When confronted with a sanctions scenario, service providers within the financial services sector must cope with a multitude of significant issues. Below, we provide a brief overview of ten key considerations that service providers should bear in mind in relation to their book of business and their portfolio of clients.
- Designated person: Is the individual receiving the service classified as a designated (i.e. sanctioned) person, potentially subject to asset freeze measures? Additionally, it is vital to assess if this person has any associations with a sanctioned jurisdiction or person, as there are specific regulations governing such associations.
- Ownership and control: Does the designated person own, hold or control, directly or indirectly, more than 50 percent of the interest in the entity being serviced? Can the entity be considered in some other way to be controlled by a designated person?
- Assets: What precisely are the assets of the designated person – are they funds or economic resources?
- Activities: Does the client’s business involve sectors subject to sanctions such as restricted military goods/technology, dual-use goods/technology, energy-related products/activities, aircrafts/ships, luxury goods, iron and steel, precious metals, natural resources, internet utilisation, professional and business services, and more.
- Services: Does the delivery of the service result in funds becoming accessible to or benefiting the designated person? Additionally, confirm if the offered service is permissible or if it falls under any prohibited activities.
- Exceptions / licences: Are there any general or special licences available that can be sought from local regulatory authorities to permit the restricted transaction? To secure a special licence, it's essential to tailor the circumstances of the case to substantiate the grounds for its issuance.
- Circumvention: Ensure that there is no circumvention of the prohibitions in the sanction legislation. If circumvention has occurred, investigate the availability of any defences to potentially mitigate the alleged breach.
- Reporting: Assess whether there is a need to file a report with the local competent authority and follow their guidance and directions.
- Offences: Breaches of sanctions will likely constitute a criminal offence and persons should take this seriously. Offences can result in monetary fines or custodial sentences, or both.
- Legal assistance: Navigating sanctions can be complex, and in cases of uncertainty, service providers should consider seeking assistance of legal counsel.
We trust you find this information beneficial. If you have any inquiries or require assistance, please do not hesitate to contact us.