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Prologue
Sanctions lists are drawn up and constantly updated by supranational organizations such as the United Nations or the European Union, as well as by individual countries, to ensure that certain individuals, organizations or states are isolated on the basis of political, economic or military interests.
From a legal perspective, it is important to understand the challenges and the need for compliance with these sanctions lists in order to avoid potential consequences.
The rules for sanctions lists.
For lawyer Wilfried Reiners from PRW Rechtsanwälte in Munich, compliance with sanctions lists is crucial for several reasons.
He lists his top 5 points that speak in favor of compliance:
- Legal obligation
Companies and individuals in the EU are legally obliged to comply with the sanctions imposed.
Violations can lead to significant legal consequences such as fines or criminal prosecution.
- Avoidance of penalties
Sanctions are generally subject to very strict penalties.
Companies that violate these regulations may have to pay high fines or even lose their license to operate.
- Protection of reputation
Companies that disregard the sanctions risk their reputation.
Doing business with sanctioned parties can significantly damage the trust of customers, investors and business partners.
- International relations:
Sanctions are often part of a coordinated international policy.
Non-compliance could lead to diplomatic tensions and put a strain on trade relations with other countries.
- Avoidance of terrorism or money laundering allegations
Sanctions are often used to combat terrorist financing, money laundering or other illegal activities.
Companies that violate sanctions could be suspected of supporting such activities.
"Those who are able to work here with digital support are heading in the direction of digitalized compliance."
To summarize, according to Reiners, risk Companies that do not adhere to sanctions lists face high fines and criminal penalties.
There is also a risk of considerable reputational damage, which can have a long-term impact on customer and investor confidence.
Compliance with these lists is not only a legal requirement, but also an essential part of risk management.
Companies must implement appropriate processes to ensure that no prohibited transactions take place.
Automated compliance solutions play a crucial role here, as they offer real-time monitoring and rapid adaptability to new regulatory developments.
In less than 5 minutes our sanctions list screening collana shield is installed and your Business Central system can immediately start with the automated sanctions list checks.
Regulatory developments in the EU
With the introduction of EU Directive (EU) 2024/12261 , the European Union has taken a significant step towards tightening sanctions in the event of violations of restrictive measures.
This directive, which is to be transposed into national law by May 2025, sets out clear criteria for the definition of criminal acts and their consequences.
The stricter penalties for directly or indirectly supporting sanctioned parties are particularly relevant.
This includes financial transfers, circumventing sanctions by concealing ownership or providing misleading information about business activities.
Manual vs automated compliance
Traditional manual methods for checking compliance with sanctions lists are often inefficient and error-prone.
These processes require considerable time and human resources, which is why the implementation of automated compliance solutions is becoming increasingly important.
Automated systems offer decisive advantages: they enable continuous monitoring in real time and can be seamlessly integrated with existing IT systems.
This not only significantly reduces the manual workload, but also minimizes the susceptibility to errors.
Companies benefit from increased process reliability, as automated systems can efficiently process and check even large volumes of data.
The switch to automated verification can therefore be seen as a strategic investment to reduce long-term risks and optimize company processes.
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