The Tribune

According to the International Monetary Fund (IMF), Vladimir Putin’s war with Ukraine - and the sanctions that followed - will have a serious impact on the global economy. Despite the highly fluid conditions, and extraordinary uncertainty, surrounding the outlook, the economic impact is already being felt throughout the world with the affect on supply chains causing rippling economic shock waves. The IMF explained: “This crisis will create complex policy trade-offs, further complicating the policy landscape as the world economy recovers from the pandemic crisis.”

At the centre of this ‘sanctions war’ is the compliance professional. At the international level, the Financial Action Task Force (FATF), which was established by the G-7 nations in July 1989 to develop policies to combat money laundering, in its ‘recommendation six’ requires countries to use targeted financial sanctions regimes to comply with United Nations Security Council Resolutions. These typically focus on the prevention and suppression of terrorism and terrorist financing. Locally, whether supervised by the Central Bank of The Bahamas, Securities Commission, Compliance Commission, Insurance Commission or Gaming Board, all financial institutions are required under the Financial Transactions Reporting Act 2018 to designate a compliance officer at a senior management level “to be responsible for the implementation of, and ongoing maintenance of, the identified risk, internal procedures and controls of the financial institution”. In addition, section 3A(1) of The Bahamas’ International Obligations (Economic Ancillary Measures) Amendment Act 2019 provides for UN Security Council resolutions to take effect in Bahamian law from the date of adoption by the United Nations Security Council.

Against this backdrop, and considering that a compliance professional has the responsibility to provide training that will enhance behavioural skills and technical knowledge for all employees, I write to provide insight pertaining to these Russian sanctions.

What are economic sanctions and why are they used

Sanctions are penalties levied either as punishments or to deter certain policies and behaviours. This is regardless of whether they are aimed at punishing a country, its officials or its citizens. Sanctions may be imposed for reasons such as, but not limited to, political, military or social matters. When a country or regime violates human rights, supports terrorist activities or threatens international peace and security, sanctions are used in an attempt to alter its behaviour.

Types of sanctions

A single country can impose economic sanctions unilaterally, or a group of countries or an international body can introduce them on a multilateral basis. In The Bahamas, our primary trigger for effecting sanctions are United Nations Security Council resolutions. In some cases, sanctions can be in the form of an embargo that prohibits trade with a country, though it can also include permit the humanitarian supply of food and medicines. In other cases, they can take the form of export controls or capital controls. Specific export restrictions bar the supply of products, services and intellectual property to targeted countries, while capital controls can restrict investment in certain industries or nations. Other sanctions may include asset freezes or seizures, travel restrictions, visa restrictions and other forms of trade restrictions. The aforementioned sanctions can be further grouped into three categories - comprehensive sanctions, sectoral sanctions and targeted sanctions.

Conclusion

In short, this article has provided some backdrop into the world of sanctions. It highlights another active area that is managed by the compliance practitioner while illustrating what sanctions are, why they are used and provide examples of types of sanctions

NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years. He has held positions at a TerraLex member law firm, a Wolfsburg Group member bank and a ‘big four’ accounting firm. Mr Smith is a certified anti-money laundering specialist (CAMS), and the compliance officer and money laundering reporting officer (MLRO) for CG Atlantic’s family of companies (member of Coralisle Group) for The Bahamas and Turks & Caicos.