September, 2021

What Are Sanctions and Why Being Cautious Can Save Your Business Millions?

What Are Sanctions and Why Being Cautious Can Save Your Business Millions?

Understanding all the specifics of the legal systems that are involved in sanctions is hard, but knowing the basics can help you avoid unwanted fines. That’s why we've narrowed it down for you. In this article, we'll provide you with the most important information that you need to know about sanctions and how they affect your business. 

Firstly, what are sanctions?

Sanctions are a way of enforcing rules. Countries use them to decrease unwanted and dangerous behaviors.

More specifically, sanctions are one of the many political trade tools that are used against countries, organizations, and individuals. The goal of sanctions is to maintain international security and change the dangerous behaviors of the targeted parties.

All the sanctioned people, businesses, and countries are put on sanctions lists. These lists are updated whenever some new entity is sanctioned.

For example, an individual can be put on a sanctions list for obstructing humanitarian aid. Because of this, doing any kind of business with this individual can land you in jail with serious fines.

Some of the most popular sanctions lists are:

What are the penalties for sanction violations?

The penalties for non-compliance are different with each sanctions list. For example, the penalties for non-compliance with the OFAC sanctions lists can range up to $2,000,000 and prison time up to 30 years. For repeated violations, the penalties add up—there are multiple companies that have been fined amounts over $1 billion.

How do sanctions affect your business?

International businesses and financial institutions must comply with the sanctions that have been set for the countries they operate in or work with. If you do business across borders, then you're legally obligated to pay close attention to your customers. You're responsible for checking who you can do business with.

Sanctions checker image with sanctions lists and sanctioned entities

However, complying with sanctions is difficult and time-consuming. Sanctions lists are updated on an ad-hoc basis by the major responsible institutions. For example, the OFAC sanctions lists alone contain approximately 6,300 names, which are updated daily with multiple additions. Keeping up with these updates manually is difficult.

What's more, OFAC is not the only list you have to check. There are multiple other lists that affect international businesses, such as the UN, EU, and UK sanctions lists.

Sanctions lists increase checker image
Source: gibsondunn.com

Each list is expanding by the day. And the lists often overlap and impact business dealings outside the sanctioned countries as well.

EU, UN, U.S. global sanctions regimes image

When a country, business, or person is sanctioned, people from many other countries can’t do business with them. A country can put in place sanctions that forbid anyone (even people from other countries) from doing business with someone.

It's not uncommon that a sanctioned country will experience the consequences of sanctions not only from the sanctioning country but from others, too.

For example, the US can sanction country X in a way that other countries cannot do business with it, too. For your business, this means that even if you’re not dealing with the US, you still are obliged to abide by US sanctions.

Businesses in certain industries are more exposed to the sanctions lists. For example, this is true for industries such as energy, finance, insurance, and transportation. However, the increasing scope of sanctions means that all businesses that deal with international supply chains and transactions are exposed to them.

How can your business comply with sanctions?

With all the different types of sanctions issued by different countries, it's understandably difficult to keep up. Manually checking all the lists to ensure compliance has become near-impossible with the current pace with which new sanctions are being rolled out.

That’s where we, SanctionGuard, can help you out by helping you avoid fines without spending hours on it. We'll check your orders and compare the customers against the sanctions lists of OFAC, UN, EU, NATO, and UK. If anything suspicious comes up, we'll notify you with our findings. Regardless of what we find, you still get to make the final decision about completing the order or denying it. 

Be cautious, save time and money by using SanctionGuard. Check out our offers and try it out for free!

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