There are several countries around the world with which companies are prohibited from carrying out any sort of financial transaction. The reason for these bans is that the countries are blacklisted under authority of the Financial Action Task Force (FATF), an intergovernmental body that the G7 group of nations founded in 1989. A country is blacklisted if the FATF and its member states deem it untrustworthy or to be avoided.
Working with a Blacklisted Country Is Dangerous and Carries Serious Risks
If a company tries to send or receive money to or from a blacklisted country, the transaction is highly unlikely to be successful. This is because the processing bank and/or funding bank will almost certainly reject the transaction, in line with rules on sanctions against the blacklisted country. Allowing such a transaction to proceed would likely result in considerably adverse consequences for the banks involved.
Should financial transactions occur in any way with an organization in a blacklisted country, it typically carries serious risks, including sizable fines and the threat of prison sentences for company executives. Other consequences are likely to include significant reputational risk.
Commonly Known Blacklisted Countries
North Korea: The Asian country is globally recognized as a pariah state, locked out of all major international and global economic cooperative agreements and institutions.
Cuba: While Cuba has opened up economically to the rest of the world in recent years, the decades-old U.S. embargo remains in place, although certain commercial operations may be permitted. The EU, however, is eager to improve economic cooperation with the erstwhile internationally isolated country. Companies can ensure that they operate within international laws regarding carrying out any operations with a Cuban entity by checking with relevant governmental authorities.
Here Are Other Restricted Countries
The following countries have differing levels of sanctions. For instance, some sanctions may apply to specific sectors of the economy, such as energy. If your company is considering working with any organization in the following list of countries, it is advised to carry out due diligence to ensure that it is permitted according to international law and does not contravene sanctions in place.
Belarus: While sanctions remain in place, the EU and U.S. relaxed a number of them in 2018.
Sierra Leone: The Sub-Saharan country is not on the FATF list of countries deemed strategically deficient in Anti-Money Laundering provision, but it was "identified as a jurisdiction of concern" in 2014 by the U.S. Department of State. Transactions from Sierra Leone are likely to be rejected.
There are numerous other restricted countries too. Reasons for restrictions on doing business with these countries include war crimes, terrorism, and a lack of adequate financial infrastructure and protocols that respect international norms, among others. These countries include Burma, Ivory Coast, Iraq, Zimbabwe, Sudan, and Liberia.
In Spite of Possible Commercial Gains, Blacklisted Countries Are to be Avoided
The risks of even attempting to work with a blacklisted country can be high. In December 2018, Chinese cell phone manufacturer Huawei landed in hot water when Canadian authorities arrested its CFO, Meng Wanzhou, based on charges of transacting with Iran. If found guilty, the huge Chinese company could be locked out of numerous foreign markets among a myriad of other grave and costly consequences. Thorough due diligence is critical to ensure that your company doesn't run any risks or fall foul of sanctions.
FATF, History of the FATF
Paypal, Prohibited Countries
Beth Moscow-Schnoll for Ballard Spahr (November 13, 2017) OFAC Increases Clarity Regarding Financial Transactions with Cuba
World ECR, EU and U.S. relax some Belarus sanctions
EU Council (May 28, 2018)Syria: EU extends sanctions against the regime by one year
U.S. Department of the Treasury (November 20, 2018) Syria Sanctions
Investing in Sierra Leone, Banking Facilities
Julia Horowitz for CNN, (December 11, 2018) How Huawei's CFO ended up in a Canadian jail cell
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