Sanctions. Part 1
As political tensions swell in what is an increasingly unstable global environment, the risks to businesses in the UAE have risen significantly. It is important that firms are aware of the risks posed by this international instability and remain compliant with rapidly evolving regulatory regimes to avoid serious financial and legal implications to their operations, employees, and directors.
In times of international crisis, a commonplace response of many countries is to impose financial sanctions against other countries including individuals, businesses, and economic sectors. These sanctions have far-reaching consequences not just for those subject to them, but also any third-party companies or individuals who may currently be engaged or are prospectively engaging with a sanctioned client.
This article will seek to offer a practical guide as to what risks UAE businesses may face in undertaking such activities and how to remain compliant.
WHAT ARE FINANCIAL SANCTIONS?
Generally speaking, financial sanctions refer to any restrictions imposed on an individual or company that affect what that party can do with their assets and funds. One common financial sanction is asset freezing. This is intended to prevent the sanctioned party from being able to access or use their assets and funds and imposes restrictions on third parties from dealing with frozen assets. Examples of eligible assets might include but are not limited to the funds directly held by the sanctioned individual or company; the property of that individual or company; the stocks, shares and assets of any company which is majority owned or where the controlling interest is held by a sanctioned individual or company; or any other tangible or intangible asset (including ships, aircraft, and vehicles owned by the sanctioned individual.
DOES THE UAE HAVE A LOCAL SANCTIONS REGIME?
Yes. As a member state of the United Nations, the UAE is required to implement sanctions imposed by the UN against any individual or company which is placed on the UN sanctions list. The UAE also formulates what are called ‘local lists’, effectively the UAE’s own sanctions regime which predominantly targets terrorist threats. The UAE is also member of the GCC, Terrorist Financing Targeting Centre, and the Arab League, all of whom may issue financial sanctions which the UAE may implement from time to time. The UAE Central Bank as well as the relevant Executive Office actively enforces its sanction policy having very recently issued fines to financial institutions for failing to implement robust anti-terrorist finance mechanisms