An increase in clientele is leading to swelling ranks, expanded offices and competition for compliance professionals
A surge in economic sanctions and a tangled web of international blacklists are overwhelming in-house compliance staffs and lifting the ledgers of third-party compliance services.
Companies seeking to navigate an increasingly complex area of business—in particular, the avoidance of doing business with blacklisted companies and individuals—are turning to accounting firms, law firms, and other consultancies that offer services to handle the screening of customers, suppliers and business partners and other compliance functions.
The increased use of sanctions as a foreign policy tool under the Trump administration alone has driven demand. In 2018, more than 1,450 individuals or entities were added to the designation list, according to data compiled by Dow Jones Risk & Compliance, which is owned by Wall Street Journal publisher Dow Jones & Co. That is more than twice the annual average over the previous 10 years. The Treasury blacklisted about 900 more individuals or entities in 2019.
Meanwhile, diverging sanctions policies between the European Union and the U.S., particularly on Iran and Cuba, have created new compliance complexity. Britain’s withdrawal from the European Union could bring changes to its sanctions policy, adding another layer of challenges for multinational companies.
Companies’ compliance efforts have also come under closer scrutiny. Fines issued by the U.S. Treasury Department’s Office of Foreign Assets Control, which enforces U.S. sanctions, hit a decade high in 2019. OFAC issued about $1.29 billion in penalties against 22 companies, compared with $71.5 million against seven companies in 2018.
“Unlike other regulatory regimes like anti-money-laundering, there isn’t necessarily a one-two-three list of steps of what you have to do,” said Amber Vitale, managing director at FTI Consulting, who was a section chief in enforcement at OFAC between 2011 and 2013. “It’s basically like, ‘These are the things that you may not do.’ And you’re left to your own devices for the most part to figure out how to make sure that you don’t do those things that are prohibited.”