17 February 2016 - ACOI. Zia Ullah ACOI sanctions seminar.pdf · 17 February 2016 Zia Ullah, Partner, Eversheds . ... (SDN list)/civil ... Jun-14 BNP Paribas 8,900 Burma, Cuba, Iran,

The Association of Compliance Officers in Ireland

Sanctions seminar

Eversheds LLP | February 2016 | ACOI Sanctions seminar

17 February 2016

Zia Ullah, Partner, Eversheds

Contents

• What are Sanctions?

• UK/US/Irish Sanctions

• Iran and the JCPOA

• Recent enforcement activity

• Compliance

What forms do sanctions take

• Economic and financial sanctions

• Smart sanctions

• Country-wide sanctions

• Export controls

• Arms embargoes

• Travel/visa bans on named individuals

• Asset freezes on specified individuals and entities

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International sanctions: The EU/Irish/UK Regimes

4

Sources Targets Impact Obligations Penalties

• UNSCR

• EU regs

• UK regs

• CTA 2008

• TFA 2010

• Individuals:

• assets

• travel

• Entities:

• assets

• Sectors:

• oil and gas

• precious metals

• Governments

• UK citizens

• UK incorporated bodies

• Extraterritorial effect

• Freeze funds

• No economic resources (directly/indirectly)

• No circumvention

• Individuals:

• imprisonment and/or unlimited fine

• Corporate entity:

• unlimited fine

The UK sanctions regulators

The UK sanctions lists

The US regime

• Exceptions under EU/UK sanctions

• Humanitarian and protective use

• UN or governmental activities

• Exemptions for contracts concluded before the sanctions in force

• Human rights and fundamental freedoms (basic human needs)

The US sanctions regulators

•policy

State Department

•financial sanctions (SDN list)/civil breaches/licences OFAC

•trade sanctions/licences BIS

•criminal breaches DOJ

Federal Reserve •regulated FI

DANY •bank licensing

DANY/DFS

The US sanctions lists

• individuals and entities subject to blocking Specially Designated Nationals

•financial institutions subject to restrictions Part 561

• individuals subject to rejection of business Foreign Sanctions Evaders

•entities subject to product restriction Sectoral Sanctions

Section 311 Patriot Act •entities/jurisdictions of money laundering concern

DANY •Iranian persons, not on SDN list

13599 List

BIS lists •de-barred/unverified/denied persons

Financial Sanctions in Ireland

• Department of Finance and Central Bank of Ireland

• The Minister for Finance makes Regulations under domestic legislation to give effect to the various EU Regulations relating to financial sanctions

• The Central Bank’s role:

enforces the financial sanctions give directions or issue instructions to financial institutions as it

sees fit. The financial institution is then required to comply with such measures

Directions are separate to the Administrative Sanctions Procedure which is usually invoked by the Central Bank for alleged breaches of financial services regulations

Penalties

Financial institutions are required to adhere to

financial sanctions regulations A person who commits an offence is liable:

a) On summary conviction, to a fine of up to €5,000 or to imprisonment for a term not exceeding 12 months or to both, or

b) On conviction on indictment, to a fine not exceeding €500,000 or to imprisonment for a term not exceeding three years or to both

Financial Sanctions in Ireland

Impact of financial sanctions on customers of financial institutions

•Operating a bank account in contravention of the sanctions regime (e.g. receiving payments from a prohibited organisation) – risk of account being frozen

•Risk that the customer will be blacklisted by financial institutions and denied access to financial services going forward

•The financial institution may report the activity to the Garda, as a suspicious transaction under the Criminal Justice (Money Laundering and Terrorist Financing) Act, 2010

•An offence of making available funds or economic resources

•Liability of directors, managers and officers

Trade Sanctions in Ireland

• Department of Jobs, Enterprise and Innovation

Responsible for implementing trade related sanctions issued by the United Nations and EU

Export and/or import bans (trade sanctions which may apply to specific products such as oil, timber or diamonds)

• Export businesses in Ireland must export goods in accordance with a DJEI licence

• The Export Licensing Unit of the DJEI is responsible for managing controls on exports of military items and items destined for countries to which trade sanctions apply

Trade Sanctions in Ireland

• The Control of Exports Act, 2008 places controls on the export of such prohibited goods.

