Webinar Notes: Mitigating Risks and Impact of Sanctions Regimes on Your Supply Chain

This week’s webinar notes are from an April 9^th webinar hosted by ISM and presented by Mark Dunn, Lexis Nexis’ Due Diligence Segment Leader for Risk and Compliance. ISM’s previous web seminars are listed on the lower portion of this page on their website.

This event, titled “Mitigating Risks and Impact of Sanctions Regimes on Your Supply Chain,” specifically addressed risks that are outside of the norm for most supply chain and procurement professionals: money laundering, bribery, corruption, and diplomatic or economic sanctions. The sanctions, which might be in place as the result of violating international law or human rights violations, can be established against countries, organizations, companies, individuals – even specific vessels. The measures against these entities may be restrictive or coercive in nature.

The primary regimes that assess and require compliance with these sanctions are the United Nations Security Council. In the United States, the US Office of Foreign Assets Control (OFAC), which reports into the U.S. Department of the Treasury, manages sanctions while the Department of Justice brings charges against violating organizations.

The information presented by Dunn in the webinar was both interesting and thorough – including even live sample searches for a company he knew would have sanctions against it on the US Treasury website.

In my opinion, however, the most interesting part of the webinar was hearing the audience submitted questions. I was very curious to see what sorts of questions would be submitted. Realistically speaking, how many procurement professionals are even remotely concerned that they would do business with Iran or Sudan? Approximately half of the questions submitted reflected an understanding that sanctions violations could take place at the second or third tier of the supply chain without the buying organization knowing.

For example…

• What if my supplier (or one of their suppliers) breaks a sanction without my knowledge?
• Given today’s extended global supply chains, what if a sanction is put into effect after goods are shipped but before they reach their destination?

The good news is, by staying aware, working closely with trained legal counsel, and by taking good faith steps to abide by in place sanctions, it is possible to stay out of trouble. Given the fact that individuals within an organization can be the subject of sanctions, it is not as simple as running the suppliers in your ERP or spend analysis solution against third party provided data to identify all risk. Constant monitoring is required to uncover sanctions or changes in sanction status. The primary effort should be to minimize exposure and understand/mitigate risks in order to prevent infractions.