In an article published by Supply Chain Management Now, Bass, Berry & Sims attorney Thad McBride provided insight on U.S. sanctions risks in the context of international supply chains.

Citing examples, such as e.l.f. Cosmetics’s 2019 settlement for nearly $1 million for sanctions violations, Thad asserts that both U.S. and non-U.S. companies need to understand how broadly U.S. sanctions are enforced.

In the article, Thad provides an overview of the current sanctions landscape in the U.S. and highlights particular challenges such as avoiding dealing with specially designated nationals (SDNs). The SDN list is vast and includes parties that reside nearly everywhere in the world. “This creates a challenge because many of them are in countries not otherwise subject to U.S. sanctions,” said Thad.

Thad emphasizes that, given the scope of U.S. sanctions, it is vital to conduct meaningful due diligence into any vendor or international transaction partner. Thad recommends that the first step should be a risk assessment to determine what transaction types and partners present the most sanctions risks, and determine how to allocate compliance resources accordingly. The next step is to create a process that reflects the level of risk associated with each potential supplier. “The most fulsome diligence exercises might include all of the intermediate diligence steps as well as interviews with key personnel, a visit to the facility and compliance training,” explained Thad.

Ultimately, Thad states, the most effective compliance programs are rooted in a strong corporate culture, so that employees know the company is committed to ongoing vigilance of supplier relationships.  By implementing and abiding by a tailored, risk-based compliance program, U.S. sanctions violations can be avoided.

The full article, “Don’t Let Economic Sanctions Rattle Your Supply Chains,” was published by Supply Chain Management Now on January 15 and is available online.