The Office of Financial Sanctions Implementation, OFSI, which is part of HM Treasury, is responsible for the implementation of financial sanctions in the UK. Financial sanctions are restrictions put in place by the UK or UN to achieve a specific foreign policy or national security objective. These sanctions are written into law, and compliance with them is mandatory for all barristers and BSB entities. Guidance is available on their website.
Policies and Procedures
Breaching sanctions can result in criminal prosecution or a fine by OFSI. Core Duty 10 says that you must take reasonable steps to manage your practice, or carry out your role within your practice, competently and in such a way as to achieve compliance with your legal and regulatory obligations. You should therefore ensure that you have procedures in place to enable you to comply with sanctions.
OFSI explains in its guidance on penalties for breaches of sanctions about how it responds to breaches: “when we consider what action to take, we take into account the level of actual and expected knowledge of financial sanctions held by an individual or a company, considering the kind of work they do and their exposure to financial sanctions risk. Regulated professionals should meet regulatory and professional standards. We may consider their failure to do so an aggravating factor….We will consider, for example, whether the breach appears to be deliberate; whether there is evidence of neglect or a failure to take reasonable care; whether there has been a systems and control failure or an incorrect legal interpretation; whether the person seems unaware of their responsibilities”.
The Economic Crime (Transparency and Enforcement Act) 2022 amends the Treasury’s powers for issuing civil monetary penalties for sanctions breaches by removing the requirement to prove that the person had knowledge or reasonable cause to suspect their activity breached sanctions. The Act also enables OFSI to publicise details of sanctions breaches.
OFSI maintains a consolidated list of sanctions in force in the UK. You can access this list, register for updates and obtain further information on financial restrictions. Please note that the US Office of Foreign Assets Control sanctions lists and regimes are not included in this list, but may apply to your practice.
OFSI does not mandate specific measures to be taken. All barristers and BSB entities should assess their own exposure and put in place processes to check sanctions that are in force to manage any identified or anticipated risks of breaching sanctions. The BSB’s Supervision Team, when reviewing the policies and processes that you have in place to ensure compliance, will consider the following:
- What is the risk that, in your practice, you will engage with clients that are subject to sanctions? Have you conducted a risk assessment and how is it kept up to date?
- What processes do you have in place to make yourself aware of current sanctions that are in place and how do you keep up to date with changes?
- What processes are in place to check the consolidated list of sanctions when engaging with a new client?
- Do you take a risk-based approach? For example, are there enhanced due diligence checks for clients (and their beneficial owners) from countries that are covered by the sanctions regime?
- Have you documented your policy and processes for screening clients (and their beneficial owners) and ensured that relevant persons (for example clerks that may carry out some of these processes for you) have received appropriate training?
- When are clients screened? Are any long-standing clients regularly screened where appropriate?
If you use electronic identification and verification tools to conduct sanction checks, please refer to Part 1, chapter 7 of the Anti-Money Laundering Guidance for the legal sector. This contains additional information to help you manage risk if you use third party services or tools to conduct your sanctions checks.
If you think you may be conducting business or anticipate conducting business with individuals or organisations subject to financial sanctions:
- contact OFSI immediately; and
- consider if you should apply for a licence from OFSI
Licences to undertake transactions with, or on behalf of persons or entities subject to sanctions
There are some exemptions for which you can seek a licence from OFSI. These include applying for a licence in order to receive reasonable fees for the provision of legal advice. OFSI will judge whether the fees are reasonable. See this page for further information on obtaining a licence to undertake transactions with, or on behalf of persons or entities subject to sanctions.
Independent legal professionals (ie all barristers and BSB entities) are subject to certain reporting obligations. You must inform OFSI promptly if you know or reasonably suspect that a person is a designated person or has committed offences under sanctions regulations, where that information is received in the course of carrying on business.
Response to the Russian invasion of Ukraine
A tranche of sanctions was imposed by the UK on Russia, following the Prime Minister’s announcement to the House of Commons on 22 February 2022. You should ensure that you monitor the lists for updates as it is subject to change. The full details of the measures are available on the Foreign, Commonwealth & Development Office website.
A Red Alert has been issued by the National Economic Crime Centre and OFSI to provide information about some common techniques being used to evade financial sanctions.
Those subject to sanctions are using associates, including family members and close contacts to:
- transfer assets, such as shareholdings in holding companies, to trusted associates;
- sell or transfer assets at a loss in order to realise their value before sanctions take effect; and
- divest investments to ensure ownership stakes are below the 50% threshold sanctioned.
Although they may claim to have relinquished the asset, it is highly likely that they will retain their influence.
Such activity may be facilitated by professionals such as lawyers, without whom evasion would be more difficult. Enablers – knowingly or unwittingly - can help distance the sanctioned person from the offence and assist with laundering the proceeds. Barristers should therefore be aware of the risk of becoming unwittingly involved in attempts to evade sanctions.
It has been observed that sanctioned persons seek to transfer assets and funds directly and indirectly to jurisdictions where sanctions are not in place, such as the UAE, Turkey, China, Brazil, India and the former Soviet Union (excluding the Baltic States and Ukraine), using secrecy jurisdictions or citing Russian legal protection from sharing information.
It is likely that alternative payment methods will be used to move funds, including the use of crypto-assets.
The attached alert contains a list of indicators that you should be aware of.
If you identify activity which may be indicative of the typology detailed in this report, you may need to: