Sanctions are prohibitive and restrictive measures directed at foreign governments and nations, individuals or groups, or non-state actors or groups.

Sanctions have an impact on, among others, financial institutions and their customers through restrictions, and controls introduced on provision of goods and services and the movement of funds involving sanctioned countries, individuals and entities.

Sanction violations are punishable by law and the consequences of breaching sanctions laws and regulations may result in significant fines and in severe violations, even imprisonment.

However, maintaining compliance is easier said than done: sanctions cover not only nations but companies and individuals and they are constantly changing.

For example,

1. during the 2014 crisis in Ukraine, sanctions were imposed by Japan, the European Union (EU), Canada, the US and other countries on dozens of Russian politicians, business people and companies;
2.  Russia, in turn, sanctioned US individuals and embargoed a range of agricultural imports from the US, EU and other countries, including Norway.
3.  The EU alone has a complex set of sanctions in force against 33 countries and groups.

Depending on where the company trades and what kinds of goods it imports or exports, treasurers may come up against sanctions completely unintentionally.

Where a breach of sanctions occurs, both he/she and the bank may be held liable in law and subject to fines into the millions, as well as the cost of damage caused to corporate reputation. The US Treasury issued 17 penalties to companies for sanction violations totalling more than US$1.2bn in January to July 2014 alone. http://1.usa.gov/ZPLEGp

The bank has an obligation to ask questions during any transaction to find out what goods are involved, who the counterparties are, and other details to make sure that the treasurer and the company are not in violation – it’s in everyone’s interest to co-operate so that payments can be processed without delay.