The Growing Compliance Burden Amid Proliferating and Persistent Sanctions

Sanctions, designed to exert pressure on targeted entities, often prove ineffective and persist indefinitely, creating a growing compliance burden for professionals, according to an article on the FCPA Blog.

Despite numerous sanctions, such as those imposed on Russia post-Ukraine invasion, they frequently fall short of their objectives. Compliance professionals face increasing challenges as sanctions, meant to induce popular discontent or regime change, prove ineffective against autocratic systems that maintain power through intimidation. Trade interruptions seldom work, leading targeted countries to form alliances with other sanctioned states, exacerbating the compliance burden.

Sanctioned regimes retaliate by seizing Western assets, engaging in intellectual property theft, and fostering state-supported smuggling. Compliance leaders find themselves navigating an intricate landscape as autocrats exploit sanctions as scapegoats, deflecting blame for domestic issues onto external forces.

Examining the unintended consequences of sanctions on Russia post-Ukraine invasion reveals a shift in capital flow. Sanctions inadvertently solved Putin’s capital flight problem, with Russian assets returning home. Rather than triggering a brain drain, sanctions hinder ordinary Russians’ mobility, contributing to economic growth and increased military spending in Russia.

While sanctions serve as a symbolic response for Western leaders, meeting public demands for action, compliance professionals must grapple with their limited efficacy. As the West continues relying on sanctions, compliance leaders need to anticipate a growing array of these measures, understand their complexities, and acknowledge the ongoing challenges in achieving substantial change.