Effective Sanctions Management: A New Compliance Challenge
Ensuring compliance is key for an organization’s success.
The ongoing conflict in Ukraine is a salient reminder that the world shifts on its axis from time to time, and many of our working assumptions have to go by the wayside. Both individuals and organizations need to quickly adapt to an ever-changing world.
A significant response, from many countries, to the current situation in Eastern Europe has been to impose substantial sanctions on Russia, many of its major businesses, its central bank, and specific individuals.
For organizations worldwide, the sanctions program imposed on Russia can have a potentially significant impact. Financial services businesses are clearly on the front line, especially in the US, the UK, and Europe. They are already assessing their exposure and that of their clients and counter-parties. However, there is scope for other businesses to get caught in the sanctions process, too, if unwittingly.
Many corporations have withdrawn from the Russian market, while others continue to minimize their exposure to their commercial partners.
The impact of the sanctions program will grow over time, and governments will likely bring in new measures as the situation evolves.
One key theme common in many sanction programs is how affected countries and entities try to find ways around the sanction programs themselves. ‘Sanction busting’ is a critical area that many governments consider when drawing up their plans. Sanctioned countries like Iran and North Korea have invested significant time, energy, and money in countering stringent sanction programs. One must assume that Russia will try the same, for a number of reasons.
There are already an array of laws and statutes covering this area already.
In the US:
- The Countering America’s Adversaries Through Sanctions Act (CAATSA), managed through the Office of Foreign Assets Control (OFAC)
In the UK:
- The Sanctions and Anti-Money Laundering Act 2018 (the Sanctions Act)
- The Export Control Order 2008
- The Anti-Terrorism, Crime, and Security Act 2001
In the EU:
- The EU and European Banking Authority (EBA) retain various tools and initiatives to enforce sanctions and monitor anti-sanctions activity.
This situation has the potential for companies large and small to get caught up – unwittingly – in complex cases which touch on sanction programs and have the potential to expose them to fines, and the reputational and contractual issues involved in breaching said programs.
Companies will likely need to enhance their due diligence efforts to ensure that their customer and/or end-user isn’t engaging in any business that may be in breach of a sanctions program.
For many companies, this will present a challenge, in some cases, for the first time.
How do you best develop a sanctions management process within your business, where your compliance staff is already working at a stretch and recruiting additional expertise remains challenging and expensive?
Global organizations are exploring new ways to deliver compliance capabilities in innovative ways that include technology as a strategic ally.
Modern governance, risk, and compliance (GRC) platforms leverage embedded expertise to help decision makers, managers and team members alike, understand their business’ policies, standards, and legal obligations. They no longer need to rely on a constant stream of guidance and direction from a hard-pressed compliance team.
SaaS-based capabilities are quick to deploy, highly functional, secure, and usable from any working location. Compliance teams can detail their policy on a specific topic – sanctions in this specific example – employees can access and digest the business’s needs in order to implement them. Digitalization of policy management is another powerful capability of GRC technology.
This allows compliance teams to act as advisors and consultants who can guide and influence their organization’s requirements while retaining firm control over the overall direction.
Attestation capabilities allow staff to demonstrate the compliance of their key processes, and AI capabilities enable compliance teams to proactively monitor compliance with relevant standards, laws, regulations and policies relevant to the company.
Mitratech’s GRC platform offers an array of capabilities applicable to many use cases, amongst them, smart and effective compliance. Enabling your organization with the key capabilities to navigate today’s business world, has never proven to be so important. Learn more about Mitratech’s GRC technology of the digital era here.