UN Sanctions

International Enterprises and Institutional Investment

Shared values:

What connects the UN and its sanctions system with the internationally active business community and institutional investors?

For one, the UN’s chief objective – a peaceful world – would deliver ideal business conditions, were it to be achieved. UN sanctions are a powerful element of a policy approach that could help to achieve the goal of maintaining or restoring peace, without the use of force.

Therefore, it should be assumed that all legitimate businesses share the UN's interest in making UN sanctions as effective as possible, while reducing compliance burdens on states and companies.

How can we together achieve the goals of using sanctions to contain or constrain the promoters of conflict and terrorism, proliferators of weapons of mass destruction, or those responsible for atrocities, without causing barriers to legitimate business?

This is one of the core questions of an initiative sponsored by the governments of Australia, Belgium, Canada, Germany, the Netherlands, and Sweden.

Led by Australia, a consultative forum will take place on 7 June 2019 where global business will meet together with global sanctions policy makers.

Who should participate?

Sensitive industries - The inter-dependence of UN sanctions and global business is nowhere more self-evident than where challenging sanctions measures would be meaningless without the collaboration of those who may unwittingly provide products and services that might be used for sanctioned purposes.

Sanctions measures Affected industries
Conventional arms embargo Defense manufacturing, international transport and logistics, banking and financial intermediaries
Embargo against weapons of mass destruction (nuclear, chemical, biological and missile technologies) Manufacturing and research industries, international transport and logistics, banking and financial intermediaries
Assets freeze Banking and financial intermediary services
Travel ban Airlines, passenger shipping, train and other land-based transportation services, including travel agents.
Ban on luxury goods (DPRK) International trade, international transport and logistics, banking and financial intermediaries
Restrictions on education Technical schools and universities providing North Koreans training in nuclear and other sensitive sciences and technologies

Additional examples for sanctions provisions that can only be responded to by companies are, among others:

Catch-All Provisions applied to most UN sanctions regimes;

Due diligence obligations for supply chain sourcing that may involve trading in certain conflict minerals from the Democratic Republic of Congo and other conflict regions;

Prohibitions against trading or sourcing of many other commodities from or to conflict zones;

Seaport and bunkering services to designated ships.

Regulatory reporting requirements relating to compliance with sanctions.

Institutional Investors - Investors can suffer material losses if a portfolio company is singled out as a sanctions violator or for entanglement with a violator. Being shut out of markets, or incurring fines and reputational losses, are typically the costs of compliance failures that investors would want to avoid.

It is therefore in the interest of investors to encourage their companies to adopt effective sanctions compliance procedures with all activities. Their interests are two-fold:

  1. Avoid steep financial and reputational costs or loss of markets;
  2. Prevent detrimental effects on the broader social, political and economic environments on which legitimate business depends.

Risks and opportunities

Colloquially, sanctions have often been considered a burden or detriment to business. The upcoming consultations are intended to provide a more practical and balanced perspective. UN sanctions supporting a conflict resolution strategy can in fact provide opportunities for legitimate businesses.

Costs Benefits
Cost for compliance and due diligence staff and auditing services Top-line global standard-setting mechanism for businesses
Lobbying to prevent the imposition of specific sanctions Sanctions boost the due diligence and compliance service industry
Loss of revenue and profits when sanctions affect a company’s vital markets Encourage the resolution of conflicts, thus opening new markets
Fines and other penalties, including civil and criminal judgments for violations Establishing political stability enables investments and economic growth
Advocacy groups attack companies and undermine shareholder value Effective application of sanctions establishes viable markets and limits unfair competition of illegitimate businesses

For interested participants, a detailed briefing paper and a draft agenda will be available shortly.

In the interim, representatives of institutional investors or

compliance professionals are welcomed to communicate their thoughts directly to the organizers Rico.carisch@ccsi.global or Loraine.rickard-martin@ccsi.global