With the US, the UK, and the EU recently lifting most sanctions on Syria, the flow of foreign investments and interests is returning to the country. Turkey, Saudi Arabia, and Qatar have already started to allocate funds to Syria, and the range of possible investments is growing in the fields of construction, financial services, and industry. However, there is still a humanitarian crisis in Syria, and there also goes without saying that Syria lacks comprehensive legal and financial structures which result in foreign investors underestimating the complex legal, compliance, and reputational issues.
How to Mitigate Risk
Foreign investors may limit their exposure by implementing thorough diligence on partners and projects, getting appropriate legal and compliance support, filtering every transaction with respect to sanctions and export control, applying reasonable AML/CTF governance and transparency.
Key Regulatory Risks in Syria
There are some key regulatory risks to consider when investing in Syria, such as risk of sanctions, unstable governance and difficulties with export controls:
Sanctions Risk
Investors run the risk of falling foul of existing sanctions when interacting with blacklisted entities and individuals. A thorough review of existing sanctions is recommended.
Export Controls
Some foreign investors may not realize that under Western export control laws, the export and shipment of certain technologies, equipment, dual-use items, or financial instruments to Syria may be illegal and punishable by fine or imprisonment if not expeditiously covered by proper permits.
Anti Money-Laundering (AML) Risks
Syria’s banking sector is improving but still developing, and weak oversight can expose investors to money-laundering risks if they partner with local intermediaries or move funds without robust compliance checks.
Counter-Terrorist Funding (CTF) Risk
Conducting less than fully detailed counterparts and transaction monitoring can result in unintentionally channeling investments into terrorism, making stringent counterpart vetting and transaction monitoring.
Corruption
Syria presents a patchwork governance environment and foreign firms often involve local agents or partners without sufficient due diligence, increasing the exposure to bribes, facilitation payments, and anti-corruption violations.
Reputational
There are also reputation challenges of operating in a post conflict country. If their initiatives appear to endorse controversial participants or aggravate the humanitarian crises, they may face reputational challenges from media, shareholders, and regulators.
