Certain sanctions sure seem to be world-wide. The Iranian sanctions, in particular, seem to be finally having some effect purely because it’s not just the US cracking down on them.
And, especially in the last 6 months, other countries have actually caught their citizens trying to skirt sanctions regimes – witness these from South Africa (from 2010), Spain, Sweden, France, Germany and Japan.
Yet, these are cases of the authorities catching just individual conspirators. All the financial services violators are all coming out of the US – why is that?
Now, to be fair, Royal Bank of Scotland was sanctioned by the FSA in the UK. However, that was for inadequate controls. not for any specific violating conduct. The same thing can be said for FINTRAC’s fines over the years; they were all for failure of procedural compliance.
So, why are the fines only coming out of OFAC? I think it boils down to a few things:
- IIran is the only sanctions program that matters. Youl’ll only see non-US fines on internationally-consistent sanctions, so that excludes the narcotics & Cuban programs, for example. And, to be blunt, there is no real money to be made on other sanctions programs – not enough to change procedures for and bend over backwards to cover a firm’s trail. The UK notes that Sudan, even with its petrochemical industry, is only its 87th largest trading partner.
- The rest of the world was late to the Iran sanctions game. Although the US has had some sanctions on Iran since 1987 (and have been quite extensive since 1997), most of the world didn’t sign on until 2010 (although the UK had very limited sanctions in 2007). So, any trade with Iran prior to 2010 wasn’t violating conduct – and that leads to the next point:
- It’s a little too soon. Prosecutions take time. Look at the big fines coming out of OFAC and none of the underlying conduct is after 2010. Maybe 2-3 years from now, there will be non-US financial services fines. But. it’s really not surprising that there haven’t been until now.
- The US Dollar has the biggest target on its back. International trade relies on foreign exchange, and almost every FX deal trades against USD. Similarly, oil is priced in dollars. In fact, the US held off on sanctioning the Central Bank of Iran solely so its allies could continue to buy Iranian oil. Under CISADA, of course, that’s all over.
So, the bottom line is: sanctions are international, but the big penalties against corporations (especially financial services firms) come out of the US. Because of its unique position in the foreign exchange and petrochemical trading industries, that will probably continue, although it is likely that, in the next 2-3 years, the number of high-profile non-US civil and criminal penalties will start to rise.
Categories: Sanctions News