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RISK ELEMENTS

CIRCUMSTANCES OF JURISDICTION

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General

What are the circumstances of the jurisdiction, internally and internationally, the imposition of any sanctions, the levels of crime and corruption, and the make-up of its economy and financial sector?



International Sanctions

There are many different types of sanctions or restrictions in place against countries.

These are usually imposed due to the political situation of the sanctioned country.

Although some sanctions are very broad (eg Iran or North Korea), many are very limited and may be an arms embargo or in respect of a deposed despot and their family and cronies.

The three main imposers of sanctions are the UN, the EU, and the US (Office of Foreign Assets Control (OFAC)). Their sanction lists are generally different and attention should be given to certain anomalies – i.e. US sanctions for Cuba. Almost all countries will tend to follow UN sanctions, and countries within the EU will mirror those sanctions imposed by the EU. Since Brexit, the UK has maintained its own sanctions regime and, although very similar to the EU, there are some differences.

Not all sanctions or restrictions will mirror the UN, EU and US. There are other international bodies and countries that have imposed sanctions against countries. Below are examples of independent sanctions that are or have been in place: -

  • The Arab league (comprising of 22 Arab countries) currently has sanctions in place against Israel and Syria.

  • Australia and New Zealand used to have limited sanctions in place against Fiji.

  • The OSCE (The Organization for Security and Co-operation in Europe) has imposed an arms embargo against Armenia and Azerbaijan with regard to the occupied territories of Azerbaijan

  • The Economic Community of West African States (ECOWAS) has imposed an arms embargo on their member countries



Bribery & Corruption

It is important to understand the levels of corruption and bribery associated with the economic activity of the customer or their associated businesses, in the principle country of business.

Higher risk industries include Mining, Oil and Gas, and Public Works and Construction are particularly vulnerable to bribery and corruption , especially in higher risk countries.

The procurement of business can also be subject to bribery and corruption especially when that business relates to large scale contracts that are often tendered by governments or government agencies, hence a major reason for the requirement to determine whether your client or customer is a politically exposed person ("PEP").

The major data sources for bribery and corruption are Transparency International’s Perceptions Index and the World Bank’s Control of Corruption database. Other internet sources provide information on corruption on a country by country basis.



Supporters and/or Safe Havens of Terrorism

Since 1995, the US Department of State has been reporting on the worldwide situation regarding international terrorism. Each year, a report is published that provides information on a country by country basis on the state of terrorism and the financing of terrorism in that country including the legislation, law enforcement, and border security. The US State Department also maintains a list of perceived state sponsors of terrorism (currently North Korea, Iran, Sudan and Syria), and safe havens of terrorism (a broader list that includes regions or areas of countries that are subject to ongoing acts of terrorism).



Proliferation Financing

Proliferation financing has been described as providing financial services for the transfer and export of nuclear, chemical or biological weapons; and their means of delivery and related materials.

The major risks relate to the safeguarding of sensitive materials, technology, services and expertise can become accessible to individuals and entities seeking to use them in WMD programmes, including terrorists who are pursuing chemical, biological, radiological or nuclear (CBRN) capabilities.

Although proliferation financing involves the financing of trade in proliferation of WMD, it could also include other financial support to individuals or entities engaged in proliferation.

According to the US National Proliferation of Weapons of Mass Destruction Financing Risk Assessment (2018), North Korea, Iran, Syria, Russia, China and Pakistan are currently identified as key threat actors concerning the proliferation of WMD.