August 20, 2018
By Anna Sayre, Legal Content Writer SanctionsAlert.com
Financial institutions and corporations playa key role in the implementation of sanctions issued by the United Nations (UN) Security Council.In fact, this is where the rubber hits the road, as private companies are the ones that enable the implementation of UN sanctions. Nevertheless, many compliance officers,who deal with the operational aspects of UN-derived sanctions on a daily basis and often spend millions of dollars/euros to ensure compliance, are not aware of how they come into being or the policies from which they derive.
A recent Report from the Columbia University Center on Global Energy Policy, written by Jonathan Brewer and Richard Nephew, offers key insights into obstacles faced by the UN in the implementation of sanctions, namely those faced by the UN committees, panel of experts members, and member states.
The Report, though targeted at UN members, can also serve as a tool for manufacturers, service providers, and financial institutions in the private sector to learn how the UN operates in New York and implements sanctions policy.
SanctionsAlert.com sat down earlier this year with Jonathan Brewer, Ph.D* – Visiting Professor at King’s College in London, UK and Advisory Board Member of SanctionsAlert.com – to find out why it is important for manufacturers and financial institutions in the private sector to understand how UN sanctions are implemented and how his Report can help private companies learn how the UN operates in New York and implements sanctions policy.
Sanctions Alert: Could you please start by telling us a little bit about yourself and how you came to work at the United Nations?
Dr. Brewer: My career started in the UK Foreign Service, which I joined in 1983. When I retired in 2010, I joined Kings College London as a Visiting Professor working on proliferation issues. In November of that same year, I came to New York after being appointed to a group created under Security Council resolution 1929 of June 2010 to monitor UN sanctions on Iran.. I remained in New York for 5 years, until January 2016 when Iran sanctions were dismantled under the Joint Comprehensive Plan of Action.
Sanctions Alert: Why do you think it was important to write a report on this particular topic?
Dr. Brewer: Both Richard and I had been involved in formulation or implementation of UN sanctions, or unilateral sanctions, and we both had experiences of some of the practical difficulties in implementing sanctions in such ways to make them properly effective. We thought it would be a good idea to identify some of these difficulties and to propose possible solutions to try to mitigate them.
Sanctions Alert:The report seems mainly targeted towards panel members and member states. Does the report have implications for the private sector as well?
Dr. Brewer: The fundamental issue with implementing sanctions is that individual states need to put in place procedures, processes and legislative structures. When states implement sanctions, very often what happens in practice is that private sector entities have to put specific measures in place. For example, controls on exports of certain goods and materials, in practice, will be implemented by manufacturers and exporters. Those manufacturers and exporters must have systems in place to ensure they are aware of sanctions regulations and that they are complying with them. As such, manufacturers and exporters have a specific and important role to play. Then there are issues related to how such goods and materials are paid for. Banks and other financial institutions must also have measures in place to make sure that for example they are not unwittingly financing exports of goods and materials that may not be licensed for export, or are being imported by states that are subject to sanctions because they are developing WMD programs. So, those are two parts of the private sector that need to be very much aware of sanctions regulations,and need to have processes in place to implement those regulations.
Sanctions Alert:You and Richard propose a number of initiatives for improving UN sanctions implementation in your Report. In your opinion, what are the key ways that you think the private sector can more effectively comply with UN sanctions?
Dr. Brewer: A very important area that is often overlooked is to maintain effective channels of communication with governments. Many times, government departments have information, which can be quite sensitive information, relating to sanctions or proliferation activities. There needs to be good channels of communication between those government departments and banks/manufacturers so that the latter can incorporate such information into their screening and monitoring systems.
Sanctions Alert:What about the UN and its processes do you think it is important for the private sector to understand?
Dr. Brewer: The report centers around the challenges faced by the UN structures in New York in particular in promoting effective implementation of UN sanctions. Those structures fall into three categories: 1. Sanctions committees;2. Panels of experts; and 3. The UN Secretariat. Sanctions committees are subsidiary bodies of the UN Security Council that are set up each time a UN sanctions resolution is passed. Their function is to monitor day-to-day implementation and promulgate official policy and guidance. Many of those committees are supported by groups of experts. They are independent bodies. They do not make policy or provide official commentary, but rather serve a variety of functions depending on the particular sanctions resolution, including providing advice, carrying out investigations, and collecting information in order to inform the committees’official functions. The UN Secretariat provides technical and administrative support to the committees and the panels of experts. It is a source of institutional memory, provides advice, and generally makes sure that the sanctions framework operates in a smooth and well-regulated way. It is important that these three structures in New York work together to ensure effective implement UN sanctions.
Sanctions Alert: Why is it important for those in the private sector and the compliance community to understand the UN and its processes and how these regulations are implemented?
Dr. Brewer: I think that there are various ways of looking at what the private sector needs to do. The private sector is made up of entities that are there to generate business and profits for shareholders, but at the same time, the private sector operates within a framework determined by the country in which it operates, which in turn is determined by the overall UN sanctions framework. Within that framework, there are legislative restrictions on their activities, there are controls, there are monitoring systems, as well as requirements to act ethically. In my view, big companies should be incorporating into their social corporate responsibility programs concepts such as promotion of international peace and security, the importance of effective controls on proliferation, such as monitoring for related financial transactions – even if they are not strictly, legally required to do so. This is a difficult line to tread for private companies. For example, let’s say you are a bank and you see a transaction that appears to be associated with a sanctioned state. You might take action to block the transactions but you may even need to consider removing the client from your customer base.
Also, big companies or banks that operate in areas that may be affected by sanctions need to ensure that their staff is aware. That means proper education, training, and awareness-raising that sanctions-compliance is a very important aspect of this work.
Sanctions Alert: In summary, what in your opinion are the top three ways you believe the private sector can improve implementation of UN sanctions?
Dr. Brewer: As just mentioned, (1) is appropriate training and awareness. (2) Your company should be making sure that monitoring systems are incorporating all the relevant regulations and lists, including the Consolidated UN Security Council Sanctions List. And (3) would be to make sure that your company has good channels of communications open with government departments so that your company is receiving appropriate information, and able to report suspicious transactions and block them or freeze assets as required.
Note: In April 2018, SanctionsAlert.com helped organize an informal meeting between the United Nations Security Council and members of the financial sector to support an open dialogue and discuss best practices in relation to implementation of UN sanctions. Such meetings play an integral part in learning how the UN Security Council influences international sanctions law, and by default – private companies all around the globe.
*Dr. Jonathan Brewer is a recognized expert on global proliferation threats, financial sanctions and proliferation financing, was the financial expert on the UN Panel on Iran, created by UN Resolution 1929 in 2010. Previously, he served with the UK Diplomatic Service, where he was Head of Counter-Proliferation 2005-2010. Dr Brewer’s current areas of research include proliferation financing, financial sanctions, and related typologies. He contributed extensive material on UN financial sanctions to reports of the UN Panel on Iran published by the Security Council. His publications include papers relating to financing of proliferation, sanctions on Iran, and the role of the private sector in supporting implementation of sanctions. He is a member of the SanctionsAlert.com Advisory Board.