Sanctions and Sanctions List Review in the Ukraine War

Due to the war in Ukraine, sanctions are on everyone's lips and a topic in private conversations and in the press or news. The world has joined forces not to counter violence with violence, but to impose sanctions on Russia across the board. People have realized that this is a way to exert enormous pressure. The central weapon in 2022 is thus the control of financial flows. Anti-terror and boycott lists now include oligarchs, politicians such as Putin, his foreign minister Lavrov and those close to them, as well as over 100 Duma deputies. In general, supporters and co-decision-makers appear on the lists. The sanctions list check thus moves into the focus of all companies that have business relations with Russia.

Sanctions lists instead of embargoes

While other countries immediately imposed sanctions, Switzerland initially held back - probably in the belief that, as a financial center, it would not have to impose sanctions against Russia so soon. However, following strong protests, it has now followed the EU line. Sanctions lists were originally a reaction to the terrorist attacks of September 11, 2001, when the UN Security Council obliged all countries of the United Nations to implement UN Resolution 1373/2001. This prohibits the provision of any economic resources, i.e. assets, services, goods or certificates, to terrorist organizations and individuals at home and abroad. These sanctions lists replace total embargoes against states and are directed against companies, company networks and individuals. The USA issues sanctions lists via the Bureau of Industry and Security (BIS) and the Office of Foreign Assets Control (OFAC). There are also lists from the EU, the UN and countries around the world such as Canada, Japan and Switzerland.

Business possible - but not without sanctions list check

The sanctions have not ruled out business with Russia per se, but they have made it much more difficult and in some cases no longer practicable. Companies are faced with the choice of doing without business with Russia or accepting risks and resistance. As parcel services no longer deliver to Russia, the export of goods has become considerably more difficult. Even more serious are the restrictions on payment transactions: many Russian banks are on the sanctions lists. This has made it impossible for business partners abroad to pay or receive money. Without Swift and IBAN, trading partners can no longer get their money. Retail chains are going out of business in Russia because commercial transactions are no longer possible without a payment infrastructure. In addition, there are embargoes on items that may not be delivered as part of export controls. This means that even Russian companies that are not on sanctions lists are excluded from items related to gas and oil production and machinery. This also applies to restrictions on the delivery of luxury goods to Russia.

All companies have a duty

All companies are affected by the sanctions list screening obligation - regardless of size, national or international business. They are obliged to carry out sanctions list screening for every business contact, regardless of the country in which the customer, supplier or trading partner is based. Swiss companies must screen their business partners and employees against their own Swiss list, but it also makes sense to consider the most important US lists.

Today, no company can afford to ignore the sanctions list check. Anyone who does so may be targeted by the US authorities and will then have to negotiate fines. If they fail to reach an agreement, they run the risk of being listed themselves. Companies damage their reputation, lose business partners and even risk insolvency. The penalties are draconian: up to 10 years imprisonment for intentional violations and fines of up to 500,000 euros for negligent violations. The USA also threatens extraterritorial criminal prosecution - due to a lack of access to the management, the entire company is then placed on a US list. Compliance is generally checked as part of audits or by customs. However, stricter controls are not expected despite the current war.

Sanctions list screening needs software

Companies have always had to comply with sanctions lists. Even before the war, the number of data records, lists and updates was steadily increasing: in 2019, there were 30 lists and more than 110,000 data records worldwide. More than 600 updates were made in 2020. Since the start of the war, the number of updates to various lists has grown enormously once again - and with it the demands on the quality of sanctions list checks. At the latest now, it is no longer possible to check randomly or manually. The company Sapper from Kempen is a leader in compliance software with its domino® tool. The company has responded to the new circumstances: Previously, all available lists worldwide were maintained on a daily basis for business partner screening - based on publications by the US authorities, the EU and other countries with their own lists. Sapper now sends its customers the current status of the sanctions lists several times a day, as it can no longer afford to do so more frequently. This customer service is unique; Sapper can provide the infrastructure for this more frequent frequency of list updates. Sapper has also noticed that existing customers who previously only considered a few lists to be necessary have increased their range and booked new lists. Sapper makes this possible within 24 hours. German companies with Russian subsidiaries have also woken up: The subsidiaries were often not adequately equipped - these processes are now being put to the test.

Permanent screening necessary

Checking sanctions lists is a challenge even without current conflicts. After all, a one-off check at the start of a collaboration is not enough. Companies must be able to prove that their partners are not on lists throughout the entire business relationship. Sapper's tool therefore automatically triggers new checks when updates are made. This also applies to applications that are fully integrated into SAP. Companies can therefore be sure that they will be informed if business partners have been added to a list over the duration of the business relationship. For all business transactions that are mapped in ERP, screening takes place at the start of the workflow. CRM systems can also be connected to an early warning system. Ad-hoc checks ensure that business relationships with partners on sanctions lists are not initiated in the first place. Business transactions outside of ERP, such as management activities like consultancy contracts, LOIs, rental and leasing, asset sales and services, can also be individually checked. The following applies to all of them: the audit must always be verifiable via reporting. In view of the large number of necessary checks, it is important to keep the error rate as low as possible. This is because business processes are blocked if errors are found. The error rate of the domino® tool is 0.1 to 0.3 per thousand. This low rate, combined with speed and accuracy, is the USP. The tool is used to check over 84 million transactions worldwide every day. The algorithm scans each word and each letter individually and can therefore compensate for hearing and spelling errors such as misspelled letters. It finds matches even if the lists are of poor quality.

Conclusion: Take sanctions list review seriously

Sanctions and the review of international sanctions lists have become more prominent in the minds of companies with the Ukraine war. They need to ensure that they do not have business relationships with listed individuals and organizations in order to avoid draconian penalties. This is only possible with modern software. Sapper's tool offers updating of the lists several times a day - so companies are on the safe side. Author: Marie-Helene Wessel is the managing director with power of representation of SAPPER INSTITUT GmbH in Kempten (Germany), manufacturer of the domino® software mentioned in the article. www.sapper.de

This article originally appeared on m-q.ch - https://www.m-q.ch/de/sanktionen-und-sanktionslistenpruefung-im-ukraine-krieg/