Sanctions and Embargoes

Economic and trade sanctions are imposed by governments or multi-national organizations (United Nations, European Union) for foreign policy purposes. These include national and international security and human rights respect. Sanctions generally prohibit companies and individuals from entering into or facilitating transactions involving sanctioned regimes or designated entities / individuals in order to limit their access to capital markets and goods.

The challenges and risks posed by economic and trade sanctions should not be underestimated. Establishing which sanctions regime applies, and under which circumstances, is by no means straightforward. Organisations face tough decisions when striking the right balance between having a conservative enterprise-wide sanctions policy and an efficient 

real-time transaction screening approach that does not adversely impact its ability to execute transactions competitively. 

Recent enforcement actions between global financial institutions and their regulators and law enforcement have demonstrated the significant potential costs, both tangible and intangible, of failure to comply with economic sanctions requirements. 

Cross Borders is providing overall and timely advice on sanctions programs risk management and compliance.

International and national tools which affect trade

Sanctions and embargoes are political trade tools, mainly put in place by the United Nations (UN) and the European Union (EU).  

The main aim of all UN sanctions and embargoes, as set out in the UN Charter, is to implement decisions by its Security Council to maintain or restore international peace and security.

The EU imposes sanctions and embargoes to further its Common Foreign and Security Policy (CFSP) objectives. The EU can impose measures to preserve peace and strengthen international security, promote international co-operation, and safeguard the common values and security of the European Union. EU measures can also be imposed to uphold respect for human rights, democracy and the rule of law.

In addition to UN and EU sanctions, sanctions and embargoes may be put in place by the Organisation for Security and Cooperation in Europe, who can also impose national arms embargoes.

Many governments have also decided, at a national level economic and financial sanctions. Among them, US trade controls create significant compliance challenges for non-US companies as well as US companies because of their extraterritorial reach, agressive government enforcement and potential liability for persons and entities with only limited ties to the US.

The most frequently applied measures are:

1. embargoes on exporting or supplying arms and associated technical assistance, training and financing;

2. a ban on exporting equipment that might be used for internal repression;

3. financial sanctions on individuals in government, government bodies and associated companies, or terrorist groups and individuals associated with those groups

4. travel bans on named individuals;

5. bans on imports of raw materials or goods from the sanctions target.

Other measures may be applied according to individual circumstances.

You are at risk …. ? 

Two examples:

BNP Paribas. French bank BNP Paribas pleaded guilty in June 2014 to two criminal charges and agreed to pay 9 billion U.S. Dollars to resolve accusations it violated U.S. sanctions against Sudan, Cuba and Iran. BNP was banned for a year from conducting certain U.S. dollars transactions, a critical part of the bank’s global business, in addition to the fine which was a record for violating American sanctions. With the knowledge of multiple senior executives, BNP employees had concealed more than 190 billion U.S. Dollars in transactions between 2002 and 2012 for clients subject to U.S. sanctions. BNP was found to have evaded sanctions against entities in Iran and Cuba, in part by stripping information from wire transfers so they could pass through the U.S. system without raising red flags.

Super Net Computers. The Dubai-incorporated Super Net Computers LLC was placed on a Denied Persons Register in 2007. At stake was its role in the receipt of computer equipment (super servers, motherboards and computer chassis) from a US  company (Supermicro Computer Inc, based in San José) for the price of 27.600 USD and a subsequent transhipment to Iran (between 2001 and 2003) without the necessary export license. At the time of the export, the items were controlled for reasons of national security, and exporting them to Iran without a license was illegal. The US exporter was also prosecuted, resulting in its export privileges being denied for five years and USD 150.000 civil fine.

… then you should

• carefully weight the relevant risk factors;
• consider disclosure obligations;
• take appropriate steps to manage such risks, including rigorous compliance reviews to ensure that your ongoing operations comply with any applicable trade controls, and thorough internal investigations if any potential violation is suspected;
• understand the many different ways in which the compliance, enforcement, and public relations risks can manifest themselves;
• take a global approach in your efforts to manage these risks.

CROSS BORDERS services

For States, International and Regional Organisations

• Compliance with arms embargoes, financial, transportation, and commodity sanctions
• Training and education on all aspects of sanctions implementation, monitoring, and compliance
• Training and advice for strengthening national and regional institutions responsible for border control, export controls, financial oversight, law enforcement as well as licensing and supervising of the relevant industries

For private sector and civil society

• Compliance with multilateral and unilateral sanctions, in particular vetting of clients and suppliers for reputation and security risks
• Compliance with international sanctions that impact on trade and supply chains
• Enhancing due diligence to secure supply chains of raw and semi-processed materials to ensure compliance with international rules and regulations
• Assistance with voluntary guidelines and other due diligence systems designed to curb sanctions violations, human rights abuses and other breaches of international humanitarian law
• Training and educating corporate staff in the provisions of multilateral and unilateral sanctions and all aspects of sanctions implementation, compliance and due diligence practice