02.10.2014 – In early July of this year, the U.S. imposed a record fine of USD 8.8 billion on BNP Paribas following the French bank's guilty plea to charges for violation of American sanctions against Sudan, Iran and Cuba. The case shows the potentially severe consequences of non-compliance with international sanction regimes. At the same time, it has become increasingly difficult to keep track of the latest developments in international sanctions. For instance, in addition to the US and the EU, inter alia also Norway, Canada, Japan, Australia and New Zealand maintain a sanctions regime related to the situation in the Ukraine. Russia has retaliatory sanctions in place, and Switzerland introduced measures to prevent the circumvention of the international sanctions. Unfortunately for practitioners, the various sanction regimes do not correspond and they evolve and change constantly. Sanctions are today also in force regarding Belarus, Syria, Iraq, Iran and various African countries.
In the context of a transaction, appropriate pre-acquisition due diligence regarding sanction compliance is becoming more and more important, and increasingly complex. On the one hand, clients and counsel should very early in the process analyze the target's risk profile in that respect. Factors to be considered are, inter alia, the target's business (some business sectors are more exposed to sanctions than others, e.g. the oil and gas business), the geographic areas where the target is doing business, whether the target is trading in US dollars, and whether they have sanction compliance processes in place. Based on this analysis, the scope and depth of due diligence can be defined, striking the right balance between risk protection and cost efficiency. On the other hand, transaction counsel needs to constantly keep pace with the ever changing landscape of international sanctions in order to identify possible risks in the due diligence exercise.