04 Feb 2020
Brexit is complete-ish and the United Kingdom has moved into the transition period of its departure from the European Union at the end of the year. Companies with UK sanctions obligations will still be required to follow EU policies through December 31st, and even then, differentiations between OFSI lists and EU financial sanctions may not be as drastic as assumed.
Sanctions are used as a tool to preempt military conflict, coerce hostile governments and curtail departures from accepted behavior, such as support of terrorism, human rights abuses, narcotics trafficking and cyber-attacks. It seems unlikely that, just because of a high-profile and messy political departure of the UK from the EU, the interconnected countries with strategically aligned foreign policies will have drastically different sanctions list. Public posturing by politicians is often vastly different from deliberate and well-considered policy measures. That strategic interconnectivity includes the United States, seen as highly proactive in its use of sanctions measures.
What might all of this mean for US, UK or EU-based companies? Not much if sanctions programs are already well-designed and tested appropriately. A keen eye towards sanctions change-management within compliance programs is certainly warranted, specifically regarding beneficial ownership, jurisdictional connectivity, list feeds, data matching criteria, decisioning and recordkeeping.
However, the impending albeit minor differentiations among sanctions lists can be seen as an opportunity to update corporate sanctions compliance programs throughout 2020 in the same ways that testing and updating those programs was beneficial in 2019:
- Maintaining a culture of compliance;
- Periodic sanctions risk assessments, including an understanding of geographic sanctions risk;
- Building effective sanctions policies and procedures;
- Implementing tested, clear, and discrete controls;
- Consistent training and communications;
- Third-party management, including enhanced due diligence to identify entities that may hit on applicable lists; and
- Validating parties along the entire supply or value chain, from sourcing and supply to distribution and sales.
2020 may be a brave new post-Brexit world, but OFAC has previously put out clear guidance that is applicable for companies in the US, UK and EU, no matter how many lists might be in a company’s screening system. That guidance specifically highlights, among many criteria, requirements to apply appropriate resources to sanctions programs, preventing the facilitation of transactions by listed entities, maintaining effective screening technology and understanding payment processes. While omnipresent in the media, Britain’s status as an EU non-member won’t necessarily make a compliance officer’s job any more difficult than it was on January 30th.
Michael Carter is an expert consultant and thought leader in the area of financial crimes that includes Anti-Money Laundering, sanctions programs, and counter terrorism financing. His Twitter feed curates the latest updates in money laundering, sanctions, fraud, bribery, and corruption developments.
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