1 00118601 Emerging themes 2019 A4 AW v31 combined - Page 71



EMERGING THEMES 2019
All secondary sanctions related to the US sanctions
against Iran that had previously been suspended while
the US participated in the Joint Comprehensive Plan
of Action (JCPOA) were fully instituted again as of
4 November 2018. Several secondary sanctions triggers
related to Iran, as well as Russia and North Korea, were
included in the Countering America’s Adversaries
Through Sanctions (CAATS) Act.
For financial institutions in Europe, these risks under US
sanctions – both primary and secondary – must be
addressed in light of the requirements under the EU
Blocking Regulation. The regulation was originally
introduced in 1996 in an attempt to counteract US
sanctions in respect of Cuba. Following the 2018
announcement that the US would withdraw from the
JCPOA and reimpose sanctions against Iran, the
European Commission amended the Blocking Regulation
to include the newly reimposed US sanctions. The EU
Blocking Regulation has the following effects on EU
financial institutions:
•It prohibits them from complying with the US sanctions
against Cuba and Iran (both primary and secondary
Iran sanctions). EU financial institutions are therefore
placed in the difficult position of having to decide
whether to breach the US sanctions or the Blocking
Regulation for transactions impacted by these
sanctions programmes.
•It provides a right to damages for any party harmed
as a result of the sanctions. Technically, this could
mean that financial institutions might risk being sued
if they require customers to comply with the US
sanctions, although it might be difficult for those
customers to identify and/or quantify any specific
damage suffered.
In summary
Keeping in mind that the enforcement actions and
secondary sanctions risks under US sanctions extend
beyond the US sanctions programmes involving Cuba
and Iran, and in light of the significant risks created by
enforcement of US primary sanctions and the possibility
of secondary sanctions, it behoves financial institutions
operating in Europe to factor this conflict of laws into
their approach to compliance. From how sanctions
compliance is addressed in the entity’s compliance
programme, to the specific actions employees are
trained to take and how information is communicated
to customers, financial institutions must plan in advance.
Some may opt to seek authorisation under the EU
Blocking Regulation to permit conduct in compliance
with the US sanctions. No matter the course taken with
respect to the EU Blocking Regulation and the sanctions
programmes impacted by it, continued attention to US
sanctions risks is key for financial institutions in Europe
and beyond.
For financial institutions in Europe,
these risks under US sanctions –
both primary and secondary –
must be addressed in light of the
requirements under the EU Blocking
Regulation.
The EU Blocking Regulation therefore causes a further
complication in the compliance strategies of financial
institutions.
CHRIS BRYANT
Partner, London
SUSAN KOVAROVICS
Partner,
Washington DC
/71

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