More than 500 statutes globally relate to sanctions

They enforce almost 1,500 conditions relevant to financial services institutions of which 48% block trade.

Yet sanctions are a relatively new problem for banks and brand new for many Asian institutions. With a refreshed rregulatory rigour, coupled with the inconsistent nature of sanctions regimes, the bar has been raised for financial services institutions operating across borders.

It is therefore critical that Asian institutions take notice. Any financial institution that decides to ignore the growing complexity and variety of sanctions regimes, and continues to deal with sanctioned entities, may well face significant regulatory penalties or even criminal action.

It is a minefield, with a wide variety of sanctions regimes and ever longer lists of sanctioned individuals and organisations which individuals must not deal with. And the problem for Asian institutions working globally, governments expect adherence with their economic and trade sanctions, even across borders.

This increasing global regulatory rigour has forced multinational organisations to focus on coordinating their economic and trade sanctions compliance.

Deloitte in conjunction with the Economist Intelligence Unit revealed in its recent survey ‘Facing the sanctions challenge in financial services’, that while multinational organisations are beginning to feel the business and regulatory imperative to coordinate economic and trade sanctions compliance activities across borders, only 50% of companies have actually integrated their sanctions policies.

The absence of a robust sanctions compliance program, or an inadequate one, poses a real risk of prosecution from either Australian or international authorities, in particular the U.S. Office of Foreign Assets Control (OFAC).

Many organisations have been surprised by the substantial penalties levied by US prosecutors for breach of sanctions and are now embarking on ways to introduce effective sanctions screening globally. More organisations are now responding to regulatory actions than in the past ten years.

At the same time, financial institutions have had to contend with shrinking compliance budgets and headcounts. This is a combination fraught with danger.

Deloitte has identified four leading practices in sanctions compliance:
•    Risk assessments – 44% of respondents reported their companies had a well-defined, sanctions-specific compliance programme in place.
•    Information technology – Financial services companies are at the forefront of industries endeavouring to use IT solutions to meet their expanding compliance obligations. Most companies have been deploying IT solutions at the initial detection stage and then manually investigating the alerts generated by those systems.
•    A global approach – Elements of sanctions compliance - from setting strategy to overseeing lists - can be run at a global, regional or local level.
•    A zero-tolerance tone at the top – The growing nature and scope of sanctions imperatives highlights the need to create an appropriate culture of compliance.