Viewing the compliance management of global business from international sanctions
where is the road
At present, the resolutions and laws related to international sanctions issued by the United Nations, the United States and the European Union have become a system of economic and trade sanctions with a large system, involving many industries, and extremely penalized, affecting across the globe. The scope is also gradually escalating, and the impact has been extended from the political field to the economic field, which has brought challenges to the company's strategic goal of achieving stable global operations and sustainable development.
I. New problems in global business operations: international sanctions are becoming increasingly severe
International sanctions are penalties or enforcement of violations of laws, rules or order. At present, the main bodies that initiate international sanctions are the United Nations, the United States and the European Union. The UN Security Council issued sanctions based on the UN Charter. The United States adopted the 1976 National Emergency Law, the 1977 International Emergency Economic Rights Act, the 2001 Patriot Act, and the 2017 The Sanctions against the US Enemy Act is the main sanction. The EU Council is the core body responsible for EU sanctions decisions and issues relevant sanctions regulations.
From trade sanctions to financial sanctions, as the issue of international sanctions has intensified, especially the United States has established a complete international sanctions system based on its own dominant international financial order and the central position of the US dollar in the settlement of international financial transactions. International business brings potential risks. If the relevant business is subject to international sanctions, it may face risks such as prohibition of transactions, asset freeze or confiscation, cutting off the access and use channels of international currencies such as the US dollar, and bring huge economic losses to the enterprise. The international reputation is affected and affects the normal development of international business. On August 22, 2017, the Office of Foreign Assets Control (OFAC) of the US Treasury Department published a list of 10 entities and 6 individuals sanctioned on the website of the Ministry of Finance, including 6 Chinese companies and 1 Chinese citizen.
For example, the U.S. Department of Commerce’s ban on ZTE’s sanctions will completely ban American manufacturers’ sales, provide technical services, and even technical support until 2025. This is undoubtedly a major setback for ZTE, which still has a large proportion of chips, components and software that are closely related to American manufacturers. It will cause extreme losses in the international market, product development, manufacturing and sales. Great impact. ZTE was sanctioned by the United States and was sentenced to a huge fine of 892 million U.S. dollars, which revealed the lag of the international sanctions compliance risk management and control capabilities and the major flaws in the international sanctions compliance risk management system. Many Chinese companies are in the process of globalization. Both have important warnings.
Second, the new challenges of global business operations: facing new compliance competition
With the rapid development of economic globalization, the traditional “going out” multinational corporations have grown into global companies. The competition of enterprises has risen from the competition of individual enterprises to the competition of global value chains, and the competition mode of enterprises has undergone major changes. Faced with the strong supervision of governments and the strong promotion of international organizations, more and more global enterprises have strengthened compliance management, and compliance competition has become a new competition rule for global enterprises.
Establishing an international sanctions compliance risk management system will bring positive and positive effects to enterprises:
First, it can actively avoid being listed on the international sanctions list and prevent international sanctions compliance risks. Enterprises to establish and improve the international sanctions compliance risk management system can effectively prevent and control the major international sanctions risks faced by global operations, reduce or eliminate the significant adverse effects of international sanctions on the international business of enterprises, consolidate market share, and protect overseas investment and business. The smooth development of the development and the smooth implementation of the international strategy.
Second, it helps to comply with relevant laws and regulations and demonstrates the commitment and determination of the company to operate in compliance with laws and regulations. For Chinese enterprises, the Foreign Trade Law of the People's Republic of China, the Anti-Money Laundering Law of the People's Republic of China, the Law of the People's Republic of China on the People's Bank of China, the Anti-Money Laundering Regulations of Financial Institutions, and other laws and regulations will be related to foreign trade and anti-money laundering. Relevant provisions have been made in areas where international sanctions are closely related. Establishing an international sanctions compliance risk management system, strictly abiding by the relevant laws and regulations of the Chinese government, and adhering to legal compliance operations, is conducive to demonstrating the company's commitment and determination to comply with relevant national laws and regulations.
