The UN Security Council can impose economic and other sanctions to maintain security and international peace. Sanctions are defined as the restriction or suspension of economic or commercial cooperation, including transport, communications or diplomatic relations with a particular state, company or person. Following Russia’s attack on Ukraine, the EU has imposed a series of export and import sanctions on Russia, which are increasing all the time. As these sanctions have become highly visible, they are also raising many questions among companies and customers.

There are two types of sanctions, coercive and voluntary. Voluntary refers to a situation where there is a voluntary withdrawal from the market or a desire to withdraw from cooperation beyond the scope of mandatory sanctions and sanctions lists. Coercive refers to a situation where the authorities impose a sanction on a particular product/company. For example, in week 11, Customs announced that the EU has banned exports of luxury goods to Russia and previously the sanctions list included iron and technology products.

Customers can require a company to comply with the listings of countries other than Finland and the EU

For companies, comprehensive enforcement of sanctions can become a tedious workload. The Finnish and EU lists are long Рhundreds, even thousands. Now the lists have been extended to include the close associates of the sanctioned persons. Customers and the various markets in which the company operates may require the company to comply with lists from countries other than Finland and the EU. The lists can thus be very extensive, numerous and constantly changing, and the number of lists and sanctioned persons is constantly growing as new lists emerge. 

When a company has a large number of customers and especially suppliers/supplier chains, there may be individuals and companies among them. If the ownership of a beneficiary on a sanctions list or his/her related parties in a company exceeds a certain threshold (e.g. 30%, in some countries 25%), this may affect whether a particular supplier is sanctioned or not. Customer management may also require a specific process to identify and manage beneficiary information, including any changes.

Changing sanction lists and their management

In procurement, it is again about suppliers, who often have their own subcontractors and suppliers. There are many moving parts and this is where the question arises; how, where and how to manage sanctions information responsibly – this applies to contracts, suppliers or specific products where there may be some issues. There is also the question of how all this is done in a comprehensive and reliable way and how any problems that arise are dealt with.

For example, what should you do if a supplier’s subcontractor is on a sanctions list; is there a clause in the contract that allows it to be terminated or a claim for a change to the contract? Or, depending on the conditions, how would you act responsibly towards your own customers? Is it acceptable not to deliver or to delay, to substitute products or even components altogether? With 1000 customers and suppliers each, 100 products and 20 countries, the number of assessments is enormous and the packing lists are constantly changing. How should one keep up with such a situation?

This is where we at NordCheck come in. 

We move companies’ lists into a more secure format with modern compliance. We manage data responsibly, destroy physical files, avoid problems that might otherwise arise and resolve contract bottlenecks in a timely manner. Constraints create new reach and our solutions prove their effectiveness when disparate issues, documents and processes are interconnected.