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Fraud Insights: Sanctions and Recent Developments in Iran and North Korea
 Article 
Author
Shaistah Akhtar and Sara Manchanda
Date
25 October 2017

Fraud Insights: Sanctions and Recent Developments in Iran and North Korea

Sanctions are often referred to as 'political trade tools' that place restrictions on targeted countries, with the aim of restoring or maintaining international peace and security. Their primary purpose is to change the behaviour of the relevant country's regimes, individuals or groups in an attempt to improve the situation in that country.

Iran

On 14 July 2015, Iran agreed a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran's nuclear program will be peaceful, in return for the lifting of sanctions. On 13 October 2017, President Trump declined to certify that Iran is complying with its obligations under the JCPOA. This is the third time during his administration that President Trump has had to confront this decision: the deal has to be certified every 90 days and each of the previous times he has done so with overt reluctance.

North Korea

In light of North Korea's recent missile launches over Japan and sixth nuclear tests, further EU sanctions have been imposed aimed at curbing the regime's nuclear and missile programme. The new measures include, amongst other matters, expanding restrictions on EU investment in and with North Korea to cover all sectors and imposing a ban on oil exports to North Korea.

Sara Manchanda, an Associate in the Fraud Defence Group at Mishcon de Reya, says:

"Individuals and businesses must exercise caution before engaging in transactions emanating from or closely linked to Iran. Before engaging in transactions, they should undertake due diligence on their prospective counterparties including their ownership structures and any potential links to the state of Iran. It is also important that businesses implement comprehensive internal compliance programmes and risk assessments to ensure their employees understand the risks of the sanctions regime, and more importantly, are in a position to escalate concerns internally enabling the company sufficient time to consider its position before violating any sanctions."

Shaistah Akhtar, a Partner in the Dispute Resolution Group at Mishcon de Reya, says:

"Unfortunately, individuals and organisations may find themselves affected by political developments and an ever-changing landscape on sanctions. Whilst it is impossible to cater for every eventuality, it is sensible for those individuals and organisations to ensure that contracts are carefully negotiated to incorporate warranties and indemnities which provide additional comfort on any representations made regarding connections to countries that are subject to sanctions. Ensuring that those agreements are kept under review also forms an important part of the organisation's risk assessment." 

Shaistah Akhtar and Sara Manchanda provide a more in-depth review of the recent developments in sanctions on Iran and North Korea.