The rising stakes of management: Why manager training is more critical than ever
Ethics and Compliance
When you hear the term economic sanctions, you might think it only applies to big multinational corporations. But sanctions can affect businesses of all shapes and sizes — from hospitals and universities to manufacturers, retailers and tech startups.
In today’s globalized business environment, your team may unknowingly interact with individuals or organizations that are subject to government-imposed sanctions. If your organization interacts with global suppliers, hires internationally or uses U.S.-based systems and services — it’s essential for employees to understand why economic sanctions matter.
What are economic sanctions?
Economic sanctions are restrictions that governments place on doing business with specific countries, companies or individuals — often to promote national security, prevent terrorism or respond to international crises.
These restrictions might block financial transactions, limit trade, freeze assets or ban travel. And they’re not limited to organizations doing business overseas. Even if your company uses U.S. goods, services, software or financial systems — such as a bank, payroll provider or cloud storage — and all your customers are local, you can be subject to U.S. sanctions laws.
For example, imagine a U.S. manufacturing company hires a third-party distributor to expand into new markets. That distributor later turns out to have ties to a sanctioned company — and suddenly, the manufacturer is facing a potential compliance investigation, fines and damage to its reputation. That’s how quickly things can go sideways, even with no bad intent.
Economic sanctions aren’t just a legal or finance team issue. HR has a major role to play — especially when it comes to:
- Hiring employees or contractors from abroad.
- Partnering with vendors or suppliers across borders.
- Training staff on how to spot red flags and follow internal protocols.
- Overseeing compliance across departments, especially in high-risk roles like procurement, sales and finance.
Sanctions vs. tariffs — what’s the difference?
It’s easy to confuse economic sanctions with tariffs, but they’re not the same.
Tariffs are taxes on imported goods, meant to regulate trade or protect domestic industries. Sanctions are legal restrictions — often severe — used to cut ties with specific governments, companies or individuals as part of foreign policy.
For instance, during the Russia-Ukraine conflict, the U.S. imposed sanctions on Russian banks and oligarchs to apply pressure. In contrast, the tariffs on Chinese imports aimed to correct trade imbalances.
The key takeaway? Tariffs affect pricing and trade strategy. Sanctions affect your legal standing. Violating them can bring significant penalties — even jail time — for organizations and individuals alike.
Who enforces U.S. sanctions?
In the U.S., the Office of Foreign Assets Control (OFAC) — part of the Treasury Department — is the lead agency for sanctions enforcement. They maintain the Specially Designated Nationals (SDN) list, which names people, companies, and countries that Americans and U.S.-linked businesses must avoid doing business with.
OFAC also expects organizations to implement a risk-based sanctions compliance program — including documented training — to reduce the risk of violations.
What happens if your company gets it wrong?
Violating economic sanctions — even unintentionally — can result in:
- Hefty fines (we’re talking in the millions).
- Criminal charges for individuals.
- Loss of licenses or export privileges.
- Reputational damage that can scare off partners and customers.
- Operational disruption if key relationships or transactions are blocked.
The good news is many sanctions violations are preventable with the right training and awareness. Training helps employees understand what sanctions are, why they exist and spot warning signs in vendor relationships or transactions. It also gives them the confidence to make smart, ethical decisions and know when to escalate a potential issue to compliance leaders.
Since sanctions rules can change frequently, especially in response to fast-moving geopolitical events, ongoing training is recommended. A strong approach includes:
- Annual refresher courses to keep up with evolving regulations.
- Job-specific training for high-risk roles like procurement, sales and finance.
- Clear reporting channels and documentation protocols.
- Leadership involvement to reinforce the importance of compliance.
