Sanctions & Embargo
What Are Sanctions And Embargo?
These are the measures imposed by governments and international bodies that restrict or prohibit certain economic activities of countries, entities, or individuals for the purpose of promoting national security, foreign policy objectives, and/or international peace by addressing concerns related to terrorism, nuclear proliferation, human rights abuses, and other geopolitical issues. The measures result in the assets of targeted individuals, entities, or governments being frozen or restricted, and engagement with them prohibited. Further, they limit or prohibit the import or export of certain goods and services to or from specific countries or regions.
If you need more information about Sanctions and Embargo, don't hesitate to get in touch.
What The Regulators Expect Of You
Regulators expect Financial Services, Professional Services and other services firms to implement robust measures for complying with Sanctions & Embargo.
These include:
Adopting a risk-based approach
Establishing comprehensive policies and procedures
Conducting thorough customer due diligence
Implementing effective transaction filtering
Providing staff training on sanctions awareness
Screening against sanctions multiple lists
Maintaining accurate records
Promptly reporting any breaches to authorities
Cooperating internationally
Conducting regular internal audits
Staying updated on changes in sanctions lists and regulations
What Happens When It Goes Wrong?
Some of the largest Anti-Financial Crime-related fines have been for Sanctions & Embargo failures, highlighting the importance attached to Sanctions & Embargo.
HSBC fined $1.3b for violating several country-based sanctions
In 2012 HSBC was fined $1.3b as part of a Deferred Prosecution Agreement, conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan, and Burma all of which were on the sanctions list. It also helped launder $881m of drug proceeds.
Standard Chartered fined £20.5m fine for 2 sanctions breaches
Standard Chartered received a penalty of £20.5m, for two sanctions breaches in 2020, from the OFSI. The bank voluntarily disclosed that it allowed sanctioned Russian firms to access EU capital markets and made a series of loans to a bank, which was an almost wholly owned subsidiary of a Russian bank. The penalty included a 30% discount due to the voluntary disclosure.
Wise outed for small sanctions violation of just £250
In August 2023, HM Treasury's Office of Financial Sanctions Implementation published a report that stated that Wise Payments, a UK Fintech, had weak systems and controls that allowed a client, which was subject to a UK asset freeze, to withdraw £250 thereby violating sanctions.
How You Can Always Stay Ahead Of Ever Evolving Sanctions Lists
In a survey of 240 Compliance Officers, of which almost one-quarter (23%) were from the Finance and Financial Services industry, Corporate Compliance Insights’ 2022 report found that over half (59%) of respondents felt burn-out from their job.
Corporate Compliance Insights also noted that “compliance officers tell us they struggle to keep up with complex regulatory demands, and they experience pressure from leadership to shield the organisation from risk and regulatory enforcement.”
Worse, under stress from evolving regulations and sanctions lists, almost 80% of anti-financial crime professionals admit to using Google search to perform their due diligence tasks.
Against this backdrop, it becomes clear that you need to regularly check-in on your teams’ systems and processes to ensure compliance.
A trusted, reliable third-party with extensive experience in the field of anti-financial crime can provide proactive, objective insights on where and why your teams’ may need additional support – before your organisation is flagged for a sanctions breach.
Click here to learn more.