Fraud and financial crime continues to appear in news headlines, and the focus on sanctions compliance is only set to increase. The Financial Times Alphaville noted on March 18, 2015 that the Budget documents have set out the UK government’s intention to move to an Office of Foreign Assets Control (OFAC)1 model of sanctions compliance:
“The government will review the structures within HM Treasury for the Implementation of financial sanctions and its work with law enforcement community to ensure sanctions are fully enforces, with significant penalties for those who circumvent them.”2
“This review will take into account lessons from structures in other countries, including the US Treasury Office of Foreign Assets Control.”2
Since these measures emerged, most sanctions compliance officers have been working at maximum capacity to help their banks deal with the complex requirements they face. Given the severity of penalties and fines, the pressure faced by sanctions officers could not be any higher. Sectorial sanctions are here to stay as method of economic persuasion, and all firms need to consider what this means to their operating models.
For help in meeting the additional requirements, firms can focus on these key areas:
- Scale: The ability to scale up sanctions resources is essential. Going forward, retaining sufficient resources to avoid overstretching teams will be challenging.
- Systems: As sanctions regulations have become “smarter,” systems need to evolve to keep up with the requirements. Blanket ban automated rules do not suffice any more.
- Trade Finance: Identifying dual-use goods is a key issue in terms of export requirements. Identification can be complex, and currently requires a highly manual process to assign the appropriate status (i.e., dual-use or not). This is because the provided descriptions are not being clear-cut, and require further investigation and clarity.
Keys factors to consider
To deal with increased sanctions requirements, firms are encouraged to consider these factors:
- Collaboration and an integrated global team: This makes it easier to have the correct controls in place, using cross-departmental skills and knowledge, such as product and systems knowledge.
- Network: Sanctions compliance officers’ should connect across the business. This is important to a joint approach and to using key insights captured within a firm.
- Strategy and planning: Having a future plan and strategy, and being able to anticipate what is going to happen in a crisis, gives you time to take action.
By building out a collaborative global team and a strong network, and supplementing that with solid strategy, financial providers equip themselves to address increased sanctions requirements. In my next post, I’ll explore additional steps and actions to consider for an effective sanctions management program.
 “A British OFAC?,” Financial Times Alphaville, March 18, 2015. Access at: http://ftalphaville.ft.com/2015/03/18/2122085/a-british-ofac/