Sanctions Horizons & Beyond

Trying to predict the future is a difficult task, that perhaps only the foolhardy would attempt, especially in an area as volatile as sanctions. However, in this series of short and longer range forecasts, we will speculate as to what we currently believe will be the influencers of sanctions going forward.

These forecasts are personal opinion, backed up with nothing more than experience and gut feel, and don’t take them as anything more…

No 4, Crimea.

The situation in Crimea has reached a point of stability from a sanctions perspective, sanctions have been applied, everyone has learnt to work with them, there doesn’t seem any likelihood of Russia withdrawing from Crimea. Perhaps Crimea will become Europe’s Cuba, a long lasting protest without any hope making any change. We have the dichotomy of GAZPROM having sanctions applied and sponsoring the champions league at the same time, and becoming a household name through that sponsorship.

It seems unlikely that change will happen now in Crimea, the Crimean people where pro Russia anyway, so there is no internal pressure to displace Russia from the Crimea, the sanctions are not strong enough to displace Russia, the UN Security Council is powerless due to Russia’s own veto, and Russia is too entangled in the European economy to make comprehensive sanctions against them.

So, for now, the prediction is expected more targeted sanctions on individuals and companies, smart sanctions on sectors which pinch a little but don’t hurt a lot (but may be hard to implement), and the situation in Crimea not to change.

No 3. The Rise of the Machines

Sanctions alerts adjudication has for a long time been a very manual intensive task, we have seen companies with 400, 500, and even 700 full-time manual investigators doing nothing other than triage screening alerts. Companies have almost showing off to regulators about the expense and commitment involved. However, Times change and expense even confronts compliance.

Technology has been trying to lead compliance down the avenue of automation of alert triage for some time, and a large amount of hype has been created around buzz words such as “Machine Learning” and “Artificial Intelligence”, and whilst – as always – the hype exceeds the reality, progress has been made and further steps will be taken.

I have been an active participant in three projects this year where automation of triage has been undeniably very successful, not only in reducing cost but improving the consistency of decision making. On this website, you will find many articles about how to get elimination done well, and as we understand the best practise more and more then automation will become king.

Look for automation in manual investigation triage to go from strength to strength over the next 5 years, and become the new normal.

No 2. Cuba (15th September 2020)

In 1958 the USA imposed Sanctions against Cuba and drew them to full strength in 1962, and today they remain largely in place despite a relaxation period during the Obama administration. Navigating the Cuban sanctions have caused many banks – particularly in Europe – to be fined by OFAC, in some cases very significant fines. The relaxation under Obama particularly was mainly around travel to and from Cuba, the sanctions regarding transfer of money, and import and export of goods remain largely in place.

There seems little doubt that under a democrat administration further relaxation would be on the cards, the United Nations has condemned the sanctions with only 2 out of 193 nations supporting the sanctions (USA and Israel). However, the Trump administration has been vocally strong on not only keeping the sanctions in place but strengthening them and may have done so if there hadn’t been so many other sanctions-related issues to concentrate on, particularly Iran.

We see the Cuban sanctions remaining unchanged over the term of the next administration, regardless of who is in office, whilst the rest of the world would like to see the removal of the sanctions it will not be a priority for America, and we predict that changes to relax the Cuban sanctions would only take place under a second term of a Democrat administration.

In the meantime be very careful of business with Cuba if there is any American nexus, and expect to see a continuing high proportion of OFAC fines to involve Cuban sanctions.

No 1. Iran (8th September 2020)

2019 and 2020 has seen further escalation of sanctions against Iran from America, but with no support from other nations. America has also assassinated an Iranian major general Qasem Soleimani.

History has shown us that the sanctions regimes that have successfully achieved their objectives (South Africa, Haiti, Sierra Leone, Liberia, Ivory Coast, Yugoslavia, Nauru) have typically been achieved through a coordinated effort by many nations.

It is difficult to see the relentless application of American sanctions doing anything other than making Iran more resolute and insular, especially after the assassination of a popular figure.

I cannot see a change in the Iranian situation unless America has a change of policy – through administration change – or gains some willing allies, I don’t see willing allies joining America unless Iran steps seriously out of line.

So until either of these things happen, expect Iran sanctions to be further tightened, look for more targeted smart sanctions such as the recent sanctions on the metal industry, expect the sanctions to remain as secondary sanctions, and also expect America to be keen on enforcement of Iranian sanctions with egregious determinations.

Whilst the future is uncertain the current situation and the history of sanctions can be more precisely documented.

Click here to see our articles about sanctions and PEPs screening.

Technology Consulting Partners