A recent webinar hosted by The Soltesz Institute brought Viktoria Soltesz and sanction legal expert Georgia Papa together to address one of the most pressing challenges in payments and banking: restricted activities and the compliance risks they pose to businesses.
While sanctions are often associated with financial institutions, the discussion highlighted how these regulations affect businesses of all sizes, from luxury goods sellers to service providers.
Understanding the Scope of Sanctions
Contrary to the common belief, sanctions are not limited to the dealings of specific individuals or businesses with their banks and financial institutions.
Sanctions can apply to entire industries, products, and countries, creating risks for companies that may not even realize they are affected. For example, if a retailer unknowingly selling to a sanctioned individual or an online merchant accepting payments from high-risk regions, they could face serious consequences without even realizing it.
Sanctions are not exclusive to banks, financial institutions, or large corporations. Small and medium-sized businesses can also be caught up in sanctions risks, leading to frozen accounts, penalties, and even jail time for their directors.
Sanctions Compliance
Sanctions compliance means knowing where the risks are in day-to-day operations.
While banks monitor transactions, they often reject anything that appears risky, putting the burden back on the business. Depending solely on the bank is not enough to stay compliant.
Steps Businesses Can Take
Businesses can protect themselves and reduce risks by taking practical steps:
Use Compliance Tools: Automated systems can screen lower-risk transactions efficiently, but high-risk cases still might require careful and expensive manual checks.
Train Employees: Regular training helps employees recognize risky activities and stay informed about changes in regulations. Ongoing education is vital, as rules frequently change.
Seek Expert Advice: For transactions which seem unclear, consulting a professional can be vital to prevent costly mistakes. Legal opinions often help businesses and their banks to make informed decisions.
Risks of Non-Compliance
Sanctions violations can have serious consequences, and claiming ignorance is not a defense. Even if the breach was unintentional, businesses and their directors can face severe repercussions.
Smaller businesses are especially vulnerable. Once flagged or added to a sanctions list, it can become almost impossible to keep the business running. Directors also carry significant personal responsibility, making it crucial to stay compliant.
Focusing on Risk-Based Compliance
To manage compliance effectively, businesses should adopt a risk-based approach:
Automate Low-Risk Transactions: Automation can handle routine checks, allowing businesses to focus resources on higher-risk areas.
Review High-Risk Transactions: Transactions involving high-risk jurisdictions or industries should be carefully checked and reviewed, however, to minimise the risk, professional advice is necessary to avoid problems.
Stay Updated: Attend industry-specific webinars or workshops to remain informed about new rules and changes.
Education is Key
Smaller businesses often struggle to stay compliant due to the lack of tailored training. While banks and large corporations have access to resources, smaller companies are left to manage these issues alone, without proper guidance.
The Soltesz Institute is offering specialized training for businesses about all payment and banking areas. These courses provide clear and practical knowledge, helping companies understand risks and maintain compliance.
Shared Responsibility
Compliance is not only the responsibility of directors or compliance teams—it is something every employee have to understand. Implementing clear reporting procedures and provide regular training for teams are vital to reduce risks and ensure that the operation remains compliant.
Staying up to date, using the right tools, and seeking professional guidance when needed can protect businesses from sanctions issues and help maintain strong, reliable banking relationships.
To watch the webinar, or learn more about training opportunities, visit The Soltesz Institute.