By Kristin Broughton
Global companies are investing more heavily in sanctions compliance, hiring staff and training existing employees, as the U.S. expands its use of sanctions and trade restrictions to achieve foreign policy goals.
One of the biggest shifts affecting compliance officers has been the expansion of U.S. sanctions to nonfinancial sectors, such as shipping and manufacturing, Elizabeth Rosenberg, a sanctions-policy adviser at the U.S. Treasury Department during the Obama administration, said Tuesday during an interview at an event in New York hosted by The Wall Street Journal and Dow Jones Risk & Compliance.
Compared with financial institutions, which have well-established sanctions compliance programs, many nonfinancial companies have fewer controls in place, said Ms. Rosenberg, who is now a senior fellow at the Center for a New American Security in Washington.
She cited the lack of industry preparedness as one of the reasons behind the rise in shipping costs after the U.S. in September blacklisted dozens of oil tankers operated by a subsidiary of Cosco Shipping Energy Transportation, a major Chinese tanker operator.
Here are edited excerpts from The Wall Street Journal's interview with Ms. Rosenberg.
On the expansion of U.S. sanctions beyond the financial services sector:
"In financial services, people are very accustomed to these sanctions," Ms. Rosenberg said. "There's a lot of existing knowledge about what it means to have sovereign debt restrictions, correspondent banking restrictions."
"But when there are new measures that go at nonfinancials -- which is an expressed goal of this administration, for example, in the shipping industry, other manufacturing areas -- that is a new compliance challenge for many industries, who haven't seen this kind of measure being handed out before, and who may not have, in many instances, the compliance programs and the awareness, the in-house and external legal counsel, the subject matter expertise on their staff or immediately available to them to understand and immediately react."
On the use of trade restrictions by the U.S. to put pressure on China:
"I think we will see more and more of the use of these tools, as well as more and more conflation of the various tools and the execution of U.S. policy, to the chagrin of those purists who do trade policy, or banking or sanctions policy," Ms. Rosenberg said.
"And I think the area for greatest innovation, if you will, will be related to [U.S. Commerce Department] entity listing. So we've seen Huawei put on that list. There's a number of [artificial intelligence] companies that have been added to the list, and a linkage between human rights abuse or weaker suppression. I think we'll see more and more of that, and an encouragement of that from the U.S. Congress as well as from the administration."
On the possibility that the U.S. could impose sanctions if violence escalates in response to demonstrations in Hong Kong:
"If there is a major escalation of violence, as a catalyst as it were for public policy, I do expect that there would be a new set of sanctions imposed either under existing authorities or new ones," Ms. Rosenberg said. "We will just have to see from President Trump whether he'd like to do a Turkey-style imposition and removal. Or if Congress has anything to do about it, they like to impose sanctions by statute, obviously, that's much harder to get rid of, even if the president isn't going to enforce regularly or remove. So I think there's some -- I think that's a real concern."
On why companies should focus on compliance even if competitors evade U.S. sanctions:
"It would be dangerous and folly to think that nonenforcement in the present may be a lasting situation," Ms. Rosenberg said. "We will have a change in political leadership at some point in the United States, and there also could be a change in whim or sentiment, even in the current Congress or with the current administration, and we've seen on Turkey for example, that sort of whiplash activity.
"It would be unfortunate, and potentially reputationally and economically damaging, to get stuck on the wrong side of an assumption when it comes to nonenforcement or lack of clarification about potential evasion. I see more and more companies that are outside of the U.S. jurisdiction who are taking that much more cautious approach."
Write to Kristin Broughton at Kristin.Broughton@wsj.com
(END) Dow Jones Newswires
November 19, 2019 17:43 ET (22:43 GMT)
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