What Do Sanctions Mean for International Business?
With the United States having recently placed new sanctions on Russia, Iran and Venezuela, it is understandable that companies intending to operate internationally may be wary. Here, Galvin International explore the impact sanctions can have on doing business abroad, and how your own company can remain compliant.
What are sanctions?
Sanctions can take many forms, ranging from extra tariffs and quotas placed upon goods entering or leaving the sanctioned country, to embargoes that restrict trade between countries.
For international business purposes, the types of embargoes you will be most likely to encounter are:
- Financial sanctions – these prohibit companies from carrying out certain transactions with any targeted person or organisation. They can apply to individuals, entities and governments.
- Trade sanctions – these prohibit trade in certain goods between nations, and are imposed by one nation onto one or more other nations. They can be unilateral (imposed by a single country onto another country) or multilateral (imposed by any number of countries onto any number of different countries).
Currently, the UK must abide by sanctions imposed by both the UN and the EU. As well as the US’s recent sanctions against Russia, Iran and Venezuela, countries which still face significant international sanctions include North Korea, Libya, Syria and South Sudan. Despite moves towards relaxation during President Obama’s administration, the US trade embargo on Cuba is also still in place.
Implications for your business expansion
Sanctions can be an extremely serious matter for businesses who have undergone international expansion. Deliberately breaching sanctions, or engaging in any activity designed to circumvent them, is a serious criminal offence which can affect businesses and their executives. From April of this year, the UK Treasury introduced tough new measures, under which serious financial sanctions breaches can incur fines of up to £1 million – and ignorance is never a good excuse. Even if no sanctions exist between your business’s country of origin and your target market, sanctions from other nations can cause disruption.
The good news is that sanctions are unlikely to affect businesses trading with developed countries in areas that they are familiar with. In these cases it won’t be necessary to make any major changes to your strategy, but it is always prudent to take sensible precautions that will keep your business compliant and protected.
One of the most fundamental precautions to take is simply to know exactly who it is you are dealing with at all times. Make sure you are clear on the identity of your client and their exact status with regard to sanctions. Understanding and complying with any anti-money laundering legislation is particularly important – otherwise you may find yourself unwittingly violating sanctions by trading with clients who are subject to them.
If you’re planning on expanding into new markets you have little experience with, it is vitally important to research them in depth to see if sanctions apply – or to find out if they are known trading areas for countries under sanction. Similarly, if you are trading in sensitive goods or services, such as defence or financial services, keeping on top of the global sanctions situation and carefully vetting all prospective clients is essential. If you feel that an extra depth of research is required, you can even purchase access to databases that will tell you if your clients are subject to sanctions.
Although the penalties for breaching sanctions are severe, any astute and conscientious business can ensure they steer clear of grey areas by taking the same approach they would to any other compliance issue – detailed research, constant oversight and a thorough due diligence process. Galvin International can provide the advice, on-ground support and implementation that you need. From helping you choose your target market to ensuring your goods get through customs hassle-free, our experts work with your business to keep your expansion plans compliant and watertight. Get in touch with us today to find out how we can help you achieve international success.
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