High Risk Countries, Terrorists & Financial Sanctions
Sanctions and Asset Freezes
The UK’s financial sanctions regime, which freezes the UK assets of certain individuals and entities, is one aspect of the government’s wider approach to economic sanctions. Other elements include export controls and measures to prevent the proliferation of weapons of mass destruction.
The UK financial sanctions regime lists individuals and entities that are subject to financial sanctions and whom should not be accepted as a new client. These can be based in the UK, elsewhere in the EU or the rest of the world. In general terms, the law requires firms not to provide funds or, in the case of the Terrorism Order(1), financial services, to those on the list, unless a licence is obtained from the Treasury’s dedicated Asset Freezing Unit.(2) The Treasury maintains a Consolidated List of financial sanctions targets designated by the United Nations, the European Union and the United Kingdom, which is available from its website. The consolidated list is shown on HM Treasury – Financial Sanctions website. If a Firm become aware of a possible breach, they must notify the Asset Freezing Unit in accordance with the relevant provisions.
(1) The Terrorism (United Nations Measures) Order 2009
(2) General licences are in place to allow individuals subject to financial sanctions to access basic, for example to insure themselves and to allow insurers to provide services for short periods following a claim, e.g. a hire car after a motor accident. The Treasury must be informed promptly.
Alongside financial sanctions, the government imposes controls on certain types of trade. As part of this, the export of goods and services for use in nuclear, radiological, chemical or biological weapons programmes is subject to strict controls. Proliferators seek to gain access to this technology illegally: aiding them is an offence under the Anti-Terrorism, Crime and security Act 2001.
Within The Key we a screening system and although screening itself is not a legal requirement, screening new customers and payments against the Consolidated List, and screening existing customers when new names are added to the list, helps to ensure that we will not breach the sanctions regime. It may be possible to knowingly continue to retain customers who are listed under UK sanctions: this is permitted if the Asset Freezing Unit has granted a licence.
When a customer’s name matches a person on the Consolidated List it will often be a ‘false positive’ (e.g. a customer has the same or similar name but is not the same person). Our MLRO will implement procedures where name matches are real.
The following countries are currently (as at February 2017) subject to financial sanctions:
- ISIL(Da’esh) and Al-Qaida organisations
- Central African Republic
- Democratic Republic of Congo
- Republic of Guinea
- Republic of Guinea-Bissau
- Iran (Human Rights)
- Iran (Nuclear Proliferation)
- Lebanon and Syria
- North Korea (Democratic People’s Republic of Korea)
- Ukraine (Misappropriation and Human Rights)
- Ukraine (Sovereignty and Territorial Integrity)
Where you identify a potentially sanctioned individual or company you must notify Pete Burgess, the Money Laundering Reporting Officer.
|A Case Study – Deficient sanctions systems and controls
In August 2010, the FSA fined Royal Bank of Scotland (RBS) £5.6m for deficiencies in its systems and controls to prevent breaches of UK financial sanctions. RBS failed adequately to screen its customers – and the payments they made and received – against the sanctions list, thereby running the risk that it could have facilitated payments to or from sanctioned people and organisations.
The bank did not, for example, screen cross-border payments made by its customers in sterling or euros. It also failed to ensure its ‘fuzzy matching’ software remained effective, and, in many cases, did not screen the names of directors and beneficial owners of customer companies. The failings led the FSA to conclude that RBS had breached the Money Laundering Regulations 2007, and the FSA’s penalty was imposed under that legislation