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AML and international sanctions – €1.1 billion lesson

(This article first appeared here, and it is republished with the author’s consent)

By Jacki Wang

Earlier this week, it was reported that French bank Société Générale expects penalties of €1.1 billion (AUD 1.9 billion) to be imposed by by US authorities for violating international sanctions. The bank is alleged to have acted on money transfers for entities based in countries that were subject to international economic sanctions.

This is a timely reminder for Australian businesses with international activities that sanctions laws in other countries (as well as Australian laws) may apply and impose restrictions to their activities.

For businesses subject to AML laws, the AML/CTF regulator, AUSTRAC expects Australian reporting entities to review their AML/CTF programs to accommodate their obligations under the sanctions regime.

While the sanctions regime operates in parallel to the AML/CTF regime, an AML/CTF Officer needs to be alert to the sanctions regime. A similar analogy is the interaction of AML/CTF rules with the privacy law requirements.

Below is a brief summary of the Australian sanctions regime.

Serious penalty

It is a serious criminal offence to contravene a sanctions measure or a condition of a sanctions permit. For example, the fine for a contravention by a company is the greater of A$2.1m or three times the value of the transaction.

Note this type of offence is a strict liability offence for a body corporate, meaning that it is not necessary to prove fault (eg intent, knowledge) to show the offence has been committed.

Types of sanctions measures

Australia implements United National Security Council sanctions regimes and Australian autonomous sanctions regimes. The different sanctions regimes impose different sanctions measures.

The sanctions measures include general prohibitions on:

  • making a ‘sanctioned supply’ of ‘export sanctioned goods’;
  • making a ‘sanctioned import’ of ‘import sanctioned goods’;
  • providing a ‘sanctioned service’;
  • engaging in a ‘sanctioned commercial activity’;
  • dealing with a ‘designated person or entity’;
  • using or dealing with a ‘controlled asset’; or
  • the entry into or transit through Australia of a ‘designated person’ or a ‘declared person’.

List of sanctions

The sanctions regime currently implemented under Australian sanctions laws prohibit or restrict certain dealings with various countries and organisations, and includes sanctions imposed through the United Nations Security Council and under Australia’s own regime. The Australian Department of Foreign Affairs regularly reviews and updates the regime countries and organisations [link] and currently it comprises:

Sanctions permits

A business which is at risk of contravening an Australian sanctions measure may be able to apply to the Minister of Foreign Affairs to obtain a permit authorising an activity which would otherwise contravene an Australian sanctions law.

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