Sanctions

What are sanctions? 

Sanctions refer to a variety of measures imposed by one country or a group of countries against another country, organization, or individual to encourage a change in behavior, punish non-compliance with international norms or laws, or achieve specific policy objectives. They are often meted out in the wake of the involved parties engaging in, or being suspected of engaging in, illegal activities. Both government entities and certain financial institutions have the authority to issue a sanctions list. 

The United Nations Security Council (UNSC) established the first sanctions regime on Southern Rhodesia (now Zimbabwe) more than 50 years ago. Since then, the global organization has enacted 30 sanctions regimes; 14 of those are still in effect today. The sanctions regimes aim to 

• Prevent escalation of or settle conflicts
• Curtail nuclear proliferation
• Counter terrorism and human-rights violations 

Today, the UNSC’s Consolidated Sanctions List includes all individuals and entities subject to UNSC sanctions measures. Many international bodies– such as Her Majesty’s Treasury in the UK, the FBI and the Office of Foreign Assets Control (OFAC) in the US, and Interpol – or individual nations also follow the UNSC’s regimes. Some may also enact their own sanctions lists related to specific regional threats or other national security considerations. 

In addition to sanctions, an individual in a prominent public position – such as a law enforcement official or a senior government member – may be more vulnerable to criminal influence like corruption and bribery. In these instances, they are referred to as politically exposed persons (PEPs). 

What is a sanctioned country? 

A sanctioned country refers to a nation that has been subjected to economic or political sanctions imposed by other countries, international organizations, or coalitions. Sanctions are measures taken to exert pressure on a country's government or ruling regime in response to perceived violations of international law, human rights abuses, aggression towards other nations, or other objectionable behavior. 

The purpose of imposing sanctions on a country is to discourage or penalize certain actions or policies and encourage a change in behavior or compliance with specific demands set forth by the sanctioning entities. 

Sanctions can be unilateral, imposed by a single country, or multilateral, involving a collective decision by multiple nations or international organizations. The specific impact of sanctions on a sanctioned country can vary depending on factors such as the severity of the sanctions, the targeted sectors or individuals, the country's level of economic resilience, and its ability to seek alternative partners or resources. The overall aim is to exert pressure on the government or ruling regime, with the hope of bringing about desired changes in behavior, policy, or leadership. 

Individuals or organizations engaging in illegal activities can end up on these sanctions lists or watchlists. Such activities can include: 

• Terrorism and terrorist financing
• Drug trafficking
• Human-rights violations
• Arms proliferation
• Violation of international treaties 

In today’s global landscape, organizations must navigate this complex network of sanctions. And it’s not just banks and financial institutions that face this challenge. Companies spanning a range of industries have been the target of these enforcement actions. Failing to comply with sanctions laws can open your business to significant legal, financial, and reputational ramifications. 

What is an International Sanction list?

International sanction lists are a consolidated list of individuals and institutions who have been sanctioned by different authorities around the world, including but not limited to the United States, European Union, United Kingdom, Dutch Authority for the Financial Markets, and the United Nations. 

When a sanction search is conducted, an organization will be able to see whether a prospective employee or potential business partner appears on a jurisdiction’s sanctions list of convicted persons and/or institutions. This information is collected from daily publications produced by a variety of financial and regulatory authorities from around the world. Additional consultation is also provided by major anti-corruption organizations such as Interpol and the FBI. 

Types of Sanctions 

Economic or financial sanctions 

Economic sanctions are commercial and financial penalties that typically ban customary trade and financial relations. These penalties can include: 

• Levying import duties on goods to the sanctioned country
• Restricting the export of certain goods from the country
• Blocking the sanctioned country’s ports 

Ultimately, financial sanctions are a way to prohibit organizations from transacting with sanctioned individuals and institutions. With no minimum monetary limit and applying to all transactions, financial sanctions are the strongest possible restriction that can be imposed. However, it is up to organizations to perform searches against the relevant sanctions lists in their chosen jurisdictions – doing so will help identify foreign financial institutions subject to sanctions, as well as potential clients not on government lists. 

