Should I worry about Sanctions for UK Clients

What are Sanctions?

Sanctions are tools used to achieve foreign policy and national security objectives. They come in various forms, including financial, trade, transport, and immigration sanctions.

What is the Purpose of Sanctions?

The primary purpose is to prohibit actions for or on behalf of designated persons or entities without a licence from relevant authorities. This aims to restrict their access to financial services, assets, and other resources.

What are the Consequences of Breaching the Sanctions Regime

Breaching the UK sanctions regime is a criminal offense, carrying severe penalties such as significant fines and imprisonment.

Strict Liability Offence

Breaching the UK sanctions regime is a strict liability offence. This means that liability can be incurred even if an individual or business was unaware of the breach or had no reasonable cause to suspect one. 

Intent or knowledge is not a prerequisite for being found liable.

Essential Compliance Steps

1. Client Screening: The most fundamental step is to conduct a simple check to ensure that a client or potential client is not a designated person or entity. This can be done manually using readily available government lists or by employing electronic verification tools.
2. Match Resolution: If a potential match is identified during screening, a thorough discount process is necessary to determine if the client is indeed the same person/entity on the sanctions list.
3. Documentation: If a match is discounted (i.e., it's determined the client is not the sanctioned person/entity), the reasons for this decision must be clearly documented and kept on file. This provides a crucial audit trail.

Government Expectations for Compliance

The government expects individuals and companies to implement robust compliance procedures, including:

• Undertaking comprehensive risk assessments.
• Implementing effective screening processes.
• Managing licensing requirements.
• Establishing clear reporting procedures for potential breaches.

Myth 1: "My firm doesn't act for Russians."

Truth: While UK sanctions do restrict certain services to individuals or entities connected with Russia, this should not be interpreted as a blanket restriction against all Russian nationals. The focus is on specific designated persons or entities, regardless of nationality.

Myth 2: "All my clients are local and/or British Citizens."

Truth: Sanctioned individuals or entities can possess British passports and have UK addresses. The regime applies to all individuals and entities in the UK, as well as UK nationals and entities established under UK law, even if located outside the UK. Examples include British individuals sanctioned under the ISIS regime or extreme right-wing groups in the UK.

Myth 3: "Only large firms with international clients need to check."

Truth: This is a dangerous misconception. Sanctions apply to all firms, regardless of size or client base. The risk of encountering a designated person or entity is not exclusive to large, internationally focused firms. Smaller firms are equally, if not more, susceptible due to potential lack of awareness or robust screening processes.

• Government Guidance: Official government resources outline expectations for compliance.
• OFSI Video Guidance: The Office of Financial Sanctions Implementation (OFSI) provides video guidance on adhering to the financial sanctions regime.
• SRA Guidance: The Solicitors Regulation Authority (SRA) offers guidance on controls firms should have in place, including webinars addressing common sanctions-related questions.