COMPLIANCE with export and sanctions law can often be overlooked by organisations, particularly those which are not used to dealing internationally or in high risk areas.
The rules are often complex, impenetrable and at times ambiguous.
However, the consequences if you get it wrong, for example by failing to obtain the correct export licence, exporting to a sanctioned country or by dealing with a listed individual or organisation, can be damaging.
The stakes are high: the penalties range from suspension of export licences to civil and criminal fines for companies and imprisonment for individuals.
You may also suffer damage to reputation and loss of business, and a history of breaches could make it more difficult for you to obtain export licences in the future.
In recent years, sanctions have been particularly troubling for EU exporters to Iran and Russia, the energy industry having been subject to significant restrictions.
Although the Joint Comprehensive Plan of Action (“JCPOA”) saw most EU sanctions against Iran lifted earlier this year, some restrictions do remain.
US sanctions on Iran remain comprehensive and are so broad that virtually all dealings with Iran by US persons are prohibited, with only limited exceptions.
However, non-US subsidiaries of US parent companies and foreign entities owned or controlled by US persons can now deal with Iran subject to various conditions.
US sanctions on Iran can even apply to organisations with no links to the US, particularly where the US banking/financial system or US origin goods are involved in transactions.
EU sanctions against Russia restrict the export of certain energy related equipment and technology to Russia and were recently extended to January 31, 2017.
There are also prohibitions on the provision of drilling, well testing, logging and completion services for deepwater, Arctic Circle and shale projects in Russia.
Dealings with certain listed persons with connections to Russia are also prohibited.
Recent changes in the regulators responsible for enforcement of export and sanctions could signal a political shift towards tougher enforcement and harsher penalties.
Earlier this year HM Treasury announced that the Office of Financial Sanctions Implementation (“OFSI”) had been officially established to work closely with law enforcement and to provide guidance on financial sanctions (restrictions which subject specific listed individuals or corporate entities to asset freezes).
Whilst the aim to provide clearer guidance will be welcomed by businesses in the UK, OFSI appears to have a more aggressive approach to dealing with breaches of financial sanctions than has previously been taken.
Among the new proposals are plans to introduce a civil penalty where a prosecution for a breach of financial sanctions is not considered to meet the public interest test.
The maximum civil penalty which could be imposed would be £1,000,000 or 50% of the value of the funds or economic resources dealt with, whichever is greater.
This power is likely to produce more and much greater penalties (albeit civil) than has previously been seen in financial sanctions enforcement in the UK. Details of any civil penalties imposed will likely be publicly available.
Our export and sanctions team can help you every step of the way.
We can help with the development and improvement of your compliance programme and can be there to represent you if things go wrong.
In particular, our sanctions workshop will explain the regulatory regime and how to keep up to date with changes.
It will also give you the tools necessary to assess the risks facing your organisation and will help you to avoid the common pitfalls often experienced in this area.