On Friday, September 12th (2014), a new round of sanctions against Russia imposed by the European Union and the United States took effect. These sanctions are intended to pressure Russia into complying with the 12-point peace plan to end the conflict in Ukraine. The steps include the complete removal of Russian-supplied material and forces being used to support the Ukrainian separatist military groups.

Sanctions affect international trade because they prohibit or place restrictions on individuals and companies from doing business with sanctioned or countries. The countries may be embargoed because of concerns about human rights violations, terrorist or nuclear proliferation activities, or antipathy towards the government’s policies.

The US and EU sanctions against Russia, for example, include reduced access to financial services, a complete ban on services related to oil exploration and production, and inclusion of Russian individuals on the lists of persons subject to travel bans and to having their assets frozen if held in US and/or European banks.

As a practical matter, caution should be used when doing business with persons and companies on these lists. The United States maintains a list of specially designated nationals with whom US nationals (individuals and companies operating within the U.S.) are prohibited from doing business unless they have obtained a license to do so. The EU maintains its own list of those subject to EU financial sanctions.

Other Sanctions Programs

Courtesy of Wikipedia

Courtesy of Wikipedia

The US sanctions programs extend to a number of other countries. These include broad sanctions against doing business with Cuba, Iran, North Korea, and Syria.   The EU sanctions are less comprehensive and maintained against fewer countries. Both countries maintain subject matter transactions, such as prohibitions against trading in “conflict” or “blood” diamonds used to finance the operations of rebel movements in a number of African countries.

Why Traders Need to Pay Attention

  • As a result of the underlying foreign policy goals to these sanctions programs, they are strictly enforced. Penalties for violation(s) can include individual and/or corporate fines in the tens of thousands of dollars/euros for each violation, denial of export privileges, and/or even imprisonment. Furthermore, just being investigated for an alleged violation can result in the loss of company reputation and clients.
  • These programs change in response to foreign policy concerns. One year ago there were no sanctions in place against Russia.
  • There is no statute of limitations on these violations.  In a previous blog, we reported on the ING Bank, which in 2012 paid US 619 million in connection with violations dating back to its inception as a small, local bank in 1991.

This is why the time to begin paying attention to the legal do’s and don’ts of doing business internationally is NOW!

Contact us for help with developing a cost-effective compliance policy to protect your company.