The FCA has a guide for small firms on dealing with and mitigating the risk of Financial Crime. It can be found here . In it they provide examples of good practice for sanctions systems and controls.
The FCA has previously carried out a thematic review on financial services firms’ approach to UK financial sanctions where it found that many small firms were unaware of the financial sanctions regime and those who were aware had misconceptions about it. It is my understanding that the FCA are now doing another review on the theme, presumably as a follow up.
They have suggested that it is useful to consider the following facts about financial sanctions:
- Standard anti-money laundering checks do not screen clients against the HM Treasury (HMT) list. Firms should not confuse HMT’s financial sanctions regime with anti-money laundering procedures.
- Financial sanctions apply to all transactions, there is no minimum financial limit.
- Politically Exposed Persons (PEPs) are not necessarily financial sanction targets.
- Most listed individuals and entities are aware that they are on the HMT list, which is publicly available. The issue of ‘Tipping off’ (as set out in the Proceeds of Crime Act 2002) should therefore not generally arise.
- HMT’s financial sanction regime is not the same as FCA enforcement action. HMT is responsible for implementing, administering and enforcing compliance with the financial sanctions regime.
The FCA have indicated that is good practice to check:
- your existing clients against HMT’s list
- all new customers prior to providing any services or transactions
- any updates to the HMT list
- any changes to your client’s details (this would only really apply to a mortgage broker where the client has come back for a new product)
Final points to note are that even providing financial advice can be a breach. It is good practice to include directors, beneficial owners of corporate customers in your checks where applicable.
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