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Challenging sanctions designations: politics and the judiciary collide

Sanctions and export controls can hit hard and fast

08: Global investigations: reading the signals

International crises, most recently in Ukraine, Syria and Iran, have resulted in largely US-led sanctions imposed against "offending" states – requiring businesses to comply with trade embargoes or face penalties.

by Tom Blass
Editor, WorldECR


With Ukraine in turmoil, the United States government and the European Union announced the designation of a number of Ukrainian individuals, in response to the tumultuous events unfolding. By the middle of March, Russia's duma had "welcomed" the Crimea into its fold, in effect annexing the largely Russian-speaking peninsula. Again, the West responded rapidly, targeting more individuals and, in the case of US sanctions, the businesses they own or control.

Though limited and uncertain in extent, the development was a picture-perfect illustration of how, while other legislation can take years or decades to draw up, sanctions tend to be imposed with abrupt rapidity.

Sanctions and economic embargoes have been used as a tool of foreign policy for millennia, though never before has it been as complex and multi-layered as today, with companies and financial institutions needing to implement compliance programs that accommodate tiers of sanctions, not only those imposed by the United Nations, but also at the regional level, the EU, for example, and the unilateral sanctions regimes of individual states.

But it is the fear of falling foul of the agencies responsible for enforcing the US Iran and Syria sanctions legislation that has put the issue close to the top of the compliance agenda for many businesses.

It is not only the severity of the potential fines, but also the reputational impact of these actions that have convinced business to take sanctions seriously

In the last two years, US agencies, including the Office of Foreign Assets Control, the Department of Justice and the Securities Exchange Commission, have imposed swingeing fines and settlement agreements on US and non-US banks and corporations for alleged sanctions and export control violations.

It is not only the severity of the potential fines, but also the reputational impact of these actions that have convinced business to take sanctions seriously, and to put in place sophisticated internal compliance procedures, training programs and screening mechanisms to ensure they're not conducting business with sanctioned parties.

Investigations typically arise through one of two scenarios: either agencies intervene or a business commissions an investigation into its own activities having got wind of a potential violation or violations, with the intention of making voluntary self-disclosure to the authorities. But agencies can also order that a business undertake such an investigation as part of its undertakings on making a settlement.

Commissioning or submitting to a sanctions investigation is not for the faint-hearted. If it is to be effective and convincing, it requires the utmost candidness. It is time-consuming and often expensive.

Given the ever-widening scope both of international business and sanctions, which as recent events have proven can hit hard and fast, it is likely that an increasing number of businesses will either consider commissioning investigations into their own activities – or be left with little choice but to do so.


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