Last summer, New Zealand aircraftmanufacturer Pacific Aerospace was charged with breaking new UnitedNations sanctions after aircraft it sold to a Chinese company endedup on a runway in North Korea. The company pled guilty. It will besentenced in January; penalties may take the form of substantialfines or imprisonment of up to 12 months for individualexecutives.

Sanctions filtering and “know your customer” are not justbanking problems. Regulations are perpetually becoming morecomplex. Companies are expected to abide by all relevant laws inthe places where they do business. For example, companies doingbusiness in the United States must ensure they're not doingbusiness with any U.S.-sanctioned individuals or entities. Inpractical terms, this means companies should be scanning theircustomers, vendors, and any payments to or from those entitiesagainst the current published government watchlists. Often,companies leave this filtering to their financial institutions, butas Pacific Aerospace can attest, regulatory authorities usuallyfine the actual initiator of the transaction—the corporate—ratherthan the bank.

In today's dynamic geopolitical environment, new traderestrictions and embargoes are emerging with increasing frequency.Sanctions have become an increasingly popular foreign policy toolfor governments. What previously were relatively straightforwardsanctions obligations and outright trade embargoes against personsor territories are increasingly taking a hybrid and nuanced form,permitting some specific types of commercial transactions butoutlawing others. For example, trade may be permitted withcompanies in a specific sector, while trade with similar businessesis against the law.

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