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Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 1 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 2 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 3 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 4 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 5 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 6 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 7 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 8 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 9 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 10 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 11 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 12 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 13 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 14 Berezansky Vladimir Trade Sanctions Risk Mitigation Overview Slide 15
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Berezansky Vladimir Trade Sanctions Risk Mitigation Overview

  1. 1. Trade Sanctions Risk Mitigation Overview Vladimir Berezansky May 2016
  2. 2. Page 2 Presentation Overview: ► Sanctions – a brief review of what and why ► Comprehensive vs. sectoral sanctions ► Legal authority ► Sanctions Gridlock ► Sanctions vs. AML/KYC ► Sanctions Regimes as Moving Targets ► Sanctions for Non-Financial Institutions ► Recent Sanctions Violations – FIs ► Recent Sanctions Violations – NFIs Trade Sanctions Risk Mitigation Overview
  3. 3. Page 3 What are sanctions? ► ‘The withdrawal of customary trade and financial relations for foreign and security policy purposes’ ► An economic means for conveying a political/diplomatic message ► Either an end in itself: e.g., occupying a middle ground between diplomacy and war ► Or supportive of other goals: e.g., trading with the enemy sanctions, dual-use technology controls Trade Sanctions Risk Mitigation Overview
  4. 4. Page 4 Intended Purpose: Why Sanctions? ► Intended purpose: ► Coerce ► Deter ► Punish ► Shame ► To advance specific foreign policy goals consistent with globally recognised norms of proper conduct: ► Anti-Money Laundering/Counter-terrorism ► Counter-narcotics ► Non-proliferation ► Human rights promotion ► Cyber security Trade Sanctions Risk Mitigation Overview
  5. 5. Page 5 Comprehensive vs. Sectoral ► Comprehensive: blanket prohibition of commercial relations; e.g., Cuba, Iran (until recently), North Korea ► Sectoral: designed to target specific activities, persons and/or entities ► Modern history of sanctions: Gradual evolution from comprehensive (blunt) toward sectoral (precise) sanctions regimes ► At least in theory, sectoral sanctions are more interactive, coercive Trade Sanctions Risk Mitigation Overview
  6. 6. Page 6 Legal authority for sanctions ► United Nations: UN Security Council can impose mandatory sanctions; member states are required to adopt implementing legislation; commercial entities must comply ► European Union: applies sanctions within the Common Foreign and Security Policy ► Applied on autonomous EU basis, or ► Implements UN Security Council Binding Resolutions ► United States: ► Federal laws (passed by Congress) ► Executive (presidential) Orders ► ‘Pick & choose’ – Switzerland, Canada, Australia, Japan Trade Sanctions Risk Mitigation Overview
  7. 7. Page 7 The Result: Sanctions Gridlock ► Especially for multinational companies heavily engaged in cross- border business activities, the possibilities for inadvertently violating an applicable sanctions control are myriad. ► Many ‘permanent’ sanctions lists are frequently updated; e.g., OFAC lists ► When names of persons or entities are removed from relevant sanctions lists, the sanctions monitor must be timely informed so as not to prohibit a compliant transaction. ► When names of persons or entities are added to relevant sanctions lists, the sanctions monitor must be timely informed so as not to permit a non-compliant transaction. ► The sanctions monitoring function operates between this mirrored pair of threats. Trade Sanctions Risk Mitigation Overview
  8. 8. Page 8 Sanctions vs. AML/KYC ► AML/KYC is an extremely important Compliance function; but if Compliance properly aligns its risk appetite and risk management profiles, the consequences for the overall organisation are properly mitigated. ► One or even two bad apples can slip through a properly gauged and implemented AML/KYC programme that makes proper use of risk- based monitoring. ► For sanctions monitoring, one mistake is one too many. A single violation of an applicable sanctions regime can have dire consequences for all concerned. ► Sanctions monitoring is analogous to a government’s anti-terrorism programme: The anti-terrorist forces need to get it right every time; but the terrorist needs to get lucky only once. ► Unlike AML/KYC Compliance, sanctions monitoring is a zero-sum game: ‘I win, you lose’ or ‘You win, I lose’ Trade Sanctions Risk Mitigation Overview
  9. 9. Page 9 Sanctions Regimes: Moving Targets ► As sanctions are an economic means of enforcing political/diplomatic agendas, sanctions regimes change in sync with changes in the political-diplomatic landscape. ► Iran, Cuba, Burma and Belarus: sanctions regimes gradually easing (or expected to in near future) ► Russia: the applicable (US/EU) sanctions regimes are regularly enhanced with the addition of new names ► This dynamic complicates even further the mirrored pair of threats between which the sanctions monitor operates. Trade Sanctions Risk Mitigation Overview
  10. 10. Page 10 Sanctions for Non-Financial Institutions ► Non-Financial Institutions (NFIs) do not get a free pass; to the contrary, NFIs may have even more perilous terrain to navigate than banks. ► Financial Institutions (FIs) operate in a highly regulatory environment. Whether or not they like it, Boards of FIs know that a robust compliance programme is the sine qua non for maintaining the trust of their regulators and staying in business. ► With certain well-known exceptions – e.g., pharmas, auto, aviation, telecoms – NFIs tend not to perceive ‘compliance’ as such to be a relatively major overall priority. Trade Sanctions Risk Mitigation Overview
