Glossary term
Sanctions Deconfliction
Subject: Financial Crime, Sanctions
Sanctions deconfliction is the process of working out what a firm should do when the sanctions rules or lists of different countries pull in opposite directions, or where one country’s law forbids obeying another’s.
Explanation
Firms that work across borders may fall under several regimes at once. Most of the time the rules overlap and the firm simply applies the strictest. Conflicts arise when one state’s law bans a dealing that another state’s law requires, or when a blocking statute forbids compliance with foreign sanctions. They also arise when the same party is listed in one regime and not another, or when a licence in one country has no equal in the next. Deconfliction is mostly legal analysis. The compliance team maps the applicable laws, takes advice, tests whether any exemption or licence applies, and records a reasoned decision, often escalating to senior management. Sometimes the answer is to refuse the business or leave the market. Deconfliction is not harmonisation: the firm cannot change the laws, only decide how to act under them. A wrong call in either direction can mean a breach somewhere.
Example
A multinational with branches in two countries receives a payment request from a customer that is a listed party in one country but legal in the other, where a blocking law bars compliance with foreign sanctions. Legal and compliance review both laws, find that the group’s dollar clearing is exposed, and decide to decline the payment and record the legal reasoning.
Not to be confused with
- Harmonisation
- Aligning rules across countries so conflicts disappear. Deconfliction is a firm’s way of acting when the rules remain in conflict.