The Practice Advice Service is a confidential telephone helpline for lawyers.
Our team of lawyers answer questions on a wide variety of topics, including anti-money laundering, costs, conveyancing, customer service and complaint handling.
The service operates Monday through Friday from 9 a.m. to 5 p.m. Call us at 020 7320 5675.
My firm has updated its practice-wide risk assessment with respect to financial sanctions. I review my files and update client business risk assessments. What should I do if I find a warrant involving a sanctioned person?
If you discover a client matter that may involve a sanctioned person or entity, you will need to determine whether the client, beneficial owner, third party funder or intended recipient of funds is on the UK Sanctions List.
Determine if the warrant involves the following prohibited conduct:
- manage the funds or economic resources of a listed person or entity
- the direct or indirect provision of funds or economic resources for the benefit of a listed person or entity
- make financial services (including providing advice on business acquisitions, restructuring and strategy) available to any person for the significant benefit of a listed person or entity
If the answer to any of the above questions is yes, then you will need to suspend work on the warrant and consider the specific legislation under which the person or entity is sanctioned.
If you decide to continue with the warrant, you will need to apply for a license from the Office of Financial Sanctions Implementation (OFSI).
You should also determine if a report on terrorist financing to the National Crime Agency (NCA) is required.
See HM Treasury’s advice on obtaining a license transact with or on behalf of financially restricted persons or entities.
Do UK sanctions only apply to work that falls within the scope of the AML regulations?
No: The UK applies numerous international trade sanctions against individuals and groups.
These penalties are enshrined in law and compliance with them is mandatory, although outside the Money Laundering, Terrorist Financing and Transfer of Funds (Payer Information) Regulations 2017.
The OFSI maintains a consolidated list of financial asset freeze restrictions in force in the UK.
Practices can access this list, sign up for updates, and get more information about financial restrictions.
The US Office of Foreign Assets Control maintains sanctions lists, and some regimes are not on the UK list but may apply to your practice.
See HM Treasury’s advice on obtaining a license transact with or on behalf of persons or entities subject to financial restrictions.
My client account received funds from a client of a Russian company that is now subject to sanctions. Should I hold the funds pending further investigations or am I allowed to pay the customer?
If your customer is not a named person and the funds arrived in your customer account before the payer was sanctioned, the funds are the property of your customer and nothing prevents them from being paid.
If in the meantime your client also becomes designated, you will need a license from the OFSI to manage the funds.
Remember that you are required to report to the OFSI if, due to information that has come to you in the course of your practice, you know or have reasonable grounds to suspect that someone:
- has committed a breach of the financial sanctions and assets freezing regimes or
- is a Designated Person on OFSI’s Consolidated Financial Sanctions Target List
You should also determine if you have any suspicions of money laundering or terrorist financing that require reporting to the ANC.
In a rapidly changing situation like this, you will need to check the latest sanctions information daily.
How can I contact the OFSI and keep up to date with changes to the sanctions list?
You can call OFSI on 020 7270 5454 or email [email protected]
The OFSI receives a very large number of requests.
To avoid unnecessary delays, it may be better to contact the OFSI by e-mail rather than by telephone in the first instance.
You can keep up to date with changes to the Sanctions List by subscription to the OFSI website.
We received instructions from a sanctioned person, who is a Russian national, to advise us on an employment matter. I know it is my company’s personal decision if we accept instructions, but if we do, will we be able to accept monies from the person for legal fees?
You can represent a sanctioned person in employment matters.
However, the law prohibits you from:
- receive payments or make funds available to persons on the sanctions list
- cope with their economic resources
- make even legitimate payments to these people
In the circumstances, you will have to ask OFSI for a specific license for the payment of your reasonable legal fees.
For more information on sanctions see our guide to the UK sanctions regime and Advice from HM Treasury on obtaining a license transact with or on behalf of persons or entities subject to financial restrictions.
I’m a money laundering compliance officer and I’m reviewing our firm’s sanctions training. Does OFSI provide guidance on receiving payment for legal services and disbursements?
You may find it useful to refer to Section 6 of the OFSI General Guidelines on UK Financial Sanctions (PDF).
This indicates that OFSI can only authorize the payment of reasonable legal fees and disbursements in connection with legal services provided to a designated person (which may include a person or entity).
The OFSI strongly encourages companies to apply for a license before providing substantive legal services in order to have clarity on the fees and disbursements that will be recoverable while the named person remains on the sanctions list.
We have declined instruction to act in litigation because we suspect a party is a Named Person. As we have not provided any legal services, are we still obliged to report to the OFSI?
Yes, even if you decide not to act, you are required to report to the OFSI if, due to information that has come to you in the course of your practice, you know or have reasonable grounds to suspect that someone :
If you fail to notify OFSI, you are committing a criminal offence.
However, the obligation only applies to information received by the companies concerned from August 8, 2017.