New regulations which expand the scope of the reporting requirements set out in existing UK financial sanctions statutory instruments have been introduced.
What are the reporting requirements?
From today, 8 August 2017, a wide range of professionals and businesses will be required to notify the Office of Financial Sanctions Implementation (OFSI) if they know or have reasonable cause to suspect that a person has committed a breach of sanctions related offences or is a person who is the subject of a sanctions-related asset freeze. Failing to notify OFSI is a criminal offence. The new reporting obligation arises only in respect of information which is received by relevant businesses on or after 8 August 2017
The European Union Financial Sanctions (amendment of information provisions) regulations 2017 amend a series of existing statutory instruments such as the Syria (European Union Financial Sanctions) Regulations 2012; Iraq (Asset-Freezing) Regulations 2012; and, Zimbabwe (Financial Sanctions) Regulations 2009, amongst others.
Which businesses and professions are affected?
In the Explanatory Memorandum provided with the new regulations, the Treasury recalls that the United Kingdom’s enforcement of financial sanctions measures backed by criminal law only require a “relevant institution” to report to HM Treasury, with “relevant institution” defined in such a way as to effectively apply to only financial institutions.
This new statutory instrument extends the organisations to which the domestic legislation and associated criminal law applies to include other businesses or professions. Those businesses and professions affected include: independent legal professionals, trust or company service providers, estate agents, dealers in precious metals and stones, casinos, accountants and others.
The Treasury say these new provisions have been introduced to ensure the United Kingdom meets best practices set by the Financial Action Task Force. Essentially in each instrument, where reference is made to ““relevant institution” this is to be replaced by “certain businesses and professions”.
The regulations have not been subject to consultation or parliamentary scrutiny and practitioners in the field have raised concern that the UK government has gone further than the original EU provisions – so-called “gold plating”. Whilst the explanatory notes state that no impact assessment was necessary because the impact on business is negligible, the Law Society’s notice on the regulations make clear that there is an impact on legal professionals, albeit that, in the absence of guidance on the issue, the impact is currently unclear.