sanctions landscape much easier to navigate, providing reassurance they can adhere with confidence to sanctions legislation in their own jurisdiction and around the world.
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Teodora Harrop is the head of financial crime and money laundering reporting officer at Link Group.