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What You Can Learn from Australia’s Review of Sanctions

July 20, 2023

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Sanctions compliance has dominated the financial crime and compliance news lately. This will continue as influential countries — in this case, Australia — attempt to curb illicit money flows, goods, trade and services that could be used, for example, by Russia.

The Economist, a well-respected UK publication, asked, “Are sanctions on Russia working?” suggesting that despite the freezing of billions of Russian currency reserves, sanctions are not enough to force a behavior change. So, does that mean that sanctions globally will abate from their intended ambitions? Absolutely not.

Sanctions will continue to develop and attempt to hamper Russian goals in Ukraine, which means that businesses globally need to be aware of every sanctions regime that affects them. Even though Australia is almost 10,000 kilometers from Russia, the impacts can be felt there and elsewhere. Australian sanctions laws are made up of both United Nations Security Council (UNSC) sanctions regimes and Australian autonomous sanctions regimes.

Will the Review Lead to More Compliance Rules?

Autonomous sanctions are punitive measures that do not involve the use of armed force that are imposed unilaterally by the Australian government (as well as other foreign governments, including the United States and the United Kingdom) as a foreign policy tool. In Australia, autonomous sanctions are implemented under the Autonomous Sanctions Act 2011 and the Autonomous Sanctions Regulations 2011. Autonomous sanctions are discretionary tools which the Australian Government can apply, alone or with like-minded countries where appropriate, to address flagrant abuses of international concern.

The Australian Sanctions Office is undertaking a complete review of the legal framework for autonomous sanctions, as the current Australian sanctions framework is due to expire in April 2024. In this review, it’s very likely that the subject of sanctions on Russia will undoubtedly be on the minds of legislators in meeting the government’s foreign policy objectives.

The comprehensive review assesses the current sanctions regime and provides legislative recommendations for the government to consider. One particular review objective that will assess existing regulatory powers will inevitably lead to more burdensome compliance requirements for businesses. While the pain of these measures on companies causes eye-rolling about yet more compliance requirements, firms could take the bull by the horns — as many pioneering businesses have — and use this compliance requirement to their benefit.

Making compliance a competitive advantage not only ensures that organizations can easily meet regulatory requirements. Good compliance also contributes to good ESG that increases the value of businesses as well as contributing positively to society.

Watch for Clarity in Sanctions Enforcement

Other review objectives include simplifying the current navigation of sanctions requirements to make the process easier for both the public and regulated entities to understand. There will be an assessment of whether there needs to be more clarity on the factors for imposing and lifting of sanctions. The terms of reference cites 10 aspects of what will be addressed in the review, including fitness of purpose of existing sanctions measures; refining authorization powers, humanitarian exemptions; and review of the existing sanctions offenses and the introduction of civil penalties.

Another area of review is enforcement. Currently there are limited steps the Department of Foreign Affairs (DFAT) can take between education and prosecution to address non-compliance. The review considers providing more flexible enforcement options by introducing a system of civil monetary penalties in situations where the circumstances do not warrant a criminal conviction.

The possible strengthening of enforcement actions alongside the streamlining of the sanctions legal framework within the sanctions regime in Australia warrant attention by companies. They will need to take steps to ensure they’re aligned with evolving regulatory expectations to avoid enforcement action.

Keeping on top of the dynamic sanctions landscape for firms is a huge challenge following Russia’s invasion of Ukraine. The sanctions issues are broad, and this overhaul of the Australian sanctions regime could add complexity.

How You Can Navigate Sanctions Complexity with Exiger

For you and your business, a question to ask is whether your approach to sanctions is fully embedded into your overall financial crime framework. For example, does your risk appetite statement take into account close associates or relatives of sanctioned individuals? The lines of ethics, moral duty and profit sometimes blur with complexity and aggressive business targets. Do you know how to navigate this continuing threat that may leave your business in either a sanctions breach situation or a PR and brand nightmare?

Exiger can help with a range of award-winning products and services, like:

Advisory – AI-Powered Advisory Solutions armed with unmatched industry expertise and Exiger’s award-winning technology, our Advisory team is transforming the fight against fraud and financial crime.

ScreenIQ provides sanctions screening and adverse media monitoring technology proven to make life easier for risk and compliance teams around the world.

Supply Chain Explorer delivers unparalleled transparency, empowering companies and government agencies to meet the urgent imperative to protect global supply chains from sanctions, ESG, and cyber risk at unprecedented speed and scale.

Last year, Exiger assessed over 7 billion supply chains and tracked 5 billion pounds of goods back to their original source to ensure compliance standards were met and cost efficiency was gained through supply chain transparency. You can rely on our expertise to help turn sanctions compliance into a competitive advantage for your business.

This post was authored by Dr. Viri Chauhan, a managing consultant on the Exiger Advisory team.

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