Keeping pace with the global sanctions landscape: responding to the continuing compliance challenge
The invasion of Ukraine by the Russian army early in 2022 led to the imposition of an unprecedented number of restrictive sanctions issued by many countries. Switzerland moved away from its neutral stance and implemented sanctions in coordination with the European Union (EU).
Compared to the number of sanctions issued during the eight years since the Crimea was annexed, we saw a massive increase in sanctions issued against Russia between February and August 20221. These restrictive sanctions target not only a large number of individuals and entities, but also the financial sector as well as trade in goods and services.
During the first six months following the invasion, banks and other businesses had to take immediate steps to implement processes and procedures to comply with these restrictive measures. Ultimately much of the burden of implementing sanctions rests with the financial services industry given its role in screening, processing, blocking, or returning payments to and from sanctioned parties.
The speed at which sanctions were issued, the number of targets (predominantly individuals) and the fact that multiple regulators were issuing sanctions have combined to create an extremely complex environment, and it has proved difficult for financial institutions to keep pace with the continual changes.
Almost inevitably regulators will look to review the accuracy, efficiency, and completeness of responses by financial institutions to the crisis and their solutions for dealing with the evolving sanctions regulations.
We reflect below on the challenges which banks have faced in implementing their responses and on the continuing challenge of ensuring that quickly initiated and perhaps short-term fixes can withstand the test of time and the scrutiny of regulators.
During implementation of responses:
Post implementation of responses:
We know firsthand how difficult it can be, when facing unprecedented levels of change, to focus on strategic priorities and switch from firefighting mode. Thanks to our experience from supporting other financial institutions we are in a position to help you focus on the critical issues and drive longer-term solutions.
This will also help you to reduce the pressure on your existing teams, and as a consequence also improve staff retention as well as ensuring that new staff integrate smoothly into their teams.
We can assist you to prioritise your efforts by providing visibility and clarity on the size and severity of the issues. We can also enable you to provide reassurance to key internal stakeholders that the approach that has been developed is robust.
Our experts below would be happy to discuss with you how to ensure that your company complies with the applicable sanctions rules.
1 After Russia occupied Crimea in 2014, Australia, Canada, the EU, France, Japan, Switzerland, the United Kingdom, and the United States issued some 3,000 sanctions against Russia. Since Russia’s invasion of the Ukraine in February 2022, the same actors have issued some 9,000 sanctions.