Sanctions are not relevant to me (and other incorrect assumptions)

Mike Melia

November 12th, 2019

Sanctions breaches are a tough lesson. They can cost you thousands (even millions), destroy hard-earned reputations and possibly land you in prison.

In this two-part blog written for compliance professionals in all sectors (yes sanctions apply to all businesses), I aim to help you improve the effectiveness of your compliance programmes. In each blog, I will cover two of the biggest mistakes I have come across in my experience as a trade compliance programme director. The idea is to help you avoid making the same mistakes.

In this piece, I look at the dangerous assumptions you might be inclined to make. Assumptions are a lazy way out for those who do not have enough information. Hopefully you can avoid such hazardous guesswork!

1. Assuming sanctions aren’t relevant

I can’t emphasise this enough: sanctions apply to all businesses.

Take financial sanctions in the UK as an example, the view of the Office of Financial Sanctions Implementation (OFSI) is that:

Financial sanctions are generally widely publicised and that businesses, particularly those operating internationally, will have reasonable cause to suspect that sanctions might be relevant to them. Therefore, they won’t be able to avoid liability simply by failing to consider their sanctions risks.

It's important to recognise that trade sanctions, export controls and financial sanctions are different.

Even if your product is not subject to trade sanctions or export controls, OFSI still requires consideration of financial sanctions if funds or economic resources are being made available – directly or indirectly – to, or for the benefit of, a designated person.

As a member of the UN and the EU, the UK imposes all financial sanctions agreed in these two international organisations as well as some of its own financial sanctions. Financial sanctions imposed by other governments may also impact operations. This means you need to effectively monitor the latest sanctions. (To find out who is on the sanctions list, you may wish to speak to data providers such as Dow Jones, Refinitiv, Lexis Nexis, or Bloomberg, for example).

Some organisations are unaware that in 2017 the Government extended powers to act against those who don’t report information required under financial sanctions legislation.

The following sectors are now all expected to conduct more intensive customer due diligence in order to comply:

• Auditors
• Casinos
• Dealers in precious metals or stones
• Estate agents
• External accountants
• Independent legal professionals
• Tax advisors
• Trust or company service providers

A sanctions breach doesn’t necessarily have to occur within the UK’s borders to involve OFSI. If there’s enough connection to the UK, it will be within OFSI’s remit.

 

2. Assuming your freight forwarder and broker will keep you compliant

Making this assumption might seem like an easy way out but as Johann Wolfgang von Goethe once said: “there’s nothing more frightful than ignorance in action”.

Let’s get this straight: in terms of screening, your broker has the responsibility to ensure they screen any parties they are dealing with. This includes your company. But they will not be screening all your business partners, your distribution agent or your final customers (ultimate consignees).

It’s obvious when you think about it. This is all your responsibility.

While brokers will carry out tasks like preparing the necessary documents for importing/exporting, processing tax and duty payments and planning shipment deliveries, they are acting on your behalf and will carry out your instructions to import your goods into the country of import.

In effect, the role of the broker is to be the intermediary between your company and the customs agency.

Most brokers will fill in the blanks of any data they don’t have based on their professional knowledge and common practices, and most brokers will do a great job. However, the broker does not know your products and your partners as well as you do. You cannot just assume they will get it right every time.

Even if the broker acts on your behalf to import the goods, as the importer of record you still have a duty of care to ensure the information supplied to customs is complete, accurate and compliant.

Above all, any compliance challenges with respect to the information provided by the broker rests with the company importing the goods.

Your broker does not take responsibility or liability for your compliance requirements.

So in summary:
1. Don’t assume sanctions aren’t relevant
2. Don’t assume your freight forwarder and broker will keep you compliant

LEARN MORE

Download our new trade compliance white paper to learn all four sanctions compliance lessons, and much more.
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Napier's Intelligent Compliance platform is transforming compliance from legal obligation to competitive edge. We provide easy to integrate end-to-end compliance solutions powered by AI and the latest data management technology.  Napier's tools dramatically reduce both false positives and false negatives and empower compliance teams to make risk-based decisions with speed and accuracy. All Napier products are built on our ICP third generation compliance platform which can be delivered via public cloud, private could or on premise.

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