How to handle sanctions in your company!

Sanctions. You know they are there, and you keep an eye on them and their consequences for your business. To be quite frank, you would like to handle them better. But how? In this blog post, we will present ten points that can help you comply with any sanctions and – not least – react as quickly as possible if you are affected by existing or new sanctions.

As is the case with many other things in life, there is no time to waste when it comes to sanctions. The faster you get a grip of which sanctions may impact you, the better you are secured.

Therefore, we go directly to the crux of the matter and present you with the ten points that will, hopefully, help you handle sanctions in your company.

It is of the utmost importance that you are familiar with the sanction regimes and legislation of primary relevance to the Danes and Danish companies. Being issued by several international states and authorities, including the EU (DK legislation), the US (inter-state trade, USD trade etc.), the UK (inter-state trade etc.), and the UN (DK support for UN resolutions), the set of sanction rules has, by now, become very large and complicated.

Daily resources would be needed to establish a process providing the overview needed of both existing and new sanctions.

However, several providers offer system support for your company’s monitoring, and a simple process continuously screening new sets of rules and escalating as needed would be a good way in which to create an overview of the legislative landscape.

It is no news that you should always know your own business, your business partners and your products. But when it comes to sanctions, this is even more important.

It is essential to be familiar with the following points since every single one of them may result in your business being subject to sanction legislation. Consequently, it may be an advantage to be extra attentive to the following:

• Whether your company is doing business outside the EU and especially in the UK or in the US
• Whether you are doing business in US dollars
• Whether your company is doing business in sanctioned countries
• Whether you are trading in products (purchase, sale or distribution) that are possibly subject to sanctions
• Whether your business relations are trading in products (purchase, sale or distribution) that are possibly subject to sanctions
• Whether your business relations (customers and suppliers) are doing business in sanctioned countries.

When striving to find out how your company could be hit by sanctions, it would be advantageous to prepare a risk assessment.

This is a description of all the company’s business processes, including any operational processes, money flows, involved suppliers, customers and other stakeholders etc.

Once your company’s business processes have been described, you can quickly assess which sanctions present a risk of affecting the company’s activities – and how great the probability hereof is in reality.

A golden rule says that the greater your company’s involvement in a process probably involving sanctioned countries, companies, products or persons, the greater the general risk of your company.

When your risk assessment has been finalised, you should draw up a sanctions policy for your company. This policy will help the company’s management, employees and partners get an overview of the framework within which they are to operate.

The sanctions policy as such can be managed using either internal or external control possibilities – both solutions have their advantages and disadvantages.

Control possibilities may have one of the following forms:

• Central management via, for example, a service centre set-up for central monitoring
• Local monitoring and management in, for example, each individual subsidiary
• Management and monitoring, if relevant, per business unit by, for example, a logistics company providing lorry transportation and store operations, respectively
• External management and monitoring, if relevant, by, for example, special consultants.

Or alternative hybrids of the above.

Continuous monitoring of new sanctions is important and, not least, informing all relevant internal parties about it.

However, it is at least as important that you – as a company – continuously monitor that your customers, suppliers and partners are not – or have not been or are no longer – subject to sanctions. In general, it is prohibited to do business with companies subject to sanctions. In addition, it would be an advantage for you to monitor those with whom you do business and the products that you use, buy or sell. Still more persons are being subjected to sanctions. And so are still more products, which means that you must not use them for production, buy or sell them.

The sanctions also apply to so-called dual-use products – i.e. products such as software and technology that can be used for both civilian and military purposes and applications.

The monitoring as such can have the form of a manual review of all information about your business relations with the purpose of ensuring that, for example, a sanctioned customer is not accepted as a new customer. The monitoring can, however, also be made by IT systems. There are clear advantages since it prevents errors in the monitoring process.

You can handle some of your company’s sanctions-related risk by placing part of it with your customers and suppliers. This can be done relatively simple by ensuring that general business terms and conditions in contracts oblige your customers, suppliers and their sub-suppliers to observe all relevant sanctions.

However, as a company, you should expect to sign similar business terms and conditions and sanction obligations when acting as a customer or supplier. So unfortunately, you cannot free yourself from all risk by merely concluding contracts.

As is the case with everything else related to compliance, it is important to follow up on your customers’ and suppliers’ actual obligations through their signature on your company’s business terms and conditions.

This is done by means of a compliance audit of your customers and suppliers, where you get access to the companies’ compliance programs – specifically as regards sanctions, their sanctions policies, how they train their employees etc. On this basis, you can assess whether they meet the obligations and the provisions of the contract concluded with you.

If they do not comply with the requirements that you as a company should make contractually, we recommend that you engage in a constructive dialogue. In case that does not have any impact, you should consider whether to continue your cooperation.

Cooperation with a partner who, either with or without intent, violates sanctions provisions may, in the worst case, result in your company being made jointly responsible for the violation.

It may make sense to teach all your employees the most basic about sanctions so that they know what they are allowed to do and what they are not. Employees in, i.a., auditing, legal, finance, logistics and procurement should get longer and more detailed training so that they can spot so-called ‘red flags’ and, thus, avoid any violations of sanctions.
There are also many different IT systems on the market that can support the teaching in sanctions. And there are so-called off-the-shelf products on the market that you can easily implement without having to involve many internal resources.

When using external training systems, you know that the system is constantly updated with the most recent sanctions, which is clearly recommendable. At the moment, many new sanctions are being introduced and, therefore, it is good to get help for keeping an overview.

As is the case with other kinds of compliance issues, you should always have an emergency response plan in place. This means that, if one or more sanctions are violated, or if a violation is about to occur, both employees with an understanding of sanctions and management representatives are prepared. As a result, the company can quickly make the right decisions about the internal and external handling of any violation of a sanction.

In this connection, it would also be sensible to have a number of external advisors to consult who are specialists in sanctions provisions.

Last but by no means least, it would be an advantage for your company to digitalise all your sanction processes as far as possible. It would make it much faster and easier to handle all the processes and you could, to a wide extent, avoid human errors.

Especially the monitoring process should be digitalised. Therefore, you should examine which IT systems could help keep an overview of the rather large jungle of sanctions against countries, companies and persons as well as of products and technology. That would also make manual controls a thing of the past.