Although we think of sanctions as part and parcel of the CDD process for anti-money laundering compliance, the requirement to check clients against the sanctions list is, in fact, totally separate. And it is not only confined to those clients whose cases/transactions fall within the scope of the anti-money laundering regulations.
If your firm routinely carries out AML checks against all clients then the recent flurry of Russian individuals and entities being added to the sanctions list might not have significantly impacted your procedures going forward (although undoubtedly the need to retrospectively check those clients already onboarded may have been an arduous task). However, if you only carry out full identification and verification checks on clients within scope you must make separate arrangements to ensure that your procedures for sanction checking extend to all clients.
If you haven’t already you should be checking that your PCPs are up to date and take into account the recent guidance. It would also be sensible to update your firmwide risk assessment (or for self-employed barristers, your individual risk assessment). You should do this even if your firm only represents local clients in small demographic area. You may be recording that you are at low risk but by updating your risk assessment you can evidence that this is a risk that you have considered. If you haven’t documented your thinking how will you be able to evidence to the SRA/BSB that you have even thought about it?
How do you check whether your client is subject to sanctions?
It is quick and easy to check the OFSI’s consolidated sanctions list – https://sanctionssearchapp.ofsi.hmtreasury.gov.uk/. This includes both sanctioned individuals and entities. If you have your client’s date of birth it will be much easier for you to discount false positives. The downside of using the OFSI list is that your result is only as good as the day you undertook the search. With the sanctions situation evolving so quickly you may wish to consider easier ways of keeping your checks up to date.
All good electronic ID&V providers provide sanctions screening as part of their ID checks for AML purposes. You should make enquiries of your search provider about:
- The extent of the coverage (UK/EU/Global);
- How often the data is updated – whether it is real time (or as close as real time as is possible);
- Whether they are using a reputable data provider; and
- Whether ongoing monitoring is available.
If your electronic ID&V provider can offer ongoing monitoring this will not only save you time but give you peace of mind. Both of the providers we have used previously offer this service, either indefinitely or for a 12 month period, for only a small additional charge.
You have discovered that your client is sanctioned – can you act/continue to act?
The short answer is yes. Sanctioned individuals still have a right to access justice and, of course, not every transaction will necessarily relate to their assets (ie. employment advice). Whether you wish to act of course, particularly in the current climate, is one for your firm. The SRA consider this is highly unlikely to be a regulatory matter – “The general position is that firms can choose who they act for, and can choose not to act for any reason (unless unlawful, for example under equalities legislation)”. The position is different for self-employed barristers who are subject to the cab rank rule, meaning that they may be professionally obliged to act (licence permitting). This topic is discussed by the Vice Chair of the Bar Council in his blog post.
If you are already acting for a client who has been sanctioned during the course of your retainer you should take care that you do not breach the SRA’s Standards and Regulations should you wish to terminate this. If you are in any doubt about the approach to take the SRA Ethics Guidance Helpline can give advice (tel: 0370 606 2577).
Fortunately, unlike the AML Regulations, there is no risk of tipping off your client if you decline to act because they are sanctioned; the sanctions list is a matter of public record.
If you wish to act for, or continue to act for, an individual or entity on the sanctions list, you will need to obtain a licence from OFSI. There are also reporting obligations you should be aware of – including the requirement to report if you are approached to act, even if you decline to. More detailed guidance is available on the .GOV website.
Finally, to ensure that you remain up to date with the latest news and guidance in this area, sign up to email alerts from HM Treasury.
