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Sanctions Compliance Lawyers
Contents
- 1 Sanctions Compliance Lawyers: Navigating Complex International Regulations
- 2 What Do Sanctions Compliance Lawyers Do?
- 3 Why Is Sanctions Compliance Important for Global Businesses?
- 4 What Sanctions Programs Do Compliance Lawyers Monitor?
- 5 Navigating Overlapping International Sanctions Rules
- 6 Due Diligence: Screening Parties to International Transactions
- 7 Sanctions Compliance Policies and Internal Controls
- 8 How Are Sanctions Violations Investigated and Disclosed?
Sanctions compliance has become an increasingly important focus for multinational companies and banks operating globally. Violations of international sanctions regulations carry severe penalties, including massive fines, damaged reputation, and disrupted access to international markets. Sanctions compliance lawyers play a crucial role in advising clients on how to navigate this complex legal landscape and avoid missteps.
What Do Sanctions Compliance Lawyers Do?
Sanctions compliance lawyers help organizations comply with restrictions and prohibitions imposed on dealings with certain sanctioned countries, entities, and individuals. Their key duties include:
- Advising on sanctions regulations and their application to the client’s business activities and transactions. This requires extensive knowledge of broad sanctions programs imposed by bodies like the United Nations, United States, and European Union.
- Screening customers, vendors, transactions, and flows of funds/goods to check for any nexus with sanctioned nations like Iran, Syria, North Korea, and Russia or designated entities and persons. This includes investigating red flags.
- Conducting due diligence to verify identities and relationships of parties to international deals.
- Drafting and updating internal sanctions compliance policies and procedures.
- Designing and implementing controls to prevent sanctions violations. This can involve compliance software systems.
- Training personnel on sanctions issues and the company’s compliance program.
- Performing periodic audits to identify and remedy gaps in sanctions compliance processes.
- Investigating possible sanctions breaches and disclosing violations to enforcement agencies when warranted.
Why Is Sanctions Compliance Important for Global Businesses?
Given the complex web of international sanctions rules and frequent changes in restricted party lists, sanctions compliance has become crucial for multinational organizations. Violations can inflict severe consequences, including:
- Civil and criminal penalties up to millions of dollars per violation.
- Being blacklisted from global financial systems.
- Losing export/import privileges.
- Reputational harm and loss of investor confidence.
- Employee liability for sanctions breaches.
- Disrupted access to sanctioned countries’ markets.
A sound sanctions compliance program helps avoid these damaging outcomes by detecting and preventing improper transactions and activities.
What Sanctions Programs Do Compliance Lawyers Monitor?
Sanctions compliance lawyers must monitor and advise on a myriad of sanctions regimes imposed by various countries and international bodies. Key programs include:
United Nations Sanctions
- UN Security Council – Imposes sanctions related to threats to international peace like nuclear proliferation, terrorism, and human rights abuses. All UN member states must implement these sanctions.
- UN sectoral sanctions – Sanctions on specific industries like arms, diamonds, timber imposed by UN General Assembly committees.
U.S. Sanctions Regimes
- OFAC regulations – Extensive sanctions on countries like Cuba, Iran, North Korea administered by the Treasury Department’s Office of Foreign Assets Control.
- Export controls – State Department and Commerce Department restrictions on exports and re-exports to embargoed countries and sanctioned entities.
European Union and UK Sanctions
- EU Common Foreign and Security Policy – EU sanctions focused on counter-terrorism, nuclear proliferation, human rights.
- UK Sanctions List – Since Brexit, the UK maintains its own sanctions list that overlaps with but differs from the EU.
One major challenge for sanctions compliance lawyers is navigating the overlapping and sometimes conflicting sanctions imposed by various authorities. For example:
- The U.S. has imposed extensive sanctions on Iran beyond those required by UN Security Council resolutions endorsed by the EU.
- The U.K. maintains sanctions on Russia that no longer align with the EU’s sanctions since Brexit.
- Even within the U.S., OFAC sanctions may differ from State Department export control restrictions on a country.
Sanctions compliance experts must closely track sanctions rule changes and prohibitions specific to each regime. Compliance steps mandated by U.S. sanctions may not satisfy EU or UN sanctions, complicating compliance for multinationals.
Due Diligence: Screening Parties to International Transactions
A core sanctions compliance duty is screening all parties to proposed international business deals or transactions to identify any prohibited relationships with sanctioned entities or jurisdictions. This typically involves:
- Know your customer – Gathering details on ownership structure, principals, nature of business, locations, etc.
- Transaction screening – Checking goods, services, funds flows against sanctioned country and party lists.
- List screening – Running names of involved entities and individuals through databases of restricted parties maintained by OFAC, the EU, UN, etc.
- ID verification – Confirming identities through documents, certifications, site visits.
- Ongoing monitoring – Periodically re-screening parties and transactions against updated sanctioned party lists.
Sanctions compliance experts use screening software and services but also conduct in-depth manual verification of red flags. Even minor oversights can lead to violations.
Sanctions Compliance Policies and Internal Controls
Sound sanctions compliance requires detailed policies and internal controls tailored to the company’s operations. Lawyers help craft key program components like:Sanctions compliance manual – Comprehensive policies and procedures for screening transactions, investigating red flags, handling potential issues, disclosing violations, training employees, and updating compliance.Transaction monitoring – Ongoing monitoring of transactions and testing against sanctions lists, verifying goods/services provided match documentation.Training – Regular employee training on sanctions laws and the organization’s compliance program. Training helps maintain sanctions awareness.Hotline for reporting issues – Anonymous employee hotline for reporting potential sanctions concerns or violations.Recordkeeping and audits – Maintaining records of compliance efforts and conducting internal and external audits of the sanctions compliance program.Documenting diligent compliance efforts is crucial in case regulators later investigate potential violations.
How Are Sanctions Violations Investigated and Disclosed?
When potential sanctions violations surface internally or regulators come knocking, sanctions compliance lawyers take the lead in investigating allegations and making required disclosures. Key investigation/disclosure steps include:
- Conducting an objective internal investigation of how the apparent breach occurred and who was involved.
- Preparing a detailed narrative of the violation events and timeline.
- Identifying root causes like inadequate training or screening failures.
- Reporting findings to management and recommending corrective actions.
- Where warranted, making timely disclosure to regulators like OFAC, which may mitigate penalties.
- Responding to regulatory inquiries and notices of violation.
- Negotiating settlement agreements and potential penalties.
Thorough internal investigations and cooperation with regulators’ investigations are critical to resolving sanctions violations.