ES Sanctions Developments - Monthly Round-Up (August 2021)

• Global

• Fraud and financial crime
• Sanctions

09-09-2021

FCA reminder regarding Afghanistan risk

In light of recent events in Afghanistan, the Financial Conduct Authority released a reminder to regulated firms about the financial crime risks posed by dealing with Afghanistan.

Whilst there are no comprehensive sanctions imposed by the UK with respect to Afghanistan. there are numerous individuals associated with the Taliban who are subject to sanctions imposed by the UK, EU and US. The FCA reminds firms of their obligations to comply with relevant sanctions but also highlights the broader financial crime risks and anti-money laundering obligations which firms must continue to assess in the context of Afghanistan.

The FCA recommends that firms:

• pay particular attention to enhanced due diligence, firm risk assessments and transaction monitoring;
• screen customers and transactions against the UK Sanctions List,; and
• continue to report suspicious activity to the National Crime Agency.

This comes as the UK Government continues to support the UN’s international humanitarian response in Afghanistan. The guidance forms a wider part of the UK Government’s efforts to uphold its diplomatic obligations while not disrupting legitimate humanitarian action. It is important that all regulated firms remain alert with regards to transactions and activity connected with Afghanistan given the uncertain situation which currently exists and the level of risk involved.

OFAC enters into settlement with Bank of China’s UK arm

The US Treasury’s Office of Foreign Assets Control has announced a $2,329,991 settlement with Bank of China (UK) Limited. The settlement relates to 111 transactions worth over $40 million that the Bank processed in alleged violation of OFAC’s historic sanctions regime in respect of Sudan.

OFAC’s press release highlighted a number of aggravating and mitigating factors that had been taken into account in reaching the settlement. Aggravating factors included the fact that the bank had “demonstrated reckless disregard for US sanctions regulations by processing the transactions.”

Conversely, the bank’s self-reporting of the transactions, as well as its cooperation with the OFAC investigation that followed, and the remedial measures Bank of China (UK) took were used as factors to determine that the bank’s conduct amounted to a non-egregious case.

Further imposition of sanctions in Belarus

On 9 August 2021, the UK, EU, US and Canada took another unified step by imposing a further package of sanctions on Belarus. This is a response to the continued undermining of democracy and human rights violations by the Lukashenko regime.

The UK package of sanctions includes:

• aviation measures to prevent Belarusian air carriers from overflying or landing in the UK;
• trade measures on potash, petroleum products, interception and monitoring goods and technology, goods used in cigarette manufacturing, and dual-use goods and technology;
• financial measures prohibiting purchases of transferable securities and money-market instruments issued by Belarus, Belarusian authorities, an entity wholly owned by Belarus or a Belarusian authority, a credit or financial institution majority owned by Belarus or a Belarusian authority, an entity incorporated or constituted under the law of any country other than the UK and majority owned by a Belarusian credit or financial institution, or anyone acting on behalf of or at the direction of a Belarusian credit or financial institution, or entities majority owned by such credit or financial institutions. The measures also prohibit a person from directly or indirectly granting a loan or credit, or entering into any arrangement with any of the above persons or institutions; and
• prohibitions on the provision of (re)insurance.

For a detailed overview of the new sanctions imposed, please see our recent briefing here.

Updated EU guidance on provision of COVID-19 related humanitarian aid in sanctioned areas

The EU Commission has further expanded its Guidance Note on how COVID-19-related humanitarian aid can be provided to countries and areas which are subject to EU sanctions.

The purpose of the Guidance Note is to provide practical guidance on complying with EU sanctions when providing humanitarian aid, including medical assistance, to fight the COVID-19 pandemic.

Among other things, the guidance states:

• The EU Counter-Terrorism Sanctions Regulations and EU sanctions in respect of Iran, Syria and Venezuela do not prohibit the provision of medicine and medical equipment to populations at large and as such should not interfere in the provision of humanitarian aid to fight the COVID-19 pandemic;
• in accordance with International Humanitarian Law, the provision of humanitarian aid should not be prevented by EU sanctions, where no other options are available; and
• EU sanctions do not prohibit humanitarian operators from liaising with designated parties as long as funds and economic resources are not made available to such parties.