This is the continuation of Sanctions topic, please refer the last post to know more. In this part we will know more on: Sanction violation’s consequences, Second level sanction, Examples, Duration of sanction imposition and a bonus topic on how scanning is done on payments. So what are we waiting for? Let’s get started..
Consequences of sanction violation and secondary sanction:
Consequences of violation depends on party involved and category of the sanction. If the category is embargoes, who ever violates the law will be warned or penalized by putting them also into sanction list. Here, the parties can be an Organization, Individual or Country. These violations can lead the party to secondary sanction. In some cases parties can face fines, cancellation of licenses or warning too.
General Example: Buying banned goods/services from primary sanction country by another country knowingly or unknowingly or via the help of 3rd party.
Global Example: Turkey & India tried buying military/arms supplies from Russia, which led to face strict warnings from US.
Another type of violation is knowingly or unknowingly processing payment instructions and allowing of funds to flow into sanctioned entity by processing bank(s). In this case bank(s) participated from origination till the end will face fine and/or cancellation of license.
Global Example: BNP fined by US Treasury for processing payments to Sudan, Cuba, Iran – Value of fine $9 Billion
Action on violation depends on the severity of breaching the law, (un)willful crime and other parameters too.
Duration of sanctions imposition
Sanctions can be long term or short term.
Global Example: US Treasury banned USD transactions to Cuba – Long Term
Global Example: Short term sanction by OFAC on Turkey, due to ceasefire with Syria. Duration: 14th Oct 2019 till 23rd Oct 2019
Bonus Info: If we need to perform activity with sanctioned entity due to emergency or its essential, then the trading party need to apply for license. Party need to have prior permits by intimating right authorities, which is explained in sanction terms. – Google it out for more information and for global example on this 🙂
How are sanction scanning on payments done?
Sanction scanning is checked for Name of Beneficiary and Debtor; other parameters which can be used in screening includes D.o.B, Gender, Address, Identity Number.
The market has various products to perform hot list scan, we can use them or the order management and engines allows plug and play with OFAC, UN Sanctions List, EU’s ALM Name search and other country specific sanction list check.
Each FI(Financial Institution) can have their inhouse white list and black listed items which is in addition to Country/Union/Region’s specific lists [Can have Specially Designated Nationalists – SDN having P.E.P’s – Politically Exposed Persons and/or terrorists, criminals, ill legal organizations, etc.]
As we reach the end of this blog, now I wanna ask, do we know all about sanctions? after going through part one
and part 2 of sanctions. Answer: Probably NO. My understanding has limitations, this is only what I have read and seen in my projects.
We need to know like: At what stages of payment’s life cycle we do these scanning?, which acts are related to scanning?, why we need to do scanning at specific stages in payment life cycle but not at our preferred stage?, what is the response got after doing a hot scan check?
I keep make you wait to know more on these.. Thank You : -)