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Staying in Line: Demystifying Sanctions Compliance and Its Importance

The term mercantile capitalism was coined a few centuries ago when the transatlantic trade of merchandise took place. The term refers to a specific event in our history as global trade (as we know it and understand it) happened for the first time. The milestone set by the first venture capitalists, who utilized the use of ships to transport goods from Brazil, India, and South Africa to England and Spain, echoes through centuries. Their legacy makes it possible for us today to enjoy a cup of matcha tea from Japan while eating our dark chocolate from the depths of the Amazon rainforest. 

Our interconnected world is being held by a delicate network of mutual agreements and international laws, making it possible to conduct business and exchange finances, goods, and information. The complexity of global regulations and the severe consequences of non-compliance can have a serious impact on companies and individuals alike. So, the essay aims to demystify sanction compliances making them understandable for everyone. Read on as we dwell into the “vague” world of sanctions compliance, elucidating its importance. 

What are sanctions? 

First, we must understand what sanctions are and how they affect global trade and shipments across the oceans. The short answer is that sanctions are measures set by governments or international bodies to exert certain “pressure” on specific countries, organizations, companies, and individuals to achieve specific economic, political, or security objectives. Those objectives vary and depend on different factors, but mostly it is to prevent possible breaches of peace agreements set by countries. 

Extreme examples would be the prevention of terrorism, abuse of human rights, halting the trade of illegal substances or weapons, but can also be to put a stop to financial or tax fraud or simply the trade of objects that one country might consider “illegal by law.” So, in short, we can agree that sanctions exist for a reason and have a purpose. Sanctions are never being made just for fun but are the product of careful examination and years of experience. When a country has sanctions, they usually have an in-depth explanation of why they exist and what are the consequences of breaching them. 

Sanctions Compliance 

As we now understand what sanctions are, it’s only understandable why sanction compliance exists, but how does it work exactly? 

Sanction compliance means adhering to the laws and international agreements set forth by countries, entities, or organizations. Why should it matter to you? If you want to conduct any sort of international business from shipments to trade of finances and goods, you’ll have to grasp sanctions compliance and become aware of the fact that not adhering to these laws and regulations can have serious consequences for you and your company. Some entities or bodies are well known to us, as we all have heard of the United Nations, OFAC, and the European Union. We also have to recognize that non-compliance is in line with causing serious harm to the delicate web we call the global trade network and how phenomena such as piracy, terrorism, and theft are often the direct or indirect consequence of us maybe going around regulations to save money and time. 

How can you navigate this landscape of regulations, laws, and compliances without falling victim to the consequences of non-compliance? Let us take a look! 

Know your regulations! 

Always stay informed about the sanction regimes and regulations relevant to your industry or business. You can ask your lawyer, legal team, or the ministry dealing with sanctions and regulations regarding trade. Thankfully, the internet provides a broad range of information on this topic and helps you stay in line with possible law changes. Try your best to understand possible prohibitions imposed by these regulations as you can avoid that you know of. Laws change from time to time and are subject to the ever-changing climate of politics and economics. 

Risk assessment 

This means conducting risk assessments of your business and whether or not certain actions can fall under the category of sanction compliance. Maybe you don’t need to know the laws as you conduct business locally and only have to adhere to the laws and regulations set by the local government. Or maybe the type of business you conduct is internationally recognized and deemed by a majority of countries as a “no-risk” operation. Try to understand all your business activities, customers, partners, supplies, and transactions. You can utilize screening tools and pay someone to identify individuals with connections to sanctioned entities. 

Due Diligence 

It seems a bit harsh and borderline paranoid, but implementing robust mechanisms of screening potential employees, customers, clients, suppliers, and transactions against sanctions lists is nothing to be afraid of. It’s a simple assessment and makes it easier for you to play on the safe side of the law. Also, while implementing these screening mechanisms, do the same for any transactions being conducted by your company as monitoring them can save you from breaking the law. 

Comprehensive Documentation 

We cannot stress enough the importance of having everything neatly on record and keeping track of all your documentation. Nowadays, it’s easy to have three copies of every document, from PDF to hard copy. Make sure to have detailed records of all your conduct, including transactions, correspondence, agreements with other parties, and possible trade agreements. This way, you can mitigate the possibility of anything illegal happening to your company as you have hard proof of compliance. 

Seeking Legal Help 

No one probably understands the intricate system of laws and regulations, like several lawyers sitting together around a table. Having a legal team by your side prevents you from making any mistakes when conducting foreign business deals, transactions, and trade. Suppose you don’t have a whole legal team on board. In that case, you can always seek legal expertise and consultations offered by law firms or simply meet with your lawyer to discuss future trade routes and agreements with international customers and clients. All in all, don’t feel ashamed to ask and seek advice from people with a better understanding of the law and years of experience. 

Many people understand sanctions compliance incorrectly, but the future of global trade heavily relies on our understanding of compliance and how these laws and regulations have been set by several entities to ensure the global network keeps operating despite all the troubles the modern age faces. 


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