Can You Afford a £1 Million Fine?

A conversation with a firm recently reminded me of the importance and, arguably, the utter impossibility of checking the HM Treasury Sanctions list. By way of a reminder, this is a list that our Government has complied of individuals and organisations that we are prohibited from dealing with. You may recall a couple of years ago the then FSA sent out a survey on Systems of Control which included a question about whether firms routinely check against the Sanctions List.

Of course such checks are mandatory for all firms and, whilst the probability of  being approached by someone or an organisation on that list is quite low, the consequences are quite serious both for your firm and personally to the individual transacting.

From April 2017, the Treasury’s Office of Financial Sanctions Implementation (OFSI) will be able to impose penalties for serious breaches of up to £1 million or 50% of the breach - whichever is higher.

So what can be done?

Well a quick look at the first three entries on the Individuals Sanctions List  below indicates the scale of the problem when considering a visual search on screen. There are 136 entries for individuals and 5 entries for Entities for the Afghan Regime alone and that accounts for approximately 10% of the size of the list. Currently, the UK has over 27 United Nations, European Union and domestic financial sanctions in place, covering just over 1,900 individuals, groups and countries.

• Extract from Afghanistan Regime Individuals List

1. Name 6: ABBASIN 1: ABDUL AZIZ 2: n/a 3: n/a 4: n/a 5: n/a.DOB: --/--/1969. POB: Sheykhan Village, Pirkowti Area, Orgun District, Paktika Province, Afghanistan a.k.a: MAHSUD, Abdul Aziz Other Information: UN Ref TI.A.155.11. Key commander in the Haqqani Network under Sirajuddin Jallaloudine Haqqani. Taliban Shadow Governor of Orgun District, Paktika Province, as of early 2010. Listed on: 21/10/2011 Last Updated: 17/05/2013 Group ID: 12156.
2. Name 6: ABDUL AHAD 1: AZIZIRAHMAN 2: n/a 3: n/a 4: n/a 5: n/a.DOB: --/--/1972. POB: Shega District, Kandahar Province, Afghanistan Nationality: Afghan National Identification no: 44323 (Afghan) (tazkira) Position: Third Secretary, Taliban Embassy, Abu Dhabi, United Arab Emirates Other Information: UN Ref TI.A.121.01. Listed on: 23/02/2001 Last Updated: 29/03/2012 Group ID: 7055.
3. Name 6: ABDUL AHMAD TURK 1: ABDUL GHANI 2: BARADAR 3: n/a 4: n/a 5: n/a.Title: Mullah  DOB: --/--/1968. POB: Yatimak village, Dehrawood District, Uruzgan Province, Afghanistan a.k.a: (1) AKHUND, Baradar (2) BARADAR, Abdul, Ghani Nationality: Afghan Position: Deputy Minister of Defence under the Taliban regime Other Information: UN Ref TI.B.24.01. Arrested in Feb 2010 and in custody in Pakistan. Extradition request to Afghanistan pending in Lahore High Court, Pakistan as of June 2011. Belongs to Popalzai tribe. Senior Taliban military commander and member of Taliban Quetta Council as of May 2007. Listed on: 02/04/2001 Last Updated: 29/03/2012 Group ID: 7060.

Obviously, it is possible to do a SHIFT F3 search on a screen version of the Sanctions List but if you are looking for the name, Mohammed, then you have  136 entries to read through.

This all takes time and frankly, whilst it is mandatory, it doesn't add to the profit margins. Even if you use a system ( and there are a few out there) you still come down to the final point of responsibility. It is you as a controller who have to have in place a system to check the Sanctions List and you and if applicable, your employees or ARs or self employed staff must undertake these checks without fail.

Next steps

You must have  in place a procedure for checking the HM Sanctions List at the this address .

• You must ensure that for each application for mortgages or insurances ( or any other business), a check is made of that list. My recommendation is check Surname first and if any occurrence, then also check full name. Depending on your level of confidence it might also be  worth checking just first name. Don't forget that these lists include names and aliases.
• If any occurrences are found, then check the details of each entry as far as you are able, e.g. date of birth or any other details that you can find that might be  pertinent ( address history for example or passport details - not an exhaustive list).
• Keep a record the result of your review and if you identify an issue or have a concern report it to Office of Financial Sanctions Implementation (OFSI).

The  OFSI has issued guidance on the Sanctions List in December 2016  and, inter alia, includes the following text.

The consolidated list generally contains additional identifying information such as date of birth, passport details, nationality, last known address, and employment or government role.  You should consider all of the information that you hold on the person or entity you are dealing with against the information on the consolidated list to determine if you have a real match, usually known as a target match.

Where you have reviewed all of the information on the consolidated list against all of the information that you have about the person or entity and you are still unsure as to whether you have a target match, you can contact OFSI for assistance. 

Additional Point

The  reality of all this is that most searches will result in nothing being found but you never know and, as important, you do need to demonstrate that you have systems of control in place to deal with this.

If you currently use my MI System, you can find a new facility to check the Sanctions List in the Library Section under Fraud. This will report all the unique occurrences of the text submitted with details of each entry identified, including duplicates where there are aliases. You can print this off and keep it on file to demonstrate compliance.