The evolving landscape of sanctions, tariffs and trade controls.

The world of sanctions, tariffs and trade controls has changed beyond recognition in the last four years. The Russian invasion of Ukraine in 2022 triggered what is now a constantly changing and evolving deployment of economic sanctions from the three main issuing administrations of the US, UK and EU. More recently there have been added counter measures coming from the East, and the US announcements of tariffs.

Within the first month of the year, we have already seen significant geopolitical moves and potentially huge shifts in the existing world order. Geopolitics took centre stage at the World Economic Forum in Davos as it did in many other events.

As risk, compliance and assurance professionals we know this is a critical topic in the Boardroom. Discussions include what this means for business, for current and future strategic decisions. We know it’s raising the profile of geopolitical risk on the company risk register.

Pinsent Masons in their ‘Spider Effect’ article delve into the current complexities, provide a useful sanctions 101 overview of the economic tools in play currently, and advocate a 6-step approach to navigating this risk:

1. Identify the applicable regimes your business is exposed to
2. Assess your exposure to countries of concern
3. Identify and understand your wider risk profile
4. Consider your stakeholders such as banks, suppliers, auditors, and insurers
5. Contingency plan
6. Question, question, question

In a nutshell, this means know your business, your industry, the countries you operate in, the counterparties you do business with directly and indirectly, your contractual obligations, and do your due diligence. It’s essential to go further than KYC when onboarding customers. Consider all counterparties and contractual relationships with continuous monitoring of counterparty transactions.

Does your company have this risk adequately covered? Do you really know who you are doing business with and do you really understand the ‘spider effect’ of your end-to-end supply chain? Can your systems provide the data you need to answer these questions, and can they provide the necessary control points to alert you to high-risk transactions? Is your compliance team sufficiently resourced and engaged?

At BRAVE we support clients through an established approach:

• Reviewing your Compliance Framework to ensure sanctions are specifically covered by policy and protocols, and that sanctions and geopolitical risk is included in your risk register (and regularly discussed at ExCo/ Board).
• Performing a Risk Assessment of Compliance, Financial Crime and Sanctions topics involving key stakeholders in your business looking at current and future business plans. Review the value chain of your business to understand what materials or services you source, what products or services you sell, to where and for what purpose, and what intermediary and indirect counterparties you are contracted with.
• Performing a Gap Analysis to commonly accepted best practices in sanctions risk management.
• Reviewing your processes and tools to ensure you have full transparency of the data you need to understand your risk, and that you have adequate controls deployed.

We believe this should be accelerated across all clients.