Why Removing Sanctions-Related Information from a Transaction is Illegal

Why Removing Sanctions-Related Information from a Transaction is Illegal

As the world becomes increasingly connected through global trade, sanctions have become an important tool for governments to enforce political and financial compliance from individuals and companies operating in their jurisdictions. Sanctions are a powerful way to pressure governments and individuals to change their behavior, and they have been successfully used in the past to bring about change in many countries. However, some entities may try to remove sanctions-related information from a transaction to evade compliance, which is illegal.

What are Sanctions?

Sanctions are legal measures employed by governments and organizations to force individuals, entities, and countries to comply with certain requirements. Sanctions can take many forms, including restricting trade, banning financial transactions, and blocking assets. They may be put in place to address issues such as terrorism, human rights violations, or weapons proliferation, and violations of sanctions can result in fines, penalties, or other legal action.

The Consequences of Removing Sanctions-Related Information

When sanctions are put in place, the government or organization implementing them often requires that specific information about the sanctioned entities be included in any transactions with them. This can include things like names, identification numbers, and other information that allows transport companies, banks, and other intermediaries to identify and track the transactions. When entities remove this information from transactions, it is known as “sanctions evasion,” which is illegal.

Violators can face significant legal and compliance risks for removing sanctions-related information. For example, banks found to be aiding in sanctions evasion can be penalized heavily for violations of Anti-Money Laundering (AML) regulations or other financial laws. Moreover, companies and individuals may be subject to civil or criminal fines, penalties, and even imprisonment under the International Emergency Economic Powers Act (IEEPA) or other international sanctions laws.

Examples of Sanctions Evasion and Enforcement

There have been many cases over the years of individuals or companies attempting to evade sanctions by removing sanctions-related information from transactions. One high-profile example is the case of Chinese telecoms company ZTE, which was accused of selling technology to Iran in violation of U.S. sanctions. As part of its settlement with U.S. authorities, ZTE agreed to pay a $1.2 billion fine and to implement new compliance measures to prevent future compliance violations.

Another example is the case of the French bank Societe Generale, which agreed to pay a $1.3 billion fine in 2019 for violating U.S. and French sanctions on Iran and other countries. The bank was accused of concealing billions of dollars in transactions involving sanctioned countries, and of failing to implement sufficient compliance measures to monitor transactions.

These cases demonstrate that governments and organizations are actively enforcing sanctions laws and that sanctions evasion will not be tolerated.

Conclusion

Sanctions are an important tool for enforcing political and financial compliance in an increasingly interconnected world. Removing sanctions-related information from a transaction is illegal and can result in significant legal, compliance, and reputational risks for those involved. It is essential that financial institutions and other intermediaries take seriously their responsibility to monitor and report all transactions that may be subject to sanctions compliance requirements. By doing so, they can help ensure the efficacy of sanctions and the integrity of the global financial system as a whole.