Have you ever made a payment with PayPal and specified »Cuba Libre« as the reason for the transaction? If so, you know that the transfer – to be precise, any transfer that even contains the word »Cuba« – is blocked directly by the online service. The reason is the U.S. embargo against Cuba, which has restricted trade with the island nation since 1960 and is implemented by PayPal worldwide.
As a U.S. company, PayPal is required to reconcile all payments with applicable U.S. trade sanctions. The so-called sanctions lists are a complex but highly relevant topic for all companies. We give you an overview:
What are sanctions lists?
A sanctions or embargo list is an official index of individuals, organizations, companies and even entire countries and states to which no funding or economic resources may be made available. In addition to the basic UN sanctions list, EU lists as well as sanctions lists from Germany, the UK, Switzerland, Japan or the USA should be noted, which impose sanctions against specific financial sectors, energy or trade sectors, and many more.
Do companies have to check sanctions lists on a mandatory basis?
Yes. Regardless of their form and size, companies are required to continuously check and comply with sanctions lists in order to conduct business in conformity with the law. Even if your company does not conduct international business, you must regularly check whether your business partners, customers, suppliers and employees are on a sanctions list – and record the screening in an audit trail.
What are the penalties for violations and who is liable?
Anyone who does not carry out sanctions list screening or cannot provide an audit trail commits a criminal offense and can be legally prosecuted and punished with fines and imprisonment. In addition, other consequences often follow, such as the freezing of company accounts or claims for damages. The company’s management is personally liable for non-compliance or a breach of sanctions lists.
How can the sanctions list screening be performed?
Various official web portals offer a free, manual sanctions lists online check. This is usually very time-consuming due to the large number of sanctions lists. However, there are tools that can be integrated into your ERP system: those tools automate the screening, perform it in the background and automatically document all check results.
By the way: If you tell PayPal the actual purpose of the Cuba Libre payment (e.g. »payment of an alcoholic beverage or long drink called Cuba Libre«), the transaction will be unlocked and carried out within 3 days. For the next times, we recommend to creatively avoid the word »Cuba« in the payment reference.
Automated review of your sanctions lists:
SAM X fo MS Dynamics and ORDAT.ERP (formerly FOSS)
By Chris Schütz
Pre-sales and product management
