COVID-19 sanctions | Deloitte UK has been saved
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As sanctions practitioners, we are accustomed to an ever-evolving sanctions landscape. Persons and entities are designated, and delisted, on a regular basis. Certain countries issue sanctions of a particular kind and scope, whereas other countries issue different measures. On a good day, it can be difficult to keep up with the vast array of global restrictions in place.
Watching the effects of COVID-19 these past several weeks and the resulting impact on our global economy, it is clear that many companies now face uncertain futures and/or have to rethink their business models. In such unprecedented circumstances, combined with the increased pressures on supply and demand in many industries that are typically subject to sectoral sanctions, businesses are potentially exposed to increased economic crime risk and fraudulent actors. Therefore, it is more important than ever to maintain oversight on operations to proactively address any potential compliance issues.
However, the question is, how do we strike the right balance on compliance matters when our companies are in “survival mode” – i.e., potentially focused more on operational and financial related implications and less so on compliance?
Further, should the introduction of any additional measures and/or the enforcement of existing sanctions regimes be temporarily relaxed?
Sanctions must still be respected during the COVID-19 pandemic
As of now, and until relevant government departments indicate otherwise, COVID-19 should not be used as an excuse to disregard sanctions compliance. Despite the current circumstances, companies must still comply with relevant requirements and be able to provide meaningful, documented evidence of such compliance.
This has prompted some confusion, and difference of opinion, across companies who are impacted by various sanctions regimes, and who are otherwise concerned about how best to mitigate sanctions risk during uncertain times. For example:
Should these restrictions stay in place during the current COVID-19 crisis?
Currently, there is a healthy debate over whether broad sectoral sanctions should urgently be re-evaluated in countries facing the coronavirus pandemic, in light of their potentially debilitating impact on the health sector and human rights. In particular, the UN High Commissioner for Human Rights, Michelle Bachelet, has called for the urgent re-evaluation of sectoral sanctions in countries dealing with the impact of COVID-19, alongside broad and practical humanitarian exemptions to sanctions measures, including authorisation for medical equipment and supplies.
Some academics and industry specialists maintain that sanctions may impede medical efforts in Cuba, North Korea, Venezuela, Zimbabwe and Iran, which have vulnerable health systems, and that easing sanctions could allow for resources to be allocated to treating and preventing the pandemic.
On a macro level, it is worth considering whether the US Office of Foreign Assets Control (OFAC) and its peers across the world have the equivalent of a “force majeure” provision, for unprecedented events of this kind, that allow for a pause of certain restrictions and compliance requirements. In addition, whether enforcement agencies can show leniency if there are potential instances of non-compliance during this time, where companies are more focused on immediate response measures to COVID-19, such as business continuity. If not, should they?
What do you think?
An international trade lawyer by background, Stacey Toder Feldman is a Partner in the Firm's Forensic practice and leads the Energy and Resources team. Stacey has over 20 years’ experience advising clients on all aspects of the economic crime compliance lifecycle, in particular on global export controls, sanctions, customs, anti-bribery and corruption and fraud. Stacey’s practice covers a wide range of industries, with a particular focus on Energy, Resources and Industrials, specifically on oil and gas, chemicals, manufacturing, trading, shipping, metals and mining and wider energy matters. She specialises in conducting complex, multi-jurisdictional investigations and identifying areas of risk and opportunity, with emphasis on developing tailored compliance frameworks designed to minimise economic crime risk for businesses.
A qualified Chartered accountant, Rob is a Director in the Firm’s Forensic practice. He has over 10 years’ forensic experience working predominantly on investigations into issues such as accounting misstatements, fraud, bribery and corruption, tax evasion and sanctions breaches. He also provides advice on all aspects of the economic crime compliance lifecycle and has assisted clients on complex financial disputes. He has significant experience in working alongside legal teams and responding to regulators’ requests and he provides his services across a wide range of industries.