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Sanctions: What are they, and how do they work?

(FREE) Essential Information to get you started on understanding what Sanctions are all about and how to deal with them in your business

When you look at the conflicts in the world, one could argue that the world is not a safe place. Certain Governments are poised for war inside or outside their country and even carry it out online nowadays. This is a direct threat to the way many people live their lives, and action must be taken to protect citizens and other countries.

But more fighting and counter-aggression is usually seen as not being the solution. Typically, countries react with sanctions.

Is your business engaging in international trade? Might you come across, knowingly or unknowingly, sanctioned individuals, entities or businesses? Do you trade in countries that are subject to sanctions?

This blog explores:

  • What are sanctions?

  • Why do countries impose sanctions?

  • Who do they apply to?

  • What countries or issues are subject to sanctions?

  • Where do sanctions apply?

  • What penalties exist for breaching sanctions rules?

  • How are sanctions implemented?

  • Introduction to Sanctions' List

  • Top three tips to avoid your business breaching sanctions

What are sanctions?

Sanctions are an essential tool in many countries' foreign and security policy, through which a country can intervene where necessary, typically with the aim to prevent conflict or respond to emerging or current crises. They aim to

  • bring about a change in policy or activity

  • maintain and promote international peace and security, and

  • prevent terrorism.

  • preventing conflicts

  • supporting democracy, the rule of law and human rights and

  • defending the principles of international law

Why do countries impose sanctions?

by targeting other countries, as well as entities and individuals, responsible for the malign behaviour at stake.

Who do they apply to?

Sanction measures can apply to action taken

  • by anyone in a country (including its territorial waters)

  • by a national outside the country.

They can also apply to companies incorporated in a country.

What measures can governments take?

A government may impose these types of sanctions measures:

  • trade sanctions, including arms embargoes

  • restrictions on dual-use items,

  • financial sanctions, including asset freezes and

  • immigration sanctions, known as travel bans.

The exact nature can vary from sanction by sanction.

What countries or issues are subject to sanctions?

Some regions or countries, like the EU or the UK, have over forty different sanctions regimes in place. Some are mandated by the United Nations Security Council, whereas others are adopted autonomously by the country/region.

Here are some examples, of Countries and Issues that are subject to Sanctions:

  • Afghanistan-Related Sanctions

  • Balkans-Related Sanctions

  • ​Belarus Sanctions ​

  • Burma-Related Sanctions

  • Central African Republic Sanctions

  • Chinese Military Companies Sanctions

  • ​Counter-Terrorism Sanctions

  • ​Cuba Sanctions (US only)

  • ​Cyber-Related Sanctions (US)

  • ​Democratic Republic of the Congo-Related Sanctions

  • Ethiopia-Related Sanctions

  • ​Human Rights / Global Magnitsky Sanctions

  • Hong Kong-Related Sanctions

  • ​Iran Sanctions

  • ​Iraq-Related Sanctions

  • ​Lebanon-Related Sanctions

  • ​Libya Sanctions

  • Mali-Related Sanctions

  • ​Nicaragua-Related Sanctions

  • ​North Korea Sanctions

  • ​Somalia Sanctions

  • ​Sudan and Darfur Sanctions

  • ​South Sudan-Related Sanctions

  • ​Syria Sanctions

  • Syria-Related Sanctions

  • ​Ukraine-/Russia-Related Sanctions

  • ​Venezuela-Related Sanctions

  • ​Yemen-Related Sanctions

  • ​Zimbabwe Sanctions

Where do sanctions apply?

While sanctions inherently have an effect in "foreign" countries, as they are a foreign policy tool, the measures apply only within the jurisdiction of the country applying it. In other words, the obligations they impose are binding on nationals of that country or persons located in the country or doing business in it.

So, a US business is subject to US sanctions. A US businessman travelling in Europe needs to respect EU sanctions, too.

How are sanctions implemented?

Implementation of the sanctions regimes through legislation, for example, in the UK, it is the Sanctions and Anti-Money Laundering Act 2018 (the Sanctions Act). The Sanctions Act provides the legal basis for the United Kingdom to impose, update and lift sanctions.

In addition, there are many countries with issue-specific laws that are imposed.

Introduction to Sanctions Lists

Countries usually publish a consolidated list of persons, groups and entities subject to financial sanctions, which authorities manage and updates whenever necessary. They often reflect the officially adopted texts published in the Government Gazettes or Journals. Often, businesses can download a PDF version of the consolidated list of financial sanctions. If you are interested in the latest Sanctions Lists' of your country or any other you are trading with, please get in touch,

What penalties exist for breaching sanctions rules?

Countries have in place effective, proportionate and dissuasive penalties, and enforce them when sanctions are breached. They go in the millions and can cripple a business.

Top three tips to avoid your business breaching sanctions

  1. Make sure you screen all your transactions against the latest restricted party list to avoid any compliance challenge.

  2. Ensure that you do not trade with undesired individuals, and you have processes and procedures in place to prevent this.

  3. Please refer to the detail of the legislation to understand which sanctions have been imposed, how they are implemented and how the new change affects your business.

Need Help?

Please get in touch with your expert to discuss ways to identify if and how sanctions and restrictive measures impact your business, and how to screen against restricted parties efficiently and effectively.

Restricted Party Screening

You can do restricted party screening with automated software.

Please get in touch and we will be able to propose a suitable software for you.

Customs Manager Ltd. also offers a screening service called "Due Diligence".

We will carry out extensive checks on your business relationship, once or on-going and provide you with a report or alert you in case of a Hit.

If you want to stay up to date with Sanctions, this is it

Dedicated Sanctions Category on Customs Manager's Expert Blog with all the latest changes and updates on sanctions development, analysis of individual sanctions, why they are imposed, how, and what businesses can do. Also, analysis of sanction laws and up-to-date information:

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