As many law firms will testify, finding that a client is listed on the consolidated sanctions controls list maintained by HM Treasury will be one of the most frustrating compliance concerns that they are likely to encounter. This is more likely to occur where the firm undertakes a higher degree of commercial or international work, but it is a potential risk nonetheless for all types of practice. It follows that this is an issue that all with responsibility for compliance within their firm should be aware of.
Sanctions are imposed by Government to register their disapproval of the conduct of other territories as a whole or organisations within them, or private citizens, and also by the UN in relation to arms-dealing in particular. Those appearing on the list are referred to as “targets” and there is a risk of criminal proceedings if a firm should deal with them, and their finances or other resources in particular, or knowingly and intentionally participate in any activities that might circumvent some form of prohibition arising from the controls that are in place.
The UK was formerly subject to the EU’s controls in this respect, but instead passed the Sanctions and Anti-Money Laundering Act 2018 in anticipation of Brexit. One of the main aims of the Act was to ensure our continued compliance with the UN controls in this respect, to which we are, of course, a signatory.
If concerns as to any client arises it is possible to consult the list on the Treasury website and, as this is a website that can be viewed by the public at large, there is no equivalent to the offence of tipping-off as found in the anti-money laundering controls found in the Proceeds of Crime Act 2002. If and when concerns do arise they are more often than not false alarms arising from the same or similar names appearing on the list, all the more so as most firms now use some form of e-checking for AML purposes which will include sanctions checks as well. Where it is clear from the facts that the person listed is not who the firm is dealing with no further action will be required, but if the links are closer than this it may be necessary to contact the Office for Financial Sanctions Investigation (“OFSI”) to investigate matters further. Legal professional privilege will apply to all such communications, however, though OFSI’s lack of enthusiasm for failing to report on these grounds is readily apparent from the advice provided by them in their General Guidance Note which can be downloaded from their website.
The main restriction that will apply if a firm is unfortunate to find itself dealing with a target is that it may not be paid its fees until such time as it has acquired a “licence” to do so from OFSI. Court fees may be paid in advance of a licence being issued, but only if they are regarded as being reasonable, so even here the best advice will be to proceed with caution. Most firms will deal with such complications by applying for a licence and then waiting for it to become available until proceeding with the matter further.
Infolegal members can access a detailed guide to this subject in our latest Factsheet – Number 37 – “Sanctions Controls in Legal Practice”.
For further information as to membership of Infolegal, please contact us at firstname.lastname@example.org