Around the world in 8 sanctions regimes

15 March 2017 10:20am

Report shows recent 'dramatic' sanctions changes

Sanctions around the world have changed significantly in the last few months, according to a new report by LexisNexis Business Insight Solutions. The report looks at how sanctions have changed in eight countries: the US, UK, Russia, Iran, Myanmar, Cuba, Democratic People's Republic of Korea (North Korea), and the Democratic Republic of Congo (DRC). The report goes onto look at the steps companies can consider to mitigate the risks of breaching sanctions.

Sanctions trends: easing or tightening

The report says that sanctions regimes can "shift in different directions". A country might face increased restrictions to curb a particular policy or perceived regional threat. For example, North Korea faces a number of new sanctions measures aimed at further encouraging the regime to stop its nuclear tests. Or a regime that has historically faced tougher sanctions may see such measures being reduced. For example, in recent years the US has gradually lifted many of its long-standing sanctions against Cuba after improvements in relations with Cuba's government. US companies are also preparing to invest in Myanmar, after the US gave it preferential tariffs to reward perceived improvements in its government.
But the report warns that although many companies will be desperate to take advantage of the opportunities offered by a newly open market, they should not rush in without implementing thorough due diligence checks. Often, media reports about sanctions being reduced overlook the fact that sanctions still remain against some individuals, companies and sectors. Moreover, even when sanctions are completely removed, there might still be corruption in the local market.

Internal politics can affect a country's sanctions policy

The LexisNexis BIS report highlights that internal political developments in some countries could lead to significant changes in sanctions regimes over the next few years. The UK voted to leave the European Union in June, which would mean it no longer automatically signs up to EU sanctions lists. But no changes are expected for at least two years, and even then overarching UN sanctions will still apply to both the EU and the UK.

The result of the US presidential election could affect the country's sanctions regime. The USA's reduction of sanctions against Cuba and North Korea has largely been driven by President Obama's use of Executive Orders. The new President could take a different approach.

How to avoid sanctions

Staying on the right lines of sanctions lists is important. The recent case of PanAmerican Seed Company illustrates this. In September, the company paid $4.32 million to settle potential civil liability with the US Office for Foreign Assets Control for violating sanctions with Iran. This fee was a reduced sentence because PanAmerican Company Seed took remedial steps such as the implementation of a compliance regime. So there are good reasons for companies that operate internationally to ensure they have strong compliance procedures in place.

What can companies do?

Given the various levels of sanctions, and the constantly changing nature of watchlists, it is vital that companies follow best practice when implementing sanctions procedures. As part of sanctions policies and procedures companies should consider the following:
1. Ensure senior management understand company's sanctions obligations and endorse policy process
2. Prepare company policy & procedures, including disclosure requirements
3. Communicate policy & procedures to employees and third-parties (eg. Contracts, sales agents etc)
4. Implement regular training to ensure staff and third-parties understand obligations and procedures
5. Implement a screening process appropriate to the nature, size and risk of the company's business
6. Align sanctions screening process to associated third-party due diligence procedures
7. Ensure procedures include escalation contacts for sanctions enquiries and to report violations
8. Audit and regularly review policy & procedures, training and screening systems
9. Reinforce policy & procedures with independent audit and testing
10. Don't wait for enforcement as a trigger to implement above actions

The full report can be downloaded for free here.

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