Frequently Asked Questions

• What are financial sanctions?

  Financial sanctions are legal restrictions, put in place by the government to limit or prevent entirely the trading of individuals, companies or whole countries. They are usually levied against people or corporations who have committed financial crimes, and fall into one of three categories: the freezing of assets, specific restrictions on financial markets and orders to cease all trading.

• What are sanctions lists?

  Used by financial authorities and governments all over the world, sanctions lists are databases which detail all the financial sanctions that are currently active in a specific state, country or continent. Some of the most well-known examples in the industry are the United Nations list, the UK Consolidated list and the EU Consolidated list.

• Which sanctions are included in the UK sanctions list?

  The UK Consolidated list, which is the most widely used official list of financial sanctions in the UK, details three types of sanctions. These are the following: targeted asset freezes, financial restrictions and directions to cease all business.

• Which countries are subject to sanctions?

  Every country is legally obliged to adhere to any financial sanctions levied against it, if it’s enforced by the relevant authorities (for example, the Office of Financial Sanctions Implementation in the UK).

• What are the risks when you fail to screen for sanctions?

  If you fail to include a sanctions search when carrying out your AML checks, you could end up unwittingly entering into business with a client or customer who is currently sanctioned. In the UK, having dealings with any sanctioned business or individual is illegal if those dealings break the terms of the arrangement, except in very specific circumstances when a license is required. If you’re found out, the consequences can include substantial fines or even a prison sentence, as it’s considered an AML compliance failure.

• Which organisations need PEP verification?

  Depending on the jurisdiction, increasingly more industries are required to practise anti-money laundering compliance these days, whereas traditionally only regulated firms had to comply. This could include:

  • Firms looking to purchase and sell property

  • Businesses that sell high-value items such as antiques and expensive collectables

  • Firms that provide financial services, such as hedge funds or accountants

  • Online gaming and gambling companies

  It is advised to contact your local regulatory body to determine if your company needs to abide by AML regulations.

• Can I still work with someone on a sanctions list?

  Regardless of the circumstances, when collaborating with others, you must not partner with anyone who is sanctioned by the government. This includes their close family members and associates.

  
  

• When should a PEP check be carried out?

  A PEP (Politically Exposed Person) check should be carried out when onboarding new customers to ensure that they are not linked to any form of financial crime. For example, if a customer is a government official or a family member of a government official, it is important to conduct a PEP check as such individuals may be involved in bribery or corruption. Additionally, a PEP check should be performed whenever changes are made that could trigger the need for additional verification. This could include changes in address, profession, or banking details which may indicate potential money laundering activity.

  
  

• Can I still work with a Politically Exposed Person?

  Organisations can legally provide services/products or choose to work with PEPs; it is their responsibility, however, to manage the risk associated with doing so.

  Regulated industries, especially those in the finance sector, are required to conduct PEPs and sanctions screening as part of their Customer Due Diligence (CDD) during onboarding. After conducting their checks, they may require further verification before making a decision on whether or not to accept the customer. CDD steps are just a part of the Know Your Customer process.

  Failing to abide by the nation's AML protocols can result in financial penalties and even jail time.

• How long is someone considered a PEP?

  The time frame a person is deemed to be a PEP may vary depending on their particular function, with designation potentially lasting up to a year after their official departure. To guarantee adherence and surveillance, a thorough assessment must be conducted into the individual and their prior connections before PEP status is cleared from them.

  
  

• What are my responsibilities when choosing to work with a PEP?

  When onboarding a Politically Exposed Person according to Regulation 35 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), you must:

  • Secure approval from upper management for the business association.

  • Ensure the origin of assets and funding is adequately investigated.

  • Keep a close eye on the business relationship over time

  Regulated businesses must ensure they meet KYC and AML regulations by performing PEPs and sanctions checks as part of their due diligence process.