You must contact OFSI even if you decide not to act for a person you know, or have reasonable cause to suspect, is a designated person. These changes, now found in Schedule 1 of the 2011 Regulations , were introduced by the European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017 . The requirements apply to all practices, not just those regulated for AML purposes. Under the 2011 Regulations an independent legal professional is defined as “a firm or sole practitioner who by way of business provides legal or notarial services to other persons, when providing such services”. You’re required to make a report to OFSI if, because of information that has come to you in the course of your practice, you know, or have reasonable cause to suspect, that someone: has committed an offence under the financial sanctions and asset freezing regimes or is a designated person listed in OFSI’s consolidated list of financial sanctions targets If you fail to notify OFSI you’re committing a criminal offence. However the obligation only applies in respect of information received by relevant businesses on or after 8 August 2017. What you must report You must provide: the information or other matter on which your knowledge or suspicion is based any information you hold about the relevant person by which they can be identified (where relevant) the nature and amount of funds or economic resources you hold for the relevant person Find out more about how to make a report to OFSI Legal professional privilege You do not have to report privileged information. However, you’ll need to state clearly whether privilege applies and what information it applies to. Blanket statements of privilege could be challenged.

Anti-money laundering

UK sanctions regime

Guide

28 Mar 2022

5 minutes read

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This guide to the UK sanctions regime sets out information on the criminal offences under the regime, how to carry out a risk assessment, the sanctions lists and your reporting obligations.

The UK sanctions regime can apply to persons and entities where the UK government has:

imposed sanctions unilaterally
implemented sanctions imposed by the United Nations (UN)

The Sanctions and Anti-Money Laundering Act 2018 provides the main legal basis for the UK to impose, update and lift sanctions.

Some sanctions measures apply through other legislation, such as the Immigration Act 1971, the Export Control Order 2008 and the Terrorist Asset-Freezing etc. Act 2010.

The sanctions regime imposes serious and extensive restrictions on dealing with people who are listed. Under the legislation they’re referred to as “designated persons”.

The law restricts you from:

receiving payment from or making funds available to persons on the sanctions list
dealing with their economic resources
making even legitimate payments to those persons

What you need to know about new sanctions on Russia

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.

The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020. They are intended to ensure that sanctions relating to Russia continue to operate effectively.

You should review the following legislation to find out about the amendments made to the regulations:

Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022, laid on 10 February 2022, which amended the definition of ‘involved person’ in the criteria which give grounds for a person to be designated
Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2020
Sanctions (EU Exit) (Miscellaneous Amendments) (No. 4) Regulations 2020

Persons designated under this regime are included on the UK sanctions list.

Check the UK sanctions list

SRA guidance on the importance of complying with sanctions

The SRA has published guidance covering:

financial sanctions
anti-money laundering
strategic litigation against public participation (SLAPPs)
continuing to act for clients

The guidance highlights that the SRA are "commencing a process of spot checks on firms to assess compliance with the financial sanctions regime".

It's important that all firms ensure that they immediately review their policies, controls, procedures and sanctions compliance.

Take a look at the SRA's guidance on the Russian conflict and sanctions

SARs glossary code for sanctioned Russian entities

The UK Financial Intelligence Unit has introduced a suspicious activity reports (SARs) glossary code, XXSNEXX, to use where you suspect activity is:

consistent with money laundering, and
linked to entities sanctioned by the UK, EU, US and other overseas jurisdictions as a result of the Russian invasion of Ukraine

The Economic Crime (Transparency and Enforcement) Act has removed the knowledge test from breach offences.

A breach offence will be committed regardless of whether a person had a reasonable basis of suspicion that they were dealing with a frozen asset. This is a shift to the US Office of Foreign Assets Control model of enforcement.

You must report frozen assets and suspected breaches to the Office of Financial Sanctions Implementation using the compliance reporting form.

Non-voluntary breach disclosures will result in larger monetary penalties.

Indicators of sanctions evasion risk

Russian clients communicating changes to the beneficial ownership of their private investment companies (PICs) to non-Russian or dual national family members
Requests to transfer assets between Russian national/dual-national family members
Use of trust arrangements, with circumstances of transfers calling into question whether the original owner retains indirect control or otherwise could retain a benefit from the assets transferred
Assets transferred have usually been shares in companies, both UK and overseas, including both minority and controlling stakes in these businesses
Payments from venture capital and private equity vehicles, many located in offshore jurisdictions or the far east
Clients seeking to move all their assets to other financial institutions and closing their accounts in London
Clients domiciled in Russia asking whether they can make transfers to their London account
Attempts to purchase sanctioned Russian securities, which have drastically fallen in price
Increased volume of transaction monitoring alerts resulting from Russian and Ukrainian clients making and receiving larger transfers than is typical
Payments received by UK businesses, often in innovative areas, also with some elements of ownership by Russia nationals
Payments via a fintech with Russian investor nexus
Research on private equity/venture capital vehicles and some people with significant control/officers of UK businesses showing individuals connected to Russian industry previously subject to sectoral sanctions and on occasion politically exposed persons (PEPs)
Russian high net worth individuals who are already on international sanctions lists (but not UK list) and/or who anticipate that they may become a sanctions target, transferring assets to family members and/or close associates such as employees
Change in address and names for Russian entities one day prior to invasion
Change of ultimate beneficial owners from Russian to other nationalities
Circumvention attempts through open account trade-based money laundering (TBML) typology – for example, increase in third-party open account payments

