Sanctions Compliance Analysis for Particular Transactions

Existing and new clients often approach us for a compliance analysis of a particular transaction that is being contemplated by a company. Analyzing the application of sanctions to a particular transaction is different from a compliance analysis of a general type of business or a risk assessment.

This process requires us to analyze the different processes and approaches a client can take to engage in a particular transaction as well as the appropriate timeline. In addition, sanctions counsel engage in compliance screening of all parties involved.

Documenting Compliance and Due Diligence

The final product is a formal document that the client can keep in their records as an advisory letter or legal opinion from counsel knowledgeable in this area of law. This document (1) analyzes the sanctions compliance of a particular transaction and (2) provides conclusions and recommendations. This is important because as sanctions violations are strict liability offenses, the lack of awareness or intent is not a defense.

In the event that a violation occurs, the OFAC enforcement guidelines have a number of different factors that OFAC uses to determine how to enforce a particular violation. When going down this list of factors of enforcement in the enforcement guidelines, there are number of different factors that stand out. Examples include the existence of a compliance program, and the lack of willfulness or recklessness of a client.

Having a compliance analysis or a letter from attorneys demonstrating a comprehensive analysis of the issues at hand can provide evidence that a company took good faith compliance and due diligence steps to analyze the activity before engaging in it.

If, for any reason, the government engages in an investigation or has reason to believe that there is a violation, these important mitigating factors are in place.

Providing Clients with the Information to Evaluate Risk

At the same time, this is an important product for companies and entities to have because it allows them to engage in their own cost and benefit analysis and examination of the risks involved.  This information can be crucial in helping an entity make an informed decision on whether they want to proceed with a particular transaction.

Addressing Practical Difficulties Caused by the Sanctions Regulations

Other times, even though a business feels confident that a particular transaction is authorized under the sanctions regulations, there may be practical difficulties at hand. For instance, there is no direct banking relationship between Iran and the United States. Because United States financial institutions are often not permitted to credit or debit an Iranian account, many companies find it difficult, even when dealing with an authorized underlying transaction, to understand the structuring payments and payment transfers required for the entire transaction itself to be authorized.

An economic sanctions compliance analysis or a particular transaction is also the first step a company should take before engaging in any type of a particular transaction when there is any nexus with economic sanctions. After reviewing a compliance analysis, the client and the counsel are on the same page about understanding the issues involved and it can be beneficial to a productive working relationship in the future.