Norway Faces Growing Concerns Over Financial Sanctions and Embargoes
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EU’s 12th Sanctions Package Sparks Concern Among Norwegian Businesses
Just before Christmas, the European Union launched its 12th sanctions package, sending a ripple of concern among businesses operating in Norway. While the EU’s restrictive measures are only binding within its jurisdiction, international experts recommend that all companies, including those trading directly with Russia, be mindful of increased focus on targeting circumvention risks.
Conducting Sanctions Risk Assessments: A Must for Companies
“Lars von Ehrenheim, Director Financial Crime Prevention, emphasizes the importance of conducting a sanctions risk assessment for both financial and non-financial companies. “The EU Commission prescribes it, as do national authorities exemplified by the FSA in Finland and Lithuania among other countries,” he says.
Kazakhstan: A Major Sanctions Circumvention Hub
Kazakhstan has emerged as a major sanctions circumvention hub, with imports making up 40% of Russia’s trade gap. The country is joined by Armenia, Turkey, and others. In November, UK and Swedish companies continued to trade with Russia despite the ongoing conflict in Ukraine.
Norwegian Banks Under Scrutiny for Sanctions Screening Accuracy
Norwegian banks are also facing scrutiny over their sanctions screening accuracy. A thematic review conducted by the Norwegian Financial Supervisory Authority found that a majority of banks demonstrated low or unsatisfactory customer screening accuracy and even lower rates for transaction screening.
European Banking Authority to Run Public Consultation on Guidelines
The European Banking Authority will run a public consultation on two sets of guidelines on internal policies, procedures, and controls to ensure the implementation of Union and national restrictive measures. The guidelines will cover individual measures, such as targeted financial sanctions, and sectoral measures, including financial and economic measures or embargoes.
Best Practices for Mitigating Sanctions Risk
Experts recommend that companies focus on typologies or risk scenarios and include frequently occurring circumvention schemes in their risk assessments. A structured approach to mitigating the risk of breaching international sanctions is crucial.
- Include a good understanding of risk assessment techniques
- Designate and skilled resources for sanctions management
- Conduct regular training and awareness programs for employees
Consequences of Breaching Sanctions: A Warning
“The fines and outreach of active supervisors and scope of enforcement actions indicate that international sanctions are not just a set of requirements subordinate to AML/CTF,” von Ehrenheim emphasizes.
As Norway’s businesses face increasing pressure from financial sanctions and embargoes, it is essential for them to have designated and skilled resources as well as a good understanding of risk assessment techniques. Forward-looking analysis of exposure and potentially geopolitical risk can be a survival factor for business in this challenging environment.