Financial Crime Risk Management

The Sanctions and Anti-Money Laundering Act 2018

May not cover factors relevant to a particular situation or circumstance.


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Frequently Asked Questions

Click Questions to see example responses, some of which include embedded links to reference sources.

Overview

The Sanctions and Anti-Money Laundering Act 2018 (’SAMLA’) received Royal Assent on 23 May 2018, which provides for sanctions (e.g. prohibitions or requirements) to be imposed where appropriate, for the purposes of:

  • Compliance with United Nations obligations or other international obligations.
  • Furthering the prevention of terrorism.
  • National security or international peace and security.
  • Furthering foreign policy objectives.

The Act also makes provision for the purposes of:

  1. The detection, investigation and prevention of money laundering and terrorist financing;
  2. Implementing Standards published by the Financial Action Task Force (‘FATF’) relating to combating threats to the integrity of the international financial system; and
  3. For connected purposes.
FAQ not legal advice

FCRM Ltd does not provide legal advice. No reliance should be placed on FAQ for interpretation of law or regulation.

International factors

The Act reduces the risk of the UK breaching international financial sanctions obligations following its withdrawal from the European Union (‘EU’) on 31 January 2020:

  • As a member of the United Nations, the UK is required to implement sanctions included in resolutions passed by the UN Security Council. These are implemented within the EU via EU Regulations which apply to and have legal effect in all member states.
  • As part of the UK’s exit arrangements from the EU, the Withdrawal Agreement between the EU and the UK includes a ‘transition period’, which ends on 31 December 2020.
  • Until the end of the ‘transition period’ the UK will adopt EU sanctions, in addition to implementing specific sanctions of its own (primarily targeted at terrorism and related activities):
Sanctions independence

After the transition period has ended SAMLA allows the UK to implement (or amend) sanctions, where necessary to comply with its obligations as a UN member; and also, to impose sanctions independently of the international community.

Commencement

The Sanctions and Anti-Money Laundering Act 2018 (Commencement No. 1) Regulations 2018 were made on 21 November 2018, triggering commencement of a number of SAMLA’s provisions from 22 November 2018. Remaining provisions, including the repeal of certain existing legislation relating to sanctions and anti-money laundering (under Part 2 of SAMLA), will commence at a later date.

Overview

Sanctions regulations may be made where an appropriate Minister considers it is appropriate to make a regulation:

  • for the purposes of compliance with a UN obligation;
  • for the purposes of compliance with any other international obligation; or
  • for a ‘discretionary purpose’ covered by section 1(2) of the Act (examples include: in the interests of national security, to further the prevention of terrorism or the interests of international peace and security, and to be a deterrent to gross violations of human rights).
Types of sanction

In force since 22 November 2018, ’Sanctions regulations’ means regulations which do one or more of the following (references apply to the relevant section in SAMLA):

  1. impose financial sanctions (see section 3);
  2. impose immigration sanctions (see section 4);
  3. impose trade sanctions (see section 5 and Schedule 1);
  4. impose aircraft sanctions (see section 6);
  5. impose shipping sanctions (see section 7);
  6. impose other sanctions for purposes of UN obligations (see section 8);
  7. make supplemental provision in connection with any provision of the regulations or other regulations made under section 1 (Power to make sanctions regulations).

Overview

’Designated persons’ means:

  1. Persons designated under any power contained in the regulations that authorises an appropriate Minister to designate persons for the purposes of the regulations or of any provisions of the regulations; or
  2. Persons who are designated persons under any provision included in the regulations by virtue of section 13 (persons named by or under UN Security Council Resolutions).
Notes

‘Person’ includes (in addition to an individual and a body of persons corporate or unincorporate) any organisation and any association or combination of persons.

In (a) ’the regulations’ means the regulations mentioned in SAMLA sections 3 (financial sanctions), 4 (immigration sanctions), 5(1) (trade sanctions), 6 (aircraft sanctions), 7 (shipping sanctions) or 8 (other sanctions for purposes of UN obligations), as the case may be.

Overview

The regulations include authorisation for the appropriate Minister to:

  1. designate a person by name;
  2. provide that persons of a description specified by that Minister are designated persons;
  3. designate different persons for the purposes of different provisions of the regulations (e.g. including Persons named by or under UN Security Council Resolutions).
Designation of a person by name

To designate a person by name the Minister must:

  • have reasonable grounds to suspect that that person is an ‘involved person’; and
  • consider that designation of that person is appropriate (within the parameters set out in the SAMLA).

An ‘involved person’ means a person who:

  1. is or has been involved in an activity specified in the regulations;
  2. is owned or controlled directly or indirectly by a person who is or has been so involved;
  3. is acting on behalf of or at the direction of a person who is or has been so involved; or
  4. is a member of, or associated with, a person who is or has been so involved.

Where a person is designated by name a statement of reasons should be issued, indicating matters that the Minister knows, or has reasonable grounds to suspect, in relation to that person and which led to a designation being made. Information may be excluded where this is in the interests of national security or international relations, or for other lawful exclusion reasons.

