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UK extra-territorial sanction[s] law reminds us of all to avoid being an enabler of sanction breaches

14/07/2022

As a tool of foreign policy, UK sanctions have jurisdiction both over England, Wales, Scotland, and Northern Ireland, as well as the Crown Dependencies and Overseas Territories (which includes the British Virgin Islands).

FURTHERMORE,

  • All UK persons worldwide are required to comply owing to the extra-territorial application of the Sanctions & Money Laundering Act 2018.

And to help understand the risks

  • A 'Red Alert' on financial sanctions evasion typologies by Russian elites and enablers has been published
  • Red Alert notice is a collaboration between
    • The Office of Financial Sanctions Implementation (OFSI),
    • The Joint Money Laundering Intelligence Taskforce (JMLIT)
    • The National Crime Agency (NCA)   +
    • Sanctions Facilitators Cell, law enforcement, private industry and regulators,

The purpose of the alert is to

  • Provide information from law enforcement and the legal and financial services sectors on some of the common techniques designated persons and their UK enablers are suspected to be using to evade financial sanctions.

The Red Alert notice can be found here.”

The Red Alert notice highlights the following critical issues:-

After a UK designation, where a Designated Persons (DP) seeks to move assets including in the methods outlined above,

  1. It could constitute breach offences under the UK sanctions regulations,
  2. As well as potential circumvention offences by the DP and any associates or enablers.

DPs are using associates, including family members and close contacts, via enablers to:

  1. Transfer assets such as shareholdings in holding companies to trusted proxies such as relatives or employees;
  2. Sell or transfer assets at a loss in order to realise their value before sanctions take effect;
  3. Divest investments to ensure ownership stakes are below the 50% threshold, or relinquishing previous controlling stakes.

Although a DP may claim to have relinquished the asset, it is highly likely that they will retain their influence through trusted proxies and enablers.

Who are the Enablers?

Enablers are individuals or businesses facilitating sanctions evasion and associated money laundering

  1. Key professions include (but are not limited to)
    • Legal (barristers and solicitors), financial (relationship managers, accountants, investment advisors, wealth managers, payment processors, private equity, trust and company service providers), estate agents, auction houses, company directors, intermediaries/agents and private family offices.
  2. The NCA and SFO have previously jointly assessed that, in relation to international bribery and corruption, London-based enablers are almost certain to be in senior positions (director, owner, CEO, senior partner) within their company or business.
  3. Enablers’ level of complicity is assessed at three common levels:
    • Criminally complicit,
    • Wilfully blind (for example in relation to source of funds checks) and
    • Unwittingly involved.

Facilitation requires:

  1. i) The criminal activity not happening, or being more difficult, without the enabler;
  2. ii) Assisting a suspect to evade scrutiny by distancing the suspect in some way from the offence; and/or
  3. iii) Allowing a suspect to benefit by laundering proceeds or assisting with doing so.

What to do

  1. Firms should assess complex corporate structures carefully as a component of their enhanced  due diligence for high-risk clients, querying the commercial justification for such structures.

Sources

UNITED KINGDOM SANCTIONS