Dr. Justine Walker,Head of Sanctions Policy, UK Finance
The dynamic geopolitical environment has resulted in the international sanctions compliance landscape changing faster than ever before. As an indication as to the scale of change since last summer we have seen increased sanctions on Iran, Syria, Russia, Venezuela and North Korea as well as a roll back of the Cuban sanctions relief provided under President Obama and the lifting of long standing sanctions on Sudan.
In January, President Trump threatened to terminate US participation in the landmark 2015 nuclear deal. The vulnerability of the deal and future US – EU alignment is now very much under the spotlight and although the deal remains currently intact the continuing uncertainty over its future offers no reassurance for those EU governments who wish to build stronger trading relationships with Iran.
The deteriorating diplomatic relationship between the West and Russia is further dominating the headlines. US Congress led the way by passing in August 2017 the unprecedented “Countering America’s Adversaries through Sanctions Act” (“CAATSA”). The Bill itself runs to over 70 pages and has posed considerable implementation challenges and notable splits in US – EU policy towards Russia. Sitting alongside “CAATSA” are continuing US/EU Russia sanctions in response to events in Eastern Ukraine and Crimea, plus growing international support for implementation of ‘Magnitsky’ style sanctions. Additionally, further legislation is currently working its way through the US political system i.e. the DETER Act. Indications are that speed of passage of these Bills may escalate depending on the outcome of the US mid -term elections. In short, if the balance of power shifts towards the Democrats, further sanctions towards Russia may be forthcoming.
Brexit adds a further dimension worthy of note for future sanctions compliance. The introduction of the impending legal sanctions framework will undoubtedly introduce a new and extremely important dynamic within US – EU sanctions architecture. The Sanctions and Anti-Money Laundering(AML) Bill which is working its way through the UK parliamentary process is viewed as a necessary piece of legislation to ensure Government is equipped to implement its foreign policy and national security priorities following Brexit. Overall, many aspects of the Bill are as largely as expected and seeks to maintain the UK’s approach to sanctions in line with international obligations. However, of crucial importance will be how these broad-based powers will be utilised post-Brexit. Clearly operating outside the EU framework will necessitate a greater flexibility in the design of sanction programmes but it also raises key questions on how to manage potential post-Brexit divergence between EU and UK sanctions. Even with the political desire for post-Brexit EU – UK sanctions cohesion the reality is that operating within different legal systems is likely to result in some divergence.
In parallel, the Bill also offers a timely opportunity to improve UK effectiveness in how it implements sanctions. Over recent months, UK Finance have taken forwards a concerted work stream to examine the impact of Brexit on the future application of sanctions. We have worked closely with a wide number of parliamentarians and government officials on ensuring the Bill offers a robust and effective framework. Last week we hosted a roundtable in the Palace of Westminster which saw a healthy debate among parliamentarians and sanctions experts. A number of our proposals have gained considerable air time on the floor in both the Lords and Commons. In specific, our detailed proposals in respect to finding a better equilibrium for facilitating both humanitarian aid and permissible civilian transactions into higher risk jurisdictions subject to economic sanctions has certainly drawn cross party support and recognition. We are presenting these same proposals this week to the EU – UN high level sanctions meetings in New York.
In conclusion, given the geo-political environment it is unlikely that Governments will cease their reliance on sanctions as the “go to” instrument of coercion. Consequently, whilst recognizing that decisions on whether to apply sanctions are a matter for Governments the role of our sanctions panel here in UK Finance, including our work streams on mitigating the risk of North Korean sanctions evasion, Russia, and supporting government in the drafting of banking sector guidance, can only be expected to grow in importance.