You must check whether your clients are on the sanctions list, your business could be at risk
New sanctions seem to be announced every week against Russia firms and individuals as the government make international moves to restrict Russia. Activity in Crimea, Ukraine and Russia have resulted in a change to the UK sanctions list. Businesses must ensure they are up to date and are not at risk of penalties or wrongdoing.
It’s a fast-changing environment and businesses need to employ tools to make sure they reduce their risk of sustaining a relationship with a restricted entity or individual. Businesses should be immediately re-screening customers to check whether any of their existing clients are now captured in the scope of new restrictions.
What are the new UK sanctions?
These are a range of measures put in place by the international community to cover a range of purposes. These purposes vary depending on the entity or individual sanctioned.
The UK sanction regime applies to all of the UK’s registered companies wherever they are in the word. All individuals and entities must make sure they comply to sanctions legislation.
The Financial Sanction Targets list details all the companies and individuals who have had their assets frozen.
Full information, provided by the UK government, about the prohibitions and requirements imposed by the Russian sanctions can be found in detail here. It lists the meaning and consequences of asset freezing as well as what to be done for loan and credit agreements. However much of the onus is upon the companies surrounding the listed individual or entity, and how it is now law to stop all proceedings with sanctionees. The OFSI may grant an individual license for certain activities and services, however this must be signed off and mostly includes basic needs. In the most part, continuing to hold a relationship with these sanctioned individuals or entities will result in penalties.
What to do if you are dealing with an individual or business that has been sanctioned?
The government has provided advice on best practice for complying with prohibitions and requirements as well as enforcement, and also detailing the circumstances where they do not apply.
The main actions you must immediately take if you find out that a person or organisation you are dealing with is subject to financial sanctions include:
- To stop dealing with them
- To freeze any assets that your firm is holding for them
- To inform OFSI as soon as possible
Businesses should be checking that they are not cooperating with individuals or entities named on a sanctions list. Doing so, be it through negligence or choice, will be considered a financial crime.
Businesses should familiarise themselves with various orders and guidance from the OFSI; penalties can be served if they are not properly adhered to.
How can businesses act to prevent sanction penalties?
Financial institutions should have screening tools that enable them to detect potential sanction matches and manage risks. These tools would include the ability to match activity with individuals and entities currently listed by the government, as well as block transactions and freeze funds. For assistance in adopting screening tools, contact Romero Insurance Brokers.
Examples of just some of the elements of a transaction the need to be screened include:
- Identity of payer and payee
- Bank institution
- Client statement reference
Some businesses may need daily screening depending on their operation, where as frequency should be done where necessary. Tools need to be created to allow this to happen without interruption business practices. Checks can be performed against a database. Businesses must ensure databases are updated regularly.
Staff training may be necessary as well as education on the implementation of sanctions. False positive can occur which will need to be addressed.
Businesses need to remember they have obligations that need to be accounted for. If your business need support or guidance, do not hesitate to contact Romero Insurance Brokers or read further government information here.