The third is to help companies to provide accountability, even defence and self-protection when they encounter penalties for violations. Due to the wide coverage and impact of international sanctions, enterprises can rely on a sound system of policies, management methods and operational manuals and a set of scientific international sanctions compliance risk management systems in response to international sanctions and related legal proceedings. , to carry out a positive and effective response to maximize the protection and protection of the legitimate rights and interests of enterprises. At the same time, through systematic review of the list of international sanctions and resolutions, the development of international sanctions compliance risk policy system, management methods and operational manuals, effectively guide enterprises to conduct customer and supplier management, international business development and management process specifications, to ensure management Do not touch the red line of international sanctions.
Failure to establish an international sanctions compliance risk management system will have serious negative impacts on enterprises:
First, the international sanctions will have a serious impact on the property security of enterprises. Specifically, the company’s overseas equipment, funds and other assets were frozen; it was subject to huge fines from the governments of the countries concerned.
Second, the international sanctions will have a serious impact on the company's international business. International sanctions have narrowed the scope of business choices for enterprises, increased the cost of applying for business licenses, greatly increased transportation risks and costs, and legal disputes with counterparties may continue to perform on unfinished contracts. Payment of goods is restricted, and goods inspection is more Frequently, once a problem is discovered in a certain link, the responsibility of each link will be traced and penalized along the entire chain of the supply chain.
Third, the international sanctions will have a serious impact on the brand reputation of enterprises. The international reputation of the company has been seriously damaged, and international partners may terminate their business. The decline in capital market financing capacity, especially for listed companies, may shake investors' confidence, resulting in a sharp fall in stock prices and blocked bond issuance, affecting the financing capacity of enterprises. Once listed on the sanctions list, it will greatly affect the establishment of institutions and business expansion in the United States and the European Union.
Therefore, enterprises only adhere to the strict and compliant operation, strictly abide by relevant state regulations, strictly implement the sanctions resolution requirements of the United Nations, the United States and the European Union, and evade high-risk businesses, and resolutely do not violate the rules as the bottom line, and avoid risks with the best combination plan. We will pay close attention to policy changes, timely and flexible adjustment measures, proactively respond to international sanctions risks, enhance international sanctions risk prevention and control capabilities, and improve the level of international sanctions compliance risk management to ensure the smooth operation of global operations.
Third, the new global business operation: establish a compliance management system
Establishing a compliance management system is a common practice for global enterprises, and it is also necessary to respond to global supply chain reviews, gain access to international market opportunities, and prevent global business risks.
In the face of international sanctions, the main contents of establishing a sound compliance management system are as follows:
The first is to establish an international sanctions compliance risk database and ensure dynamic updates. Comprehensively sort out the sanctions business and the applicable sanctions laws and regulations involved in business operations, investment projects, organize international sanctions risk assessment and establish an international sanctions risk framework and risk event database. At the same time, it dynamically follows up on the latest sanctions laws and regulations of the United Nations, the United States and the European Union, and conducts international sanctions compliance risk identification and risk assessment in accordance with international sanctions lists and resolutions.
The second is to establish an international sanctions compliance risk management system and ensure effective operation. Organize enterprises to analyze and evaluate the sanctions risks and consequences that may be faced when conducting business with various sanctions countries, formulate and publish overall policies and guidelines for international sanctions, formulate differentiated control measures according to international sanctions risk levels, and carry out international sanctions at the corporate headquarters level. The top-level design of compliance risk management, the establishment of international sanctions compliance risk management procedures and institutional systems at the overseas business and overseas project level, strengthening the international sanctions compliance risk management system evaluation audit, cultural construction and capacity enhancement, and promoting international sanctions compliance The risk management system continues to improve, ensuring that the company successfully operates globally and has a good international image.
The third is to establish an international sanctions compliance risk response mechanism and ensure continuous investment. The enterprise conducts an assessment of the international sanctions compliance risk according to the business type, business scope, counterparty or transaction target, establishes an international sanctions compliance risk business response mechanism, and formulates the business policies and risks of international sanctions compliance risk management. Strategies, clarifying risk appetite and risk tolerance, determining how much efforts companies are willing to take to prevent international sanctions compliance risks, investing much manpower and material resources, preparing rules and operational procedures for specific business involving international sanctions, and strictly implementing them. The system is guaranteed, the professionals are guaranteed, the budget is guaranteed, the full coverage of key businesses, the full coverage of key countries, and the full coverage of key processes are supported to support the global operations of the company.