Nowadays we cannot rely on same sanction text twice… such as “we cannot step into the same river twice” . The sanction waves; texts, amendments, general licenses, wind-down periods… Such mass of sanctions and frequent updates are not the conditions that we get used to deal. Each extraordinary condition feed the myths, which are easy to believe instead of facing with the truth by paying significant energy and time on it. In brief I have summarized some few myths about sanctions that I have heard in these rush times;
“There are many grey points in sanctions”
Usually to have a red or green light is requested by internal/ external stakeholders. The rest named as “grey”. But I have an idea to name it as “yellow”, such as traffic lights.
In fact there are prohibited actions – red lines- , clear sanction conditions in the regulations. Such as prohibited items to sell, SDN listed persons / entities subject to limitation via their tags in the list… and there are rest non-sanctioned areas. In each transaction in “non-sanctioned” areas / persons contain a risk from sanctions point of view (risk could be less /more). Never forget the sanction related punishments / settlements are caused by the previous actions of non-sanctioned parties! So a risk assessment is a must. You may heard “low-risk/high-risk” as answer to your questions instead of “forbidden / allowed” . So what is your risk appetite? Finally your counter party -mostly it is the banks you are dealing with- may request a due diligence process to have a better understanding. These are not grey areas -it is yellow – ; like the security checks before you are boarding to a flight. Millions of checks may be done to prevent only one violation.
“I can do everything with a General License”
As Archimedes said “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” some people may perceive the GLs like “Give me a General License and I can proceed the entire transactions”
Although there are non-sanctioned areas / exceptions / general licenses; it is a must that in any deal/transaction the entire chain must be complied with the relevant sanction requirements. Compliance is a discipline which covers all steps/all parties of a transaction. A general license (GL) is not a sole authorization make the all process complied by itself; the rest of the condition in GL must be complied with the rest of the sanction regulations in your luggage. Additionally the wordings in GLs are mostly not wide, some could be subject to time / condition limits that brings tighter limitations.
“We cannot understand sanctions properly unless our native language is English”
Unfortunately I have started to hear this wording nowadays once again… Made me remember the saying of Bernard Lewis “…what we call democracy nowadays, is the parochial custom of the English-speaking peoples for the conduct of their public affairs, which may or may not be suitable for others. “?!
First of all sanction texts are not religious writings, they are open and publicly available ! Almost all sanction and restrictive measure texts are in English (UN, US ,EU, UK…), but being good at English is not enough. Sanction text are legal / administrative texts and most of the time the words have meanings far beyond they have in the dictionary. The definitions parts are as important as the main part. “Bottled drinking water” could not be an agricultural commodity where utility pole is ! (TSR 2000 )
“Sanctions are mostly related with energy sector, so the rest is riskless. ”
It is very common sense that people may think of energy or defense sectors when the sanction is the topic. Just a recent example against this myth; there are plenty household electrical appliances which is forbidden to sell Russia from European Union OR facilitation into these sales by any EU party. Hairdryers, toasters, coffee or tea makers, microwave ovens, cookers … You could violate the sanctions by selling any of them (if the per value is exceeding EUR 750) from EU to Russia! At the same time an energy company based in EU could import oil/gas from Russia to EU which is not a sanctioned action.
“My counter party is based in EU or US, so I can rely on their compliance checks”
Each entity carry on its own responsibility for sanctions compliance. Never forget that sanction risk is not a risk that you could delegate out of your entity. Being transparent and not to cause any direct or indirect deceptive practices against your counter party is not merely enough. Also you must do your own checks due to your compliance processes. Your counter party could be a good partner to proceed your sanctions compliance checks and controls, but it is not your risk control unit.
Abdurrahman ÖZBEK , CGSS, CAMS
SANCTION OBSERVER 