Identifying and mitigating sanction risks
Regulated organizations need to ensure they comply with sanctions regardless of where they may operate in the world. An informed approach allows organizations to focus resources on and tailor systems and controls to where business is most likely to encounter sanctioned parties.
There is a wide range of sanctioning bodies operating in varying regions today. Perhaps the best-known are the U.S. Treasury’s Office of Foreign Asset Control (OFAC), the United Nations Security Council, and the European Union.
In an ever-evolving and complex sanction landscape, organizations need to be able to identify where the real risks lie.
Keeping track of the evolving risk landscape
Since 9/11, the landscape has become more complex – the introduction of countering the financing of terrorism (CFT) focused sanctions, the non-proliferation of weapons of mass destruction regime, and in 2010, the introduction of Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA).
In 2014, the U.S. and the European Union, along with a number of other countries, placed economic sanctions on Russia. The so-called U.S. “sectoral” ones against the Russian Federation focus on specific critical aspects of the economy and target specific entities in those sectors, most of which are state-owned.
On June 30, 2014, OFAC amended the Burmese Sanctions Regulations, easing certain dealings with respect to U.S. citizens and businesses. In January 2015, the U.S. enacted new travel and trade regulations for Cuba. In January and March 2016, the U.S. further eased trade and travel restrictions on Cuba. A final agreement called the Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5+1 countries came into effect in July 2015, following two years of negotiations.
On January 16, 2016, the U.S. lifted nuclear-related sanctions following the International Atomic Energy Agency, certifying that Iran had taken steps to limits its nuclear activities under July 2014 JCPOA.
Dealing with multiple sanction regimes
Opaque ownership structures are challenging
Since August 2014, OFAC has aggregated ownership stakes of all blocked persons when determining whether an entity should be blocked (sanctioned) in accordance with OFAC’s "50 Percent Rule." Identifying these relationships is a burdensome task for regulated organizations, primarily when those sanctioned individuals and companies try to obscure the ownership through multiple-layered structures.
The implementation of an agile compliance program is crucial for avoiding regulatory censure, penalties, and subsequent reputational damage.
Features and benefits
Examines how companies and financial institutions will be assessing their risk appetite and exposure, as Iran opens up for business after the relaxation of sanctions by the UN, US and EU as part of the Joint Comprehensive Plan of Action (JCPOA).
This article takes a look what the various kinds of economic and trade sanctions, the sanctioning bodies and their effect on business as well as how to help minimize the risk of a company dealing with sanctioned entities and associates.
A look at the timeline of these special OFAC sanctions and how the 50% aggregate ownership rule works in practice.
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