Understanding Sanctions Compliance: The Basics

Sanctions compliance refers to the policies, controls, and processes an organization puts in place to ensure it does not engage in prohibited transactions or dealings with individuals, entities, countries, or sectors that are subject to economic or trade sanctions.

Sanctions are imposed by governments and international bodies such as the United Nations, Office of Foreign Assets Control (OFAC – U.S.), Office of Financial Sanctions Implementation (OFSI – UK), and the European Union, among others. These measures are typically used to influence political behavior, combat terrorism, prevent human rights abuses, or enforce international law.

Key elements of sanctions compliance include:

Screening: Checking customers, vendors, transactions, and counterparties against global sanctions lists to ensure no designated party is involved.

Risk Assessment: Identifying where and how your business may be exposed to sanctions risk (e.g., high-risk jurisdictions, products, or third parties).

Policies & Procedures: Establishing clear internal rules and escalation processes that align with regulatory expectations.

Training & Awareness: Ensuring staff understand what sanctions are, why they matter, and how to identify red flags.

Ongoing Monitoring: Keeping systems and controls up to date with changing sanctions regulations and geopolitical developments.

Failure to comply can lead to severe legal, financial, and reputational consequences, including fines, investigations, and restrictions on business operations.

In short, sanctions compliance is not just a legal requirement, it’s a critical part of protecting your business and operating responsibly on the global stage.