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Last summer, New Zealand aircraft manufacturer Pacific Aerospace was charged with breaking new United Nations sanctions after aircraft it sold to a Chinese company ended up on a runway in North Korea. The company pled guilty. It will be sentenced in January; penalties may take the form of substantial fines or imprisonment of up to 12 months for individual executives.

Sanctions filtering and “know your customer” are not just banking problems. Regulations are perpetually becoming more complex. Companies are expected to abide by all relevant laws in the places where they do business. For example, companies doing business in the United States must ensure they’re not doing business with any U.S.-sanctioned individuals or entities. In practical terms, this means companies should be scanning their customers, vendors, and any payments to or from those entities against the current published government watchlists. Often, companies leave this filtering to their financial institutions, but as Pacific Aerospace can attest, regulatory authorities usually fine the actual initiator of the transaction—the corporate—rather than the bank.

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