Effective management of sanctions risk

If a company, in the course of its business activity, cooperates with partners from jurisdictions subject to sanctions (Russia, Belarus, etc.) or countries with a high risk of sanction circumvention (e.g. CIS countries, United Arab Emirates, Turkey, Serbia, China, etc.), which includes movement of goods to/from the aforementioned countries, the company is recommended to develop an internal control system for management of sanctions risk.

An effective internal control system for sanctions risk management is an essential prerequisite for a company to ensure compliance with the requirements of the Law on Sanctions of the Republic of Latvia and the European Union’s regulations and to avoid risks that may have an adverse impact on the company’s operations. An effective sanctions control process requires that the company performs due diligence before entering into a business relationship with a partner, during the business relationship and before entering into a transaction with the partner.

In order to demonstrate the effectiveness of the company’s sanctions control system to the supervisory authorities and cooperation partners, Rietumu Banka recommends documenting the procedure for the sanctions screening process and checks carried out at the company, for example:

1. The company has developed an internal control policy, which is documented and establishes a procedure for sanctions monitoring in accordance with the company’s business activity and specifics.
2. The company has developed a questionnaire that is used in due diligence assessment of the company’s partners, customers and/or transaction screening process. It has to contain information on the following:
   
   • a. Cooperation partners (name, reg. No., country of operation, date of establishment, industries in which they operate)
   • b. Beneficial owners of the cooperation partner (name, surname, nationality)
   • c. A complete geography of the movement of goods, from the original consignor to the final consignee
   • d. The original consignor and the final consignee (name, reg. No., country of registration, date of establishment, type of business activity, beneficial owners)
   • e. TARIC codes of the goods transported
   • f. Country of origin of the goods transported
3. Documents on the ownership structure of the partner (screenshots/printouts from public commercial registers, ownership documents, etc.).
4. Documents on transactions (contracts, invoices, transportation documents for the complete movement of the goods).
5. Documented results of verification of partners, clients, consignors, final consignees and their beneficial owners against the OFAC, UN, EU, national sanctions lists.
6. Documented results of verification of TARIC codes of the goods against public sanctions registers.

* The given information is of a recommendatory nature and does not prescribe a standardized approach to the process of due diligence on business partners and transactions. Rietumu Banka individually assesses effectiveness and compliance of each client’s internal control system in relation to the risks inherent in the client’s business activity.