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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Ibtissem Lassoued - Partner, Head of Advisory - Financial Crime / Family Business
As a matter of fact, abstaining from dealing with blacklisted entities, ensuring that self-regulation is diligent and thorough, and actively ensuring the validity of a client or transaction in line with applicable trade sanction laws will best enable companies to comply with these far-reaching economic sanctions.
Enhanced due diligence is the key, as highlighted by the recent advisory issued by the US Treasury’s Office of Foreign Assets Control (OFAC) in January 2013.
The OFAC has issued on the 10th of January 2013 an Advisory on “the Use of Exchange Houses and Trading Companies to evade US Economic Sanctions against Iran”, providing primarily and cautiously guidance to US financial institutions dealing with such entities located in countries/regions identified as high risk by the OFAC. In particular, the OFAC identifies the Iranian evasion techniques used to circumvent but also to adapt to the existing economic sanctions (i.e. the use of third country exchange and trading companies to access the US financial system). The OFAC Advisory is available at: http://www.treasury.gov/resource-center/sanctions/Programs/Documents/20130110_iran_advisory_exchange_house.pdf
Important note from the OFAC: “The Advisory is not intended to suggest that U.S. financial institutions close accounts they hold for third-country exchange houses and/or trading companies. Additionally, the Advisory should not be interpreted to signal that third-country exchange houses and/or trading companies are necessarily facilitating illicit finance”.
This recent development is briefly summarized below, as it is relevant from a business perspective in the Middle East.
1.Practices used by third country exchange houses and trading companies
– Both the exchange houses and the trading companies are able to transmit funds on behalf of third parties, and consequently allowing them to access the US financial system.
– The OFAC identifies practices used by third country exchange houses and trading companies to circumvent international and US Economic Sanctions against Iran; in particular:
2. Fact Patterns identified by the OFAC
– Trading companies would try to send payments through the US on behalf of a company located in Iran thus with an Iranian address: such payment would be blocked or rejected after review by the US financial institution’s filter. The Trading companies would resubmit payments through the US, with no reference to the company’s address located in Iran, to avoid the US financial institutions’ filters.
– Trading companies or exchange houses would repeatedly try to send payments through the US to Iran and without the required information in relation to the involved entities/individuals and their location (Iran).
– Trading companies or exchange houses would have for example:
3. Recommended Measures and Risks Mitigations
– When processing such payments, it is recommended:
As per the US Treasury Department’s statement in January 2013, the US Undersecretary for Terrorism and Financial Intelligence will discuss “issues related to illicit finance including the implementation of international economic sanctions against Iran and Syria” with senior officials in the UAE. This is in line with the continued cooperation between both countries on combating terrorism and illicit finance. Press reports also indicate that some global banks have taken a step further by deciding – under certain conditions – to discontinue accounts of customers from countries that are subject to significant sanctions from the USA or the European Union.
In the context of significant expansion of Iran sanctions and with the Middle East being on the watchlist (e.g. re. the hawala system), it is crucial for companies located in the Region to ensure that proper detection and compliance programs are in place, as it is the best practice to limit your exposure.
For any questions on this topic, please contact Ibtissem Lassoued, heading the Global Economic Sanctions Practice at Al Tamimi & Company: firstname.lastname@example.org.
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