Designation of persons by description

For the Minister to conclude that persons of a specified description should be designated by description, the following conditions must be satisfied:

  • The description of persons specified is such that a reasonable person would know whether that person fell within it.
  • At the time the description is specified, it is not practicable for the Minister to identify and designate by name all the persons falling within that description at that time.
  • The Minister:
    1. has reasonable grounds to suspect:
      • in a case where the specified description is members of a particular organisation, that that organisation is an involved person; or
      • in the case of any other specified description, that any person falling within that description would necessarily be an involved person, and
    2. considers that the designation of persons of the specified description is appropriate, having regard to:
      • the purpose of the regulations as stated under section 1(3); and
      • the likely significant effects of the designation (as they appear to the Minister to be on the basis of the information that the Minister has) on persons of that description.

    A ‘statement of reasons’ should indicate the matters that the Minister knows, or has reasonable grounds to suspect, in relation to persons of the specified description which have led the Minister to make the provision designating persons of that description. Information may be excluded where this is in the interests of national security or international relations, or for other lawful exclusion reasons.

Overview

In limited instances an exception might be applicable, or a licence obtained (from or via the Office of Financial Sanctions Implementation (‘OFSI’)) to enable continuance of an activity that would otherwise be prevented under the regulations. Section 15 of SAMLA includes, Regulations may:

  1. create exceptions to any prohibition or requirement imposed by the regulations;
  2. provide for a prohibition imposed by the regulations not to apply to anything done under the authority of a licence issued by an appropriate Minister specified in the regulations;
  3. provide for a requirement imposed by the regulations to be subject to such exceptions as an appropriate Minister specified in the regulations may direct.
Applying for a licence

For information on how to apply for a licence to progress a transaction or activity covered by financial sanctions, see Guidance published by the OFSI. Applications should be made as early as possible and at least four weeks before a licence is needed. OFSI can only issue a licence where there are legal grounds to do so.

Overview

The UK has registers of beneficial ownership for three asset types:

  1. Companies - Launched in 2016 and known as the People with Significant Control (‘PSC’) register, accessed via UK Companies House. The register provides information on beneficial ownership of companies.
  2. Properties and land - For UK properties owned by overseas companies and legal entities, the Government plans to launch a public beneficial ownership register in 2021.
  3. Trusts – The UK introduced a non-public register of beneficial ownership for trusts in July 2017. Via the Trusts Registration Service, trustees can register their trust online and provide information on beneficial owners. Information on the register is available to law enforcement bodies and the UK Financial Intelligence Unit.
Progress Reporting

The SAMLA introduced a requirement that the Secretary of State must, after the end of each reporting period (as defined in the SAMLA), publish a report explaining the progress that has been made during that period towards putting in place a register of beneficial owners of overseas entities. Where, for the purposes of Section 50 of the SAMLA ‘a register of beneficial owners of overseas entities’ means a public register:

  1. which contains information about overseas entities and persons with significant control over them; and
  2. which in the opinion of the Secretary of State will assist in the prevention of money laundering.

With regards to a publicly accessible register of beneficial ownership of companies registered in British Overseas Territories, Section 51 SAMLA requirements include:

  • For the purposes of the detection, investigation or prevention of money laundering, the Secretary of State must provide all reasonable assistance to the governments of the British Overseas Territories to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in each government’s jurisdiction.
  • The Secretary of State must, no later than 31 December 2020, prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so.

These FAQ have been prepared with a specific focus on the SAMLA. Other Financial Sanctions FAQ indicate information to consider with regards to, for example:

  • To whom or what do UK Financial Sanctions apply?
  • Where can I obtain a copy of the sanctions lists?
  • Is guidance available on Financial Sanctions?
  • What are the main Financial Sanctions risks facing my business?

Financial sanction framework arrangements should include:

  • Governance - Senior management risk-appetite, risk ownership and accountability (e.g. by Board member or other individual with authority, expertise and resource), with supporting activity endorsed by the Board or equivalent senior management body:
  • An informed awareness – Document an assessment of whether (or how) your business is exposed to the risk of facilitating supply, movement, negotiation and/or funds flow linked to a sanctioned person.
  • Group or firm-wide Policy - With due consideration of legal and regulatory risk in the operating environment, including the countries in and through which business is done (e.g. the UK, EU or other territories including, where applicable, if transacting via the U.S. or using U.S. Dollars, taking account of U.S. sanctions enforced by OFAC)
  • Risk-based control environment - Design and implement a suitable control framework, reflecting assessed risk and appropriately resourced to promote compliance with policy and supporting procedure(s)
  • Training and Awareness - Develop appropriate training content and ensure coverage of key risk in the operating environment. Content should, as a minimum cover:
    1. Policy, procedure and supporting guidance
    2. Risk-based training of appropriate employees (i.e. generic for all staff, with additional focused content for staff in higher-risk roles’)
  • Compliance monitoring - Controls testing and assurance must be included, to provide assurance or insight for senior management on compliance with policy and procedure
  • Reporting - An internal mechanism accessible to all staff, so as to be able to report any concern identified to an appropriate person (e.g. a senior manager or a designated point of contact, possibly the Nominated Officer or Money laundering Reporting Officer).

For more on our AML & Financial Sanctions services - See AML Services