Sanctions: Corporates in the hot seat | Deloitte UK has been saved
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In the current climate of geopolitical tensions, widespread fears of terrorism, people taking stands against perceived corrupt or oppressive governments, and public scrutiny against corporates to be held accountable for unethical behavior; trade sanctions are being used to block business with, and the flow of funds to, targeted entities or individuals. In fact, we are even seeing them being utilised alongside, or in place of, military action in recent confrontations.
For an organisation, breaking these regulations can lead to heavy fines, export bans, the denial of access to the US banking system, reputational damage, supply chain disruption or even becoming designated as a sanctioned entity itself. For an individual, the consequences are even more severe, where criminal prosecutions can lead to fines or even imprisonment.
Why should corporates take note?
For the past two decades, the banking industry has been subject to regulatory scrutiny and suffered significant financial penalties over sanctions violations, culminating in BNP Paribas paying a record penalty of $8.9 billion in 2015.
Whilst the threat of punishment to corporates has long existed, recent years show a noticeable uptick in the size and number of financial penalties, and other consequences, across a number of sectors. For example:
What can you do to address sanctions compliance risk?
Businesses need to establish a robust, workable and monitored compliance programme to help avoid sanctions problems. It is vital to assess all parts of your supply chain and onward sale routes, and consider if any goods might be affected. Should there be a risk, you must consider how to police these goods and all related services.
In May 2019, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued guidance on the essential components of a risk-based sanctions compliance program, which centered on the five principles of senior management commitment, risk assessment, internal controls, testing and auditing, and training.
We will explore industry-specific issues, best practice and the OFAC guiding principles in more detail in our next blog.
An international trade lawyer by background, Stacey Toder Feldman is a Director 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.