When conducting a Sanctions Risk Assessment, it's essential to consider a wide range of risk factors that may be relevant to your organisation to help you to identify and assess sanctions risks, so that you can implement controls to mitigate and manage these risks.
Some of the key factors that should be considered include:
Jurisdictional Risk:
- Determine which countries or regions you operate in or conduct business with.
- Assess the presence of sanctions, embargoes, or restrictions in those jurisdictions.
- Consider the extraterritorial reach of sanctions laws, as some jurisdictions may apply sanctions to activities conducted outside their borders
- Evaluate the country of origin of your products or services and consider whether it poses unique sanctions risks.
Industry and Sector Risk:
- Examine whether your industry or sector is subject to specific sanctions or export control regulations.
- Identify any products, technologies, or services that may be subject to restrictions or licensing requirements.
Customer and Counterparty Risk:
- Assess the risk associated with your customers, clients, suppliers, and other counterparties.
- Conduct due diligence to verify their identities and evaluate their risk profiles.
- Screen these entities against sanctions lists and databases to identify potential matches.
Transaction Risk:
- Analyse the nature of your transactions, including their size, frequency, and complexity.
- Identify any unusual or suspicious transaction patterns that may raise sanctions-related concerns.
Products and Services Risk:
- Consider whether the products or services you offer have potential dual-use applications that could be subject to export controls or sanctions.
- Evaluate whether your products or services are intended for military, defence, or sensitive applications.
Ownership and Control Risk:
- Examine the ownership and control structures of entities you do business with to identify beneficial ownership.
- Assess whether there are hidden interests or affiliations with sanctioned individuals or entities.
Geopolitical Risk:
- Stay informed about geopolitical developments that may impact sanctions regimes.
- Consider the political relationships and conflicts involving countries or regions where you operate.
Supply Chain Risk:
- Evaluate the countries and entities within your supply chain.
- Identify potential vulnerabilities in your supply chain that may expose you to sanctions risks.
Employee and Third-Party Risk:
- Assess the risk associated with your employees' interactions with sanctioned parties.
- Consider the risk of third parties, such as agents, intermediaries, or distributors, engaging in prohibited activities on your behalf.
Technology and Information Risk:
- Evaluate the use and transfer of technology, software, or information that may be subject to export controls or sanctions.
- Assess the cybersecurity risks associated with sanctions compliance efforts.
Sanctions Lists and Databases:
- Regularly screen individuals, entities, and transactions against sanctions lists and databases maintained by government agencies and international organisations.
Regulatory and Legal Risk:
- Stay updated on changes in sanctions laws and regulations that may impact your activities.
- Ensure that you have processes in place to promptly adapt to regulatory changes.
Humanitarian and Compliance Risk:
- Consider the potential humanitarian impact of sanctions on vulnerable populations.
- Implement compliance measures, including policies, procedures, and training programs, to mitigate risks.
Reputation Risk:
- Evaluate how sanctions-related issues may impact your organisation's reputation.
- Consider the potential consequences of negative publicity or public perception.
Sensitivity to Sanctions Risk:
- Assess your organisation's overall sensitivity to sanctions risk based on its size, industry, and international exposure.
Compliance Program Effectiveness:
- Evaluate the effectiveness of your existing sanctions compliance program, including the adequacy of internal controls and due diligence processes.
Reporting and Record-Keeping:
- Ensure that you have mechanisms in place for reporting and documenting sanctions-related concerns and actions taken to address them.
Third-Party Risk Management:
- Assess the effectiveness of your third-party risk management processes, including ongoing monitoring and auditing.
Government Contract Risk:
- If your organisation has government contracts, assess the specific sanctions-related obligations and restrictions associated with those contracts.
Global Operations Risk:
- Consider how your global operations and subsidiaries may be impacted by sanctions risks.
A comprehensive Sanctions Risk Assessment should be tailored to your organisation's unique circ*mstances, activities, and exposure. It is an ongoing process that requires regular updates and adjustments as your business evolves and sanctions regimes change. Consulting with legal and compliance experts can be invaluable in conducting a thorough and effective risk assessment.
