A sanction is a tool of foreign policy designed to change or punish the behaviour of another country or entity. Sanctions can range from a ban on trading to extra tariffs placed on selected goods and/or restrictions on financial transactions.
The most common types of sanctions currently in use or used in the UK are:
The Foreign & Commonwealth Office (FCO):
Responsible for negotiating international sanctions and has overall responsibility for the UK’s policy on sanctions and embargoes. The FCO has broad oversight for sanctions policy in the UK. However, responsibility for administering and enforcement of sanctions in the UK is delegated to various government departments.
Implements and enforces financial sanctions, through its Office of Financial Sanctions Implementation (OFSI). OFSI helps to ensure that financial sanctions are properly understood, implemented and enforced in the UK.
UN sanctions derive from UN Security Council Resolutions which require nation states to implement local legislation to comply with the Resolutions.
UK Border Agency:
Administer travel bans.
The sanctions regime imposes serious and extensive restrictions on dealing with people and entities who are listed. Under the legislation they’re referred to as “designated persons”.
The law restricts you from:
Sanctions screening involves screening individuals, groups or companies against designated sanction lists according to the territories in which an organisation trades, the currencies they trade in, and their partnerships and alliances.
This can take the form of manually inputting a name into an online search tool, checking a customer database for any sanctions alerts, or automatically screening customer and stakeholder databases regularly.
You may apply a risk-based approach to setting up a system that checks your clients and counterparties against the sanctions lists.
Factors that may increase the risk of a person being on the sanctions list, and so increase the reason for checking the list, include:
However this list is not exhaustive and you should have a risk assessment and policy in please for your own sanctions checking processes. With lists and risks changing daily, the only robust approach is to screen all clients and counterparties on a regular basis.
It is a criminal offence not to comply with a sanctions order currently in place.
The Terrorist Asset Freezing etc. Act 2010 created a series of criminal offences. It prohibits:
Additionally, you must not knowingly and intentionally participate in activities that would directly or indirectly circumvent these financial restrictions or enable or facilitate the commission of any of the above offences.
Individual: Although the penalties can vary depending on the nature of the sanctions breach, a general guideline is that individuals found guilty of a sanctions breach can face imprisonment for up to 7 years and/or unlimited fine.
Corporate entities: A fine either 50% of the total breach value, or up to £1 million (whichever is greatest). If a sanctions breach was committed with the consent of any given individual, that individual can face imprisonment and/or fine alongside the corporation.
With the UK government imposing a tranche of sanctions on Russia in response to the situation in Ukraine, make sure you’re up to date with UK sanctions obligations.
This sanctions regime is aimed at encouraging Russia to cease actions destabilising, undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.
All firms regulated by the Financial Conduct Authority must have appropriate policies in place to make sure they comply with sanctions legislation. This includes carrying out regular and appropriate checks of sanctions lists.
The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020. They are intended to ensure that certain sanctions relating to Russia continue to operate effectively.
You should review the Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022, and the Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022, laid on 1 March 2022.
You should also review the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2020, the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 4) Regulations 2020, the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022, the Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022 and the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022 to find out any amendments made to the Regulations.
We believe that trade need no longer be slowed and frustrated by regulatory and legal processes that lead to market participants making decisions that are counter-productive to their growth and success aspirations. Through our smart technology we put customers in control of their counterparty trading risks and relationships, including the screening, assessment, and management of sanctions. Working with us mitigates threats, maintains compliance and opens channels for legal, safe trade supply and distribution.