Australia has announced that it will impose financial sanctions and travel bans on key Russian and Ukrainian figures. Australia's sanctions come in response to Russian President Vladimir Putin's move to annex the Ukrainian Territory of Crimea. This follows similar sanctions imposed by the United States and European Union.
Understanding these sanctions (including possible civil and criminal penalties) should be a top priority for anyone with operations or interests in Russia or Ukraine or with customers that are connected with Russia or Ukraine.
What do you need to know about economic and trade sanctions?
Australian sanctions laws are both complicated and far-reaching. The laws are not just relevant to domestic operations, but can also apply to transactions conducted wholly offshore.
There are two main sources of Australian sanctions laws:
- those that the Australian government implements in response to resolutions by the United Nations Security Council which are contained in the Charter of the United Nations Act 1945 (Cth) and country specific regulations made under that Act; and
- those that the Australian government imposes independently of the United Nations Security Council which are contained in the Autonomous Sanctions Act 2011 (Cth) and the country specific regulations made under that Act.
At a practical and operational level, Australian sanctions laws are shaped by the ever-changing range of countries, persons, goods and services appearing on the relevant sanctions lists published by the Department of Foreign Affairs and Trade (DFAT List) at http://www.dfat.gov.au/sanctions/sanctions-regimes/.
Australia has not yet named the individuals under its sanctions and is not expected to do so immediately. However, we expect that the new sanctions against key Russian and Ukrainian figures will be implemented through a regulation under the Autonomous Sanctions Act 2011 (Cth).
What steps should you be taking?
Once details of the sanctions are released by DFAT your sanctions compliance program should be updated to reflect these new sanctions and you should review your existing operations and customers to ensure that you do not breach the new sanctions.
Your review should do more than screen your customer list against the DFAT list. While screening customer lists against the DFAT List is a good start, it is unlikely to be sufficient to establish a due diligence defence for those offences where it is available.
An effective compliance program will require a detailed understanding of the law, training for employees, a reporting framework and a process for independent audit and update of the program.
Consequences of a breach of Australian sanctions laws
The consequences of not having an effective sanctions compliance program are significant – fines of up to $1.7 million can be imposed and individuals can face up to ten years’ imprisonment. Individuals involved in a company offence could commit an ancillary offence and directors could face civil or criminal penalties resulting from the breach of their duties as directors.
The situation in Ukraine is evolving rapidly, and companies/financial institutions with affected business transactions should monitor developments closely.