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Global Business Leaders Facing Sanctions Complexity Should Take OFAC’s Advice: Adopt a Sanctions Control Program

As The Economist observed following the initial tranche of Russia sanctions, “The West has deployed an economic weapon that was until recently unthinkable.” The breadth and complexity of the Russia sanctions are unprecedented, and their ripples are affecting technology and numerous other global supply chains.

A fair bit of the complexity flows from imperfect allied alignment. Despite laudable early collaboration, US, Canadian, UK, and EU authorities have adopted sanctions regimes which continue to reflect disparate political processes and domestic sensitivities. For example, in March of last year, both the US and the EU issued sanctions against certain dual-use exports to Russia, such as EU Regulation 2022/428 and US Executive Order 14068. Months later, Canada revised its sanctions regime to come in line with the previous EU and US enactments. And this lag in coordination creates compliance risk.

Despite this complexity, global business leaders must ensure that their company complies with all laws in each jurisdiction in which they do business. So, how does one develop a program that captures diverse sanctions cascading across multiple customer jurisdictions?

Over the past five years, first advising Raytheon Global Trade and later Geotab Global Trade Enablement, I’ve been impressed with the ability of an OFAC Sanctions Control Program (SCP) to adapt to geopolitical challenges. A well-designed SCP is a critical tool for global business leaders when sanctions regimes become complex, as now.

And the US Government agrees. The US Treasury Office of Foreign Asset Controls (OFAC) strongly encourages organizations subject to US jurisdiction, as well as “foreign entities that conduct business in or with the United States, US persons, or using US origin goods or services” to employ a risk-based approach to sanctions compliance by developing, implementing, and continuously updating a SCP.

The relevant Framework for OFAC Compliance Commitments identifies five elements of a fully compliant SCP:

(1) Management Commitment;

(2) Risk Assessment;

(3) Internal Controls;

(4) Testing and Auditing; and

(5) Training.

The framework is flexible. In fact, OFAC recognizes that “no one size fits all” and encourages a tailored, risk-based approach. And the enforcement guidelines credit the existence of an SCP—by identifying it as a factor in mitigation of punishment—in any OFAC enforcement action you may suffer.

An SCP both hedges against an OFAC enforcement action and militates against its worst consequences, particularly during challenging times.

As sanctions have become increasingly more complex, global business leaders should take OFAC’s advice; an SCP can help you reconcile conflicting sanctions regimes and avoid financial and reputational injury.