Sanctions Compliance Obligations

The recent amendments made by the Jersey Financial Services Commission (“JFSC”) to the AML/CFT/CPF Handbook include a new section (8.8) which provides guidance on the reporting obligations set out in the Sanctions and Asset-Freezing (Jersey) Law 2019. The section summarises the statutory requirements and provides guidance on meeting these requirements. This section, whilst not adding any new Code requirements, sets out new Guidance Notes which should be considered and reviewed against your existing internal systems and controls.

Reporting Obligations

A relevant financial institution, which knows or has a “reasonable cause to suspect” that it is in possession or control of, or is otherwise dealing with, the funds or economic resources of a designated person, may demonstrate their sanctions reporting compliance by undertaking and documenting the following:

• immediately freezing funds or economic resources without notice and without delay;
• refraining from dealing with the funds or assets or making them available (directly or indirectly) to such persons unless licensed by the Minister;
• as soon as practicable, reporting any findings to the Financial Sanctions Implementation Unit, together with any additional information that would facilitate compliance with the Sanctions and Asset Freezing Law;
• providing any further information concerning the frozen assets of designated persons, if required. Examples of information to be reported to the Minister may be found in Annex A to the JFSC’s Financial Sanctions Practical Guidance.

As Soon As Practicable

The requirement to disclose a breach to the Minister “as soon as practicable” after discovery of the breach is dependent on the circumstances in each case. Though it is reasonable to take some time to assess the nature and extent of the breach, and/or seek advice, this should not delay reporting the breach.  Documented records should be kept of the decision-making process and the reason for any reporting delay.

Where full disclosure is not possible, it is recommended that a relevant financial institution makes an early disclosure with partial information on the basis that it is still determining the full facts and will make a further disclosure as soon as possible.

Tipping-Off

Sanctions reporting is generally subject to a reduced risk of tipping-off as sanctions designations are public. However, there may be circumstances when tipping off provisions may apply, such as when a SAR has been submitted for related suspected money laundering or the financing of terrorism.

Qualified Staff

The Guidance Notes state that, due to the constantly changing and evolving nature of the sanctions landscape, dedicated and qualified staff are required to ensure that all sanction designation changes are reviewed and implemented without delay through effective sanctions screening and asset-freezing processes.

Whilst “qualified” is not defined, it would be prudent to consider this as ensuring these staff members understand aspects including:

• The purpose of sanctions;
• Where to obtain further information on the current sanction regimes;
• The processes to be followed for reviewing potential hits and for discounting such hits, including recording the reason for discounting the hit;
• Management of potential hits within the stated timeframes;
• Management of any positive hit;
• WWhen to escalate a matter and the escalation process to be followed;
• Where an automated screening tool is utilised, they should understand how this operates and be able to check it is operating to the agreed parameters.

Both the JFSC and the Office for Financial Sanctions Implementation (“OFSI”) publish guidance which can be utilised as part of a training programme, please refer to the following links:

• Financial sanctions: guidance – GOV.UK (www.gov.uk)
• Sanctions — Jersey Financial Services Commission (jerseyfsc.org)

Effective Sanctions Compliance Culture

A relevant financial institution may demonstrate this by, for example:

• Having appropriate procedures and controls in place to ensure that there are dedicated and qualified staff assigned to monitor and report on sanctions;
• Evidencing that relevant training is provided to the assigned employees and to management, including on sanctions evasion techniques and the identification of sanctions evasion;
• Ensuring that requisite reports are filed in accordance with the legislation relevant to the particular sanctions regime and its guidance;
• Maintaining robust and effective policies and procedures for sanctions compliance and ensuring that these are reviewed regularly;
• Appropriate sanctions reporting record-keeping.

OFSI has published useful feedback on “Financial Sanctions Evasion Typologies: Russian Elites and Enablers” which directly addresses the sanction evasion techniques point in the training guidance. It can be found at file (nationalcrimeagency.gov.uk)

Next Steps

As with all changes to the AML/CFT/CPF Handbook, this new section should be mapped to your existing internal systems and controls (including policies and procedures) to ensure that your organisation is able to comply, and demonstrate its compliance with this new section.

In particular, consideration should be given to ensuring that there are dedicated and qualified staff in place and that relevant employees have received appropriate training to enable them to deal with all potential sanction matters promptly and in line with your internal processes. If you have any queries or would like to discuss the appropriate steps to take to ensure compliance in this area, please do get in touch.