EXTRA-TERRITORIALITY

The concept of extra-territoriality goes to the ability of a sovereign state or regional actor to impose their policy measures on a cross-border basis – particularly where this relates to actions taken outside of their geographical jurisdiction. This is also a highly controversial approach from an international law perspective.

Since the attacks on the US on 11 September 2001, the extra-territorial approach of the US on sanctions and AML-related grounds has increased in its intensity. This has caused a lot of global actors to under-estimate the scope and reach of US policy enforcement, often with disastrous consequences.

One prime example was BNP Paribas, a French bank fined $8.9bn for breaching US sanctions on Sudan, Cuba and Iran. The bank contested the US enforcement, claiming that it had: “…broken no EU nor French laws…” But the bank still ended up paying a major fine for an alleged $190bn of illicit, US sanctions-breaching transactions.

Critically, the EU takes the view that extra-territorial measures lack validity, and many commercial entities and investment actors face the stark reality of potentially breaching extra-territorial US measures, or following the EU line, which attempts to disregard extra-territorial policy. To date, adopting the EU’s “Westphalian” approach has proven extremely costly for many.

A proactive, pre-emptive, pragmatic and results-oriented approach to Extra-Territoriality is therefore essential.