Sanctions compliance for a company trading here

Any company trading in or through this region needs a sanctions compliance process. This is a practical description of what one consists of; it is not legal advice and a company with genuine exposure should take it.

Counterparty screening

Check every counterparty against the applicable sanctions lists before the first transaction, and re-check periodically, because lists change and a clean counterparty can become a listed one.

Screen the company, its directors and its ultimate beneficial owners. Screening only the company name misses the most common structure, which is a listed individual holding through an unlisted entity.

The ownership test

Most regimes treat an entity as sanctioned if listed persons own or control it above a threshold, and ownership can be aggregated across several listed persons.

This is where diligence actually bites: the counterparty is not listed, its owner is not listed, and its owner's owner is.

Goods and end use

Dual-use classification: many ordinary industrial items — machine tools, electronics, chemicals, optics — have a control classification and require a licence for certain destinations.

An end-user statement, obtained and retained, showing who will use the goods and for what.

The internal process

A named person responsible. A written procedure. A record of every screening performed, kept with the transaction file. Training for the commercial team, because they are the people who meet a new counterparty first.

Why the record matters

If something goes wrong, the question asked will be what the company did to check. A documented process that was followed is a substantially different position from a good intention.

Setting up a screening process is a day's work; not setting one up can end with your bank closing the account. In my own companies I have made it a procedure: an ownership check for every new counterparty, an end-use declaration for every shipment, all of it on file. The protection is not against a penalty — it is being able to show what you did when a question arises.