Diplomatic sanctions 

Diplomatic sanctions are political measures that aim to demonstrate displeasure with or disapproval of certain actions, stopping short of taking economic or military steps. Such sanctions generally involve reducing or removing diplomatic ties, such as eliminating embassies or cancelling high-level government meetings. 

Military sanctions 

Military sanctions – called on only in extraordinary circumstances – involve the intervention of armed forces. Such sanctions can vary, for example, from arms embargoes to targeted military strikes. 

Sport sanctions 

Sports sanctions are restrictions that prevent a country’s athletes from competing in international events. The idea behind these types of sanctions is to draw the world’s attention to the sanctioned entity and to hurt the spirit and morale of the country and its people. 

Sanctions on individuals 

The UNSC can establish sanctions on political leaders or economic individuals. Sanctions against individuals might include freezing the person’s assets or imposing travel bans on them. 

Sanctions on the environment 

Sanctions regarding the environment are reasonably new, but international environmental protection cooperation and efforts are ongoing given recent concerns over environmental issues. Such issues typically might apply to endangered species, environmental laws and ozone-depleting chemicals. 

What is a sanctions list search?  

When a financial sanction is enacted, it applies to all types of transactions and there is no minimum financial limit. These financial sanctions are designed to stop organizations from putting themselves at risk by transacting with a sanction-listed individual or institution. 

With a sanction search tool, organizations can check against publications across the region – e.g. the United States, the United Kingdom or the European Union – to find PEPs, high-risk individuals and other sanctioned persons who are listed. 

Depending on the platform you use for your sanctions screening, this is an easy way to reduce the time and effort required to perform detailed sanctions checks against listed targets. 

By searching a PEP or sanctions list, organizations can ensure that the people and/or institutions they intend to transact with are not a corruption risk.

Mitigate your sanction compliance risks 

If you’re doing business internationally, one thing your company doesn’t need is costly sanctions violations. To help protect your organization from conducting business with sanctioned entities, it’s essential to have a robust sanctions compliance program, including national and international screening and monitoring, in place. This involves conducting specialized searches through global, government and regulatory databases to identify entities that are barred from participating in certain activities or industries. 

What’s more, because the global sanctions landscape is ever-evolving and more complex than ever before, you need to make sure these compliance processes are equally agile, too. 

To ensure compliance with worldwide (and wide-ranging) sanctions, there are some best practices that organizations can follow for implementing a sanctions program. Such considerations include: 

• Making sure senior management understands your organization’s sanctions obligations and endorses policy processes
• Preparing company policies and procedures
• Communicating policies and procedures to staff and third parties
• Providing regular training to make sure staff and third parties fully understand requirements and procedures
• Ensuring that the organization’s screening process adequately covers the nature, size and risk of its business
• Ensuring that the sanctions screening process aligns with associated third-party due-diligence procedures
• Making sure procedures provide escalation contacts for sanctions enquiries and to report violations
• Auditing and regularly reviewing the sanctions compliance program, including policies, procedures, training and screening
• Conducting independent auditing and testing to reinforce policy and procedures
• Not waiting for enforcement to trigger the implementation of the other above actions 

What are the benefits of using a sanction list checker?   

Searching for potentially compromised individuals and institutions via a sanctions list checker allows organizations to screen potential employees and business partners against up-to-date sanctions lists on an ongoing basis. The ultimate goal of using this tool is that your organization is protected, and you won’t be in breach. Here are some of the biggest benefits: 

• Time-saving: Less time spent screening targets through traditional processes.
• Easy to use: Sanctions search platforms are user-friendly and don’t require complex configuration.
• Cost effective: By using a single platform, your overall screening costs are reduced and dependent only on your usage.
• Protected data: Sensitive client data is stored securely to ensure the protection of your information.

How can LexisNexis help with sanction checks?

Nexis Diligence+™ combines all the most valuable intelligence and checks you need in a single solution, allowing you to conduct consistent due diligence and sanctions searches to ensure your organization is protected against potential threats.

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