Sanctions are a type of restrictions that are imposed on juridical or natural persons activities. The purpose of the sanctions is to force the sub-sanctioned subject to comply with the requirements of international or national law.
Sanctions can be:
- blocking (a complete ban on relations with the sub-sanctioned subject, as well as blocking his assets);
- sectoral (limitation of a certain type of operations).
Sanctions can be imposed both by governmental bodies and organizations (for example, OFAC (Office of Foreign Assets Control), EU Council and others), and supranational (for example, the UN).
Most of the international sanctions restrictions are mandatory for the service to comply with in order to prevent violations of the requirements of international law. Failure to comply with the established sanctions restrictions, the service (exchange, company, etc.) may unilaterally refuse to conduct further actions and/or block funds (depending on the type of applicable sanctions). Circumvention of sanctions is considered a felony in most jurisdictions.
By implementing procedures for compliance with sanctions restrictions, the company also implements and takes a set of measures to ensure that the service cannot be used to circumvent imposed sanctions restrictions. One of the most common measures to comply with sanctions restrictions are KYC and AML/CTF procedures.
Compliance with sanctions restrictions procedures is mandatory. The implementation of these procedures is expressly provided for by current legislation. Failure to comply with the necessary procedures may entail the reputational and material losses in the form of fines imposed by regulatory authorities. A user who ignores the fulfillment of the requirements of the service will be denied further service and operations, and his balances may be blocked.