FIs should ‘review policies’ and avoid over-compliance, says UN Rapporteur
Over-compliance by banks with unilateral sanctions hampers ‘the purchase and shipment to sanctioned countries of goods, including humanitarian goods and services such as essential food, medicine, medical equipment and spare parts,’ and prevents states, international organisations, diplomats and individuals in targeted countries from participating in ‘international cooperation.’
So says Alena Douhan, ‘UN Special Rapporteur on unilateral coercive measures’, in new guidance aimed especially at banks and other FIs.
The report says that over-compliance takes forms including ‘Blocking all financial transactions with a sanctioned country, entity or individual even when some transactions are authorized by humanitarian exemptions;’ ‘deterring authorized transactions by requiring cumbersome, onerous documentation…or imposing discouraging long delays;’ or imposing asset freezes ‘that are not targeted by sanctions, or deny individuals the possibility to open or maintain bank accounts…simply because they are nationals of a sanctioned country, even when the individuals are refugees from that country.’
The practice, says the report, ‘prevents, delays or makes more costly the purchase and shipment to sanctioned countries of goods, including humanitarian goods and services such as essential food, medicine, medical equipment and spare parts for such equipment, even when the need is urgent and if of life-saving nature.’ It argues, ‘The complexity of many unilateral sanctions regimes, burdensome administrative processes, extraterritorial enforcement and the magnitudes of financial or business penalties for breaching sanctions are some of the reasons why financial, business and numerous other actors (such as shipping companies, insurances, but also publishers of scientific and academic journals) prefer resorting to over-compliance rather than facing the risk of being sanctioned themselves. Obligations to comply with financial sector regulations aimed at minimizing risk are also a key factor.’
It recommends that those at risk of over-complying should ‘review their sanctions compliance policy to determine if the restrictions they impose on the provision of financial services are broader than those actually required by the sanctions,’ and adjust them accordingly.