  11. 11. Page 11 Sanctions for Non-Financial Institutions (cont’d) ► This inadequate or improperly gauged threat assessment leaves NFIs susceptible to being blind-sided by sanctions violations. ► Even NFIs that do maintain a robust compliance function streamlined for their specific industry sector may not be properly equipped for the painstaking and subtle nature of adequate sanctions monitoring. ► In this context, retaining the expertise of qualified third- party consultants can provide vital insights into otherwise overlooked and/or underestimated potential exposures to violations of sanctions regimes. Trade Sanctions Risk Mitigation Overview
  12. 12. Page 12 Recent Sanctions Violations – FIs ► US$8.9bn – BNP Paribas – June 2014 (largest sanctions fine in DOJ history) ► BNP pled guilty to criminal charges of multiple transactions with Sudan, Iran and Cuba ► French President Hollande personally protested the size of penalty to US President Obama ► US$1.3bn (plus US$665mn in civil penalties) – HSBC – December 2012 ► Per terms of Deferred Prosecution Agreement (DPA) ► Found to have completed transactions on behalf of clients in Cuba, Iran, Libya, Sudan and Burma ► US$787mn – Crédit Agricole – October 2015, for illegal funds transfers, mostly to Iran ► US$619mn – ING – June 2012, for alleged transactions with Cuban and Iranian entities amounting to billions of dollars ► US$536mn – Crédit Suisse – December 2009, CS employees were alleged to have trained Iranian clients how to falsify transfer instructions to avoid triggering US transaction monitoring filters ► US$350mn – Lloyds TSB – January 2009, for transactions with Iranian clients by manipulating correspondent bank accounts so as to evade detection ► US$298mn – Barclays – August 2010, for allegedly stripping wire transfers for clients in Cuba, Iran, and other sanctioned countries ► US$258mn – Deutsche Bank – November 2015, for violating sanctions in both Syria and Iran ► US$227mn – Standard Chartered – December 2012, for stripping identifying information from wire transfers for customers in Iran, Cuba and Burma Trade Sanctions Risk Mitigation Overview
  13. 13. Page 13 Recent Sanctions Violations – NFIs ► US$4,073,000 – Epsilon Electronics – March 2014, civil penalty levied by Office of Foreign Assets Control (OFAC) for violations of Iran sanctions regime ► US$614,000 – CGG Services, SA – February 2016, for violations of Cuban Assets Control regulations ► US$304,000 – Halliburton – February 2016, for violations of Cuban Assets Control regulations ► US$250,000 – Johnson & Johnson – January 2016, for violations of sanctions against Sudan ► US$141,000 – WATG Holdings, Ltd. (UK) – January 2016, for violations of Cuban Assets Control regulations ► US$123,000 – Barracuda Networks (USA) – November, 2015, for violations of sanctions regimes for Iran and Sudan ► US$97,500 – Gil Tours Travel – US$43,000 – October 2015, for violations of Cuban Assets Control regulations and for facilitating travel to Cuba Trade Sanctions Risk Mitigation Overview
  14. 14. Confidential — all rights reserved © Ernst & Young LLP 2016 [TBU] 14 Background ► Vladimir is the one of the first foreign professionals to bring Western (US, UK, EU) regulatory compliance leadership to the Russian/CIS/CEE financial services market. He has more than fifteen years work experience in Russia/CIS and Eastern Europe, as well as Cyprus, Switzerland and London’s financial markets. ► Vladimir is a recognised expert in structured off-shore Russian wealth, including how and why these specific strata of global off-shore wealth were created, their legitimate uses, and indicia of suspicious and/or potentially illegal uses. Most recently, he has been presenting a series of seminars on relevant changes in Russian and other legislation that have caused off-shore Russian structures to reconfigure and often relocate their activities. Professional experience Mr. Berezansky’s expertise includes the following areas of corporate governance, due diligence and compliance: ► Due diligence on Russian/CIS/CEE cross-border holding structures; ► Analysis/assessments of off-shore (tax haven) structures, family offices, SPVs ► Challenges presented by Russian HNWI clientele ► Integrity Due Diligence – dossiers on high-profile (PEP, HNWI) Russians and other Russian speaking nationals ► Expert support to civil disputes (litigation, arbitration) involving Russian oligarchs in US/UK/EU courts ► Review and analysis of Russian/CIS/CEE banking, financial and corporate Compliance infrastructures; ► Gap analysis and similar (e.g., dashboard) assessments of internal policies and protocols as measured by global best practices, US/UK regulatory standards, and local regulatory requirements; ► Russian trade sanctions expertise and experience ► Anti-bribery/anti-corruption expertise and experience Education Bachelor’s (Linguistics), Columbia University (New York); Juris Doctorate (JD), international private law, Washington College of Law, The American University (Washington, D.C.), ► Federal District (Washington, D.C.) Bar (license) ► Russian broker-dealer license (1,0 Certification) ► Regular speaker at conferences, graduate (business and law) schools; meetings with financial regulators ► Languages spoken – English, Russian, French and German Vladimir Berezansky Compliance Thought Leader Fraud Investigation and Dispute Services (FIDS) EY Mobile: + 44 7500 112 534 Email: VBerezansky@uk.ey.com
  15. 15. EY | Assurance | Tax | Transactions | Advisory Ernst & Young LLP © Ernst & Young LLP. Published in the UK. All Rights Reserved. ED None The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF. ey.com

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