Roubles under the bed: are you on top of sanctions screening?

Moscow-on-Thames; Londongrad. The epithets bear testament to the fact that the UK has long been the overseas hub of choice for Russian money.  

Since Russia’s invasion of Ukraine, over 1,600 individuals and entities have been sanctioned, including 29 banks with global assets worth £1 trillion, over 130 oligarchs with a combined net worth of over £145 billion, and over £20 billion worth of UK-Russia trade. In the UK alone, several new sanctions regulations are announced every week.^[1] 

Yesterday the FCA issued a report on the findings of their recent review of sanctions systems and controls in over 90 firms. The summary can be found here: 

https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-firms-response-increased-sanctions-due-russias-invasion-ukraine 

The findings are not particularly surprising but they are important: 

• Senior management are expected to understand and actively oversee sanctions programmes. They must ensure they are receiving and reviewing appropriate management information based on smart metrics 

• Global firms need to ensure they comply with UK regulations, not (for example) just implement US programmes globally. One size does not fit all 

• The FCA were concerned at the extent of poor-quality Customer Due Diligence (CDD) and ‘Know Your Customer’ (KYC) assessments which increased the risk of firms not being able to identify sanctioned individuals. 

• Sanctions screening tools must be properly calibrated, screen the right lists, include fuzzy logic, re-screen at appropriate frequencies, not generate too many false alerts  

• Firms must have adequate skills and resources in compliance staff 

• Firms must ensure there is appropriate and prompt escalation and reporting internally and externally 

Whilst the report comes from the FCA, it must be remembered that sanctions regulations apply to everyone, not just FCA-regulated firms. And the stakes are high. Sanctions enforcement in the UK is on a strict liability basis, meaning that you can be found guilty even if you didn’t know or suspect a breach. 

Ongoing sanctions risk reviews and dynamic sanctions programmes are essential for every UK organisation with potential exposure to sanctioned entities and individuals in their client base or supply chains.  

At Punter Southall Law, we have a team of highly experienced risk, compliance and legal experts with direct experience in building and running sanctions programmes, including policies, governance, training, screening, monitoring and reporting. If you would like a friendly chat with one of us, get in touch. 

[1] https://www.gov.uk/government/news/uk-announces-new-sanctions-in-response-to-russias-forced-deportation-of-ukrainian-children#:~:text=Over%201%2C600%20individuals%20and%20entities,worth%20of%20UK%2DRussia%20trade.