Sanctions: How to Mitigate the Risk of Non-Compliance

Sanctions are restrictions imposed by countries or governments on others to achieve specific goals without using force.

Implementing an effective sanctions compliance program is crucial as the consequences for non-compliance can result in severe penalties and reputational damage.

The Office of Foreign Assets Control (OFAC) suggests five key elements for such a program:

1. Senior Management Commitment:

  • Senior Management’s approval and support are essential for an effective sanctions program
  • Appoint a sanctions officer and ensure the compliance unit has authority, autonomy, and necessary resources.
  • Foster a culture of compliance and emphasize the seriousness of potential violations.

2. Risk Assessment:

  • Assess inherent risks based on clients, products, services, and geographic locations.
  • Enable risk-based decision-making and identify the level of due diligence required.
  • Regularly update the risk assessment to address emerging risks.

3. Internal Controls:

  • Establish policies and procedures to identify, detect, and report prohibited activities.
  • Define clear expectations for the sanctions compliance program.
  • Enforce policies, address weaknesses, and subject internal controls to audits.
  • Maintain adequate record-keeping procedures to meet regulatory obligations.
  • Communicate the program to relevant staff and integrate it into daily operations.

4. Testing and Auditing:

  • Conduct comprehensive and objective testing to identify weaknesses.
  • Ensure accountability to senior management.
  • Deploy qualified personnel with expertise, skills, and resources for audits.

5. Training:

  • Provide periodic employee training, at least annually.
  • Deliver job-specific knowledge, communicate responsibilities, and assess comprehension.
  • Include clients, suppliers, and business partners as necessary.
  • Tailor training to products, services, customers, counterparties, and locations.
  • Address specific findings and make materials easily accessible.

By incorporating these elements into your sanctions compliance program, you can not only mitigate effectively non-compliance risks but also demonstrate your commitment to regulatory compliance.

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