Though the list of types of companies that must have a functional AML/CFT compliance programme does not include international trading companies, the fines & penalties that have been levied upon such companies, for OFAC sanctions violations, frankly indicate that it has become mandatory from a risk management perspective. These huge fines for sanctions violations, which are published in a very public manner, seem to hit those international trading companies who do not have a compliance programme in place.
What are the fines, some of which are in the millions of dollars, imposed for ?
(1) Trading with companies that are sanctioned by the Office of Foreign Assets Control, OFAC.
(2) Buying goods originating in nations that are designated State Sponsors of Terrorism, where most commercial transactions with local companies are prohibited for United States persons.
(3) Obtaining merchandise from companies that are themselves trading with Iran. Remember, it is not just Know your Customer, it can also be Know your Customer's Customer. Sellers who resell goods from sanctioned countries to your company expose you unwittingly to sanctions.
(4) Trading with legitimate companies in Latin America that are sanctioned, due to the fact that they are owned by narcotics trafficking organisations. Unless you check out the sanctions lists, you will not know that it is against US law to conduct business with these companies.
What do you need to protect your company ?
(1) A proper compliance programme.
(2) A designated compliance officer.
(3) The use of sufficient commercial tools to ensure that your customers, vendors and sellers are not sanctioned.
(4) An adequate training programme for your employees.
(5) A periodic external audit, to ensure that your staff are following the compliance programme.
Non-financial companies need to Know their Clients, to prevent fines and penalties from government regulators. Avoid those fines through effective compliance.