10.1 Introduction

The use of economic sanctions by the international community has become a feature of modern times. Sanctions regimes are dynamic and change constantly. The United Kingdom government is currently operating financial sanctions against 21 countries including Iran, Sudan, North Korea, Zimbabwe and Syria. Sanctions regimes are also operated by the UN, the EU, the United States, Singapore, Australia and others. For banks, this presents particular challenges. Banks are compelled to comply with sanctions in accordance with the laws of the jurisdiction in which they are incorporated. A failure to do so can result in substantial penalties. Where banks are incorporated in one country but have branches elsewhere, they may also be affected by sanctions imposed by the countries where those overseas branches are located. Added to this, some countries, particularly the United States, consider their sanctions to have an extraterritorial effect, and banks may choose to comply with sanctions even in circumstances where they are not strictly legally applicable to them, or the banks are not directly affected by them.