Financial sanctions are imposed by the government and may apply to individuals, entities and governments, who may be resident in the UK or abroad.
Financial sanctions orders prohibit a firm from carrying out transactions with a person or organisation (known as the target). In some cases the order will prohibit a firm from providing any financial services to the target.
These measures can vary from the comprehensive – prohibiting the transfer of any funds to a sanctioned country and freezing the assets of a government, the corporate entities and residents of the target country – to targeted asset freezes on individuals/entities.
It is a criminal offence not to comply with a financial sanction unless you have an appropriate licence or authorisation from the Office of Financial Sanctions Implementation (OFSI). Their website contains information about current financial sanctions, including the consolidated list of all those subject to asset freezes or sanctions under UK law.
We are not responsible for enforcing these asset freezes or sanctions, but we do expect your systems and controls to mitigate the risk of financial crime to include those that enable you to meet financial sanctions obligations. These may need to be different from those you might have in place for anti-money laundering purposes, because compliance with sanctions means that you also need to consider to whom payments are being made and whether funds are from an entirely legitimate source.
What can I do?
For all enquiries about asset freezing or other financial sanctions, or to make a report if you suspect you or a customer of your firm have breached restrictions, contact OFSI by:
email: [email protected]
post: Office of Financial Sanctions Implementation, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ
OFSI also have an email subscription service which you can sign up to and get notified as and when amendments to the financial sanctions regime are made.
Financial Crime: A Guide for Firms (PDF). We have provided some examples of good practice for sanctions systems and controls in Chapter 7 of Part 1 of the guide.
Our thematic review on financial services firms’ approach to UK financial sanctions has found that many small firms were unaware of the financial sanctions regime and those who were aware had misconceptions about it.
It is useful to consider the following facts about financial sanctions:
- Standard anti-money laundering checks do not screen clients against the HM Treasury (HMT) list. Firms should not confuse HMT’s financial sanctions regime with anti-money laundering procedures.
- Financial sanctions apply to all transactions, there is no minimum financial limit.
- Politically Exposed Persons (PEPs) are not necessarily financial sanction targets.
- Most listed individuals and entities are aware that they are on the HMT list, which is publicly available. The issue of ‘tipping off’ (as set out in the Proceeds of Crime Act 2002) should therefore not generally arise.
- HMT’s financial sanction regime is not the same as our enforcement action. HMT is responsible for implementing, administering and enforcing compliance with the financial sanctions regime.
It is good practice to check:
- your existing clients against HMT’s list
- all new customers prior to providing any services or transactions
- any updates to the HMT list
- any changes to your client’s details
Remember, even providing financial advice can be a breach. It is good practice to include directors, beneficial owners of corporate customers and any third party payees in your checks.