• Offences: (i) summary – a fine of up to €5,000 and/or imprisonment for six months; (ii) on indictment - a fine of up to €10m or three times the value of the goods exported and/or imprisonment for 5 years.

• Consent, connivance or approval of, or to be attributable to, any neglect on the part of a person being a director, manager, secretary or other officer of the body corporate.

Iran and the JCPOA

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1979 US – Embassy crisis

1995 US – Clinton bans US companies investing in oil sector

1996 US – First set of extraterritorial sanctions

2001 US/UN/EU

2006 UN – UNSCR relating to nuclear materials

2007 US/UN – Further UNSCR and tougher US regime

2008 US/EU – U-turn exemption ends

2010 UN/US/EU – secondary sanctions extended

2011 US – further secondary sanctions

2012 US/EU – other sectors targeted

2013 JCPOA-US/EU/P5+1 – first set of relaxations

2014 JCPOA-P5+1 – extension

2015 JCPOA-P5+1 – finalised agreement of plan

2016 JCPOA- Implementation Day

Historical basis of Iranian sanctions

Iran and the JCPOA 17

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The changes- UN

Iran and the JCPOA 18

− In accordance with UN Security Council resolution 2231(2015) of 15 July 2015, all provisions of previous UN Security Council resolutions on the Iranian nuclear program have been terminated. Specific restrictions will remain in place in areas such as military, nuclear and missile technology.

The changes- EU

EU persons and entities can now engage again in activities and associated services in the following sectors:

• financial, banking and insurance; • oil, gas and petrochemicals; • shipping, shipbuilding and transport; • gold, other precious metals, banknotes and coinage; • metals (subject to an authorisation regime); and • software (subject to an authorisation regime).

In addition, most (but not all) of the Iranian or Iran-related persons and entities who were listed as being subject to an asset freeze have been delisted. This means that EU persons and entities can now trade normally with them again.

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The changes- US

The United States has lifted nuclear-related “secondary sanctions”, i.e. sanctions that were applicable only to non-US persons and entities with activities in the following sectors in Iran:

• financial and banking; • energy and petrochemicals; • shipping, shipbuilding, and automotive; • port operators; • insurance, re-insurance and underwriting; • gold and other precious metals; • graphite, raw or semi-finished metals such as aluminium and steel,

coal, and certain software. • NB- General Licence ‘H’

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EU (and rest of world) vs US position on Iran

Iran and the JCPOA 20

Divergence Convergence

Convergence Divergence

Practical challenges- going in or staying out?

• Correspondents

• Contractual provisions- protection and deflection

• Trade finance

• IRGC

• US persons

• Iranian due diligence- FATF etc

The future?

• Hizballah Financing Prevention Act 2015

• Snapback?

• US/Iranian elections

• Geopolitical situation

• Commercial risks

In the News…

Date Bank/Firm Settlement

(USD Millions) Country highlighted in breach

Mar-15 Commerzbank AG 1,450 Iran, Sudan, Cuba,

Myanmar

Jun-14 BNP Paribas 8,900 Burma, Cuba, Iran, Sudan

Dec-13 RBS 100 Burma, Cuba, Iran, Sudan

Dec-12 HSBC 1,920 Burma, Cuba, Iran, Libya

Dec-12 Standard Chartered

Bank 667 Burma, Iran, Libya, Sudan

Jun-12 ING 619 Cuba, Iran, Libya, Sudan

Aug-10 Barclays 298 Burma, Cuba, Iran

Dec-09 Credit Suisse 536 Iran

Dec-09 Lloyds 350 Iran

Practical tips- what are the key issues to consider?

•public policy

•market communication

•annual reports

•policy

•training

•assurance

•clients

•regulators/monitors

•shareholders

•correspondents

•board

•senior management

•legal/compliance

•business units

•employees

Internal stakeholders

External stakeholders

External communications

Internal communications

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