What are sanctions?
It has come to be understood that sanctions mean the formal adoption by states and/or international organisations (such as the United Nations and European Union) of coercive economic measures, usually in reaction to another state’s breach or threatened breach of its obligations under international law or particular treaties. For example, the imposition of sanctions in response to acts of terrorism or war.
Who do sanctions target?
In relation to their impact, sanctions can be separated into two broad categories: direct targets and indirect targets. Sanctions that work to directly target parties will result in entities and individuals being listed on a national or international list as a designated party that is prevented from travelling, accessing their finances, and/or receiving a wide range of services. These parties are generally categorised as ‘Designated Persons’.
However, sanctions also work to indirectly target non-designated persons, specifically persons who are nationals of and/or operating within the borders (including the territorial waters) of a sanctioning state, i.e. where there is a relevant ‘nexus’. These persons, usually businesses, are restricted in the way they must interact with ‘Designated Persons’, for example they must not make funds (whether directly or indirectly) available to sanctioned persons. The definitions imposed by sanctioning states, such as the UK, US and EU are widely interpreted, and making funds available to a ‘Designated Person’ can range from discharging a debt to entering into a commercial contract.
What is sanctions compliance?
Sanctions compliance is the process by which those indirect targets of sanctions, such as financial institutions, and other businesses and individuals that interact with states and entities within states subject to sanctions must ensure that they do not fall foul of the regulations. The simplest way to do this to implement a sanctions screening procedure, which can be done by checking counterparties that you interact with against open-source lists of designated persons, such as:
- In the UK, OFSI’s Consolidated List: OFSI Consolidated List Search
- In the US, OFAC’s Sanctions List: Sanctions List Search
- In the EU, the Council’s Sanctions Tracker: Entities | EU sanctions tracker
However, sanctions compliance is not a one-size-fits-all practice and therefore not as simple as screening against open lists. Every organisation will need to tailor its sanctions approach to its own business practices, commercial dealings and jurisdictions it deals with.
How can we assist?
We can either carry out an analysis, and provide an opinion on a single transaction, such as a proposed commercial contract, divestment, or purchase which crosses into sanctioned territories or sectors.
We are also experienced in providing all encompassing sanctions policies, which cover regular dealings. Our policies are drafted in a way that they can be updated by in-house counsel, or compliance officers, given the ever-changing nature of sanctions.
Representative Matters:
- Preparing the global sanctions policy of a state oil and gas company, to include the sanctions of the US, UK, EU, Canada, Australia and Kazakhstan
- Advising on a single transaction, specifically the purchase of shares in the sanctioned company of Roman Abramovich, Evraz Plc on the secondary market
- Advising a UK chemical company on the divestment of its subsidiary from Russia, and on the Russian ‘exit tax’
- Advising a UK pharmaceutical company, with subsidiaries in India, on the impact of sanctions on the export of pharmaceuticals to Russia, under the Russia Regulations
- Advising a property management company on the impact of sanctions on the recovery of service charges from persons designated under the Russia Regulations
- Advising a UK based electronic payment processing company on the impact of Ukrainian sanctions in the UK