Expand all

The Terrorist Asset Freezing etc. Act 2010 created a series of criminal offences. It prohibits:

dealing with the funds of designated persons
making funds, financial services or economic resources available, directly or indirectly, for the benefit of designated persons

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.

The 2011 Regulations replicate a substantially similar set of offences for persons designated in different ways. A consolidated list of designated persons is available on the Treasury website.

You can act for someone who’s on the sanctions list, but you must apply for a licence from the Office of Financial Sanctions Implementation (OFSI) before you start work.

When you carry out your firm’s anti-money laundering (AML) risk assessment, you should consider how likely it is that your clients may be on the sanctions lists.

It’s difficult to categorise the clients that may need to be checked simply by their nationality or country of residence. UK nationals and UK residents can be on the sanctions lists, so you may still be at risk even if you only act for local clients.

The regimes list can help you assess risk but bear in mind there may be some retainers where it’s not immediately apparent that a person or entity may have some connection to a relevant regime.

You cannot limit your risk assessment to the work regulated under the AML regulations. Examples of unregulated work that the sanctions regime may affect include:

payment of personal injuries settlements
property settlements following a divorce

You’d also need a licence from OFSI to use legal aid payments for the benefit of a person on the list.

Selected sanctions lists

UK – HM Treasury’s consolidated list

UK financial sanctions targets by regime

EU sanctions list

EU regimes sanctions list

UN sanctions list

US sanctions lists

High-risk jurisdictions lists

European Commission (EC) list of high-risk third countries

Financial Action Task Force (FATF) high-risk and other monitored jurisdictions

Transparency International corruption perceptions index

Transparency International corruption by territory page

If you decide you still want to act, you’ll need to apply for a licence from OFSI before proceeding.

You must:

suspend the transaction while you wait for advice from OFSI
contact OFSI to get a licence to deal with the funds
consider whether you have a suspicion of money laundering or terrorist financing which requires a report to the National Crime Agency (NCA)

The last point is important because the sanctions regime applies in addition to reporting obligations under anti-money laundering and counter-terrorist financing legislation, including the 2011 regulations. For example you’ll need to consider whether to apply enhanced due diligence measures when dealing with a person or entity from a high-risk third country.

There may be circumstances where a report to the NCA is not required. For example, a person on the sanctions list may be suspected of terrorist involvement but may not have received a benefit from, or been involved in, raising funds for those activities.

The transaction they may be asking you to undertake could have no involvement with their alleged terrorist activities, for example a divorce or personal injury claim.

Even where you’re satisfied you do not need to make a report to the NCA you must not deal with the resources of the designated person without OFSI’s approval.

You can discuss the person’s sanctioned status with them without being concerned about tipping off, as the sanctions list is public information.

Apply for a licence from OFSI

OFSI

OFSI has the power to grant licences exempting certain transactions from the financial restrictions. It considers requests on a case-by-case basis, to make sure there’s no risk of funds being diverted to terrorism.

It has also issued general licences that govern certain situations, such as the use of legal aid payments.

You must contact OFSI even if you decide not to act for a person you know, or have reasonable cause to suspect, is a designated person.

These changes, now found in Schedule 1 of the 2011 Regulations, were introduced by the European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017.

The requirements apply to all practices, not just those regulated for AML purposes. Under the 2011 Regulations an independent legal professional is defined as “a firm or sole practitioner who by way of business provides legal or notarial services to other persons, when providing such services”.

You’re required to make a report to OFSI if, because of information that has come to you in the course of your practice, you know, or have reasonable cause to suspect, that someone:

has committed an offence under the financial sanctions and asset freezing regimes or
is a designated person listed in OFSI’s consolidated list of financial sanctions targets

If you fail to notify OFSI you’re committing a criminal offence. However the obligation only applies in respect of information received by relevant businesses on or after 8 August 2017.

What you must report

You must provide:

the information or other matter on which your knowledge or suspicion is based
any information you hold about the relevant person by which they can be identified
(where relevant) the nature and amount of funds or economic resources you hold for the relevant person

Find out more about how to make a report to OFSI

Legal professional privilege

You do not have to report privileged information.

However, you’ll need to state clearly whether privilege applies and what information it applies to. Blanket statements of privilege could be challenged.