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Should each client be checked against sanctions lists?

In the February 2020 issue of iTiesības, an article by Kristīna Markeviča, associate of PRIMUS (Certified Anti-Money Laundering Specialist (CAMS)), dealing with major aspects when complying with and executing international and national sanctions, was published.

Should each client be checked against sanctions lists?

According to the Ministry of Foreign Affairs (MFA), sanctions are restrictive measures, or restrictions or prohibitions, imposed pursuant to international public law. Any transaction prohibited under the law governing sanctions is considered a breach of sanctions.

Failure to comply with sanctions, as well as suspicion of a breach of sanctions, may carry the risk of the suspension of economic activities and the freezing of funds for the defaulting economic operator, because the State Police has the right to seize all funds of such economic operator in order to prevent a breach of sanctions, and this is what actually happens in practice.

Therefore, in order to minimise the likelihood of being involved in circumvention of the sanction regime, those which, on account of their activities, are not required by law to establish an internal sanction control system (in the case described in this article, online shops) should at least follow the following four steps when assessing their counterparty:

  • prior to the transaction, it must be ascertained that the economic operator itself is not involved in the trading of strategic goods, otherwise an authorisation needs to be obtained from the MFA;
  • the economic operator should make every effort to ensure that it does not enter into any business relationship with a sanctioned entity;
  • it should be ensured that the customer is not associated  with high risk countries;
  • it is the responsibility of every economic operator to monitor and evaluate whether its customers are conducting or intending to perform suspicious operations or transactions.

The full article in latvian is available in the February 2020 issue of iTiesības.



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