U.S. Sanctions Compliance Weighs on Nonfinancial Companies
19 November 2019 - 10:58PM
Dow Jones News
By Kristin Broughton
Global companies are investing more heavily in sanctions
compliance, hiring staff and training existing employees, as the
U.S. expands its use of sanctions and trade restrictions to achieve
foreign policy goals.
One of the biggest shifts affecting compliance officers has been
the expansion of U.S. sanctions to nonfinancial sectors, such as
shipping and manufacturing, Elizabeth Rosenberg, a sanctions-policy
adviser at the U.S. Treasury Department during the Obama
administration, said Tuesday during an interview at an event in New
York hosted by The Wall Street Journal and Dow Jones Risk &
Compliance.
Compared with financial institutions, which have
well-established sanctions compliance programs, many nonfinancial
companies have fewer controls in place, said Ms. Rosenberg, who is
now a senior fellow at the Center for a New American Security in
Washington.
She cited the lack of industry preparedness as one of the
reasons behind the rise in shipping costs after the U.S. in
September blacklisted dozens of oil tankers operated by a
subsidiary of Cosco Shipping Energy Transportation, a major Chinese
tanker operator.
Here are edited excerpts from The Wall Street Journal's
interview with Ms. Rosenberg.
On the expansion of U.S. sanctions beyond the financial services
sector:
"In financial services, people are very accustomed to these
sanctions," Ms. Rosenberg said. "There's a lot of existing
knowledge about what it means to have sovereign debt restrictions,
correspondent banking restrictions."
"But when there are new measures that go at nonfinancials --
which is an expressed goal of this administration, for example, in
the shipping industry, other manufacturing areas -- that is a new
compliance challenge for many industries, who haven't seen this
kind of measure being handed out before, and who may not have, in
many instances, the compliance programs and the awareness, the
in-house and external legal counsel, the subject matter expertise
on their staff or immediately available to them to understand and
immediately react."
On the use of trade restrictions by the U.S. to put pressure on
China:
"I think we will see more and more of the use of these tools, as
well as more and more conflation of the various tools and the
execution of U.S. policy, to the chagrin of those purists who do
trade policy, or banking or sanctions policy," Ms. Rosenberg
said.
"And I think the area for greatest innovation, if you will, will
be related to [U.S. Commerce Department] entity listing. So we've
seen Huawei put on that list. There's a number of [artificial
intelligence] companies that have been added to the list, and a
linkage between human rights abuse or weaker suppression. I think
we'll see more and more of that, and an encouragement of that from
the U.S. Congress as well as from the administration."
On the possibility that the U.S. could impose sanctions if
violence escalates in response to demonstrations in Hong Kong:
"If there is a major escalation of violence, as a catalyst as it
were for public policy, I do expect that there would be a new set
of sanctions imposed either under existing authorities or new
ones," Ms. Rosenberg said. "We will just have to see from President
Trump whether he'd like to do a Turkey-style imposition and
removal. Or if Congress has anything to do about it, they like to
impose sanctions by statute, obviously, that's much harder to get
rid of, even if the president isn't going to enforce regularly or
remove. So I think there's some -- I think that's a real
concern."
On why companies should focus on compliance even if competitors
evade U.S. sanctions:
"It would be dangerous and folly to think that nonenforcement in
the present may be a lasting situation," Ms. Rosenberg said. "We
will have a change in political leadership at some point in the
United States, and there also could be a change in whim or
sentiment, even in the current Congress or with the current
administration, and we've seen on Turkey for example, that sort of
whiplash activity.
"It would be unfortunate, and potentially reputationally and
economically damaging, to get stuck on the wrong side of an
assumption when it comes to nonenforcement or lack of clarification
about potential evasion. I see more and more companies that are
outside of the U.S. jurisdiction who are taking that much more
cautious approach."
Write to Kristin Broughton at Kristin.Broughton@wsj.com
(END) Dow Jones Newswires
November 19, 2019 17:43 ET (22:43 GMT)
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