The FSA has recently published details of its latest thematic project – how organisations comply with their AML/CFT obligations in relation to sanctions.
Following the initial phase of the project, which will involve a questionnaire being issued to all relevant licence holders and designated businesses using the FSA’s new AML/CFT risk analysis system - STRIX, the FSA will select certain organisations to test and evidence how they are meeting their obligations The project will also assist the FSA’s overall understanding of the AML/CFT risks faced by organisations, the financial industry and the Isle of Man itself in respect of sanction regimes.
Sanctions are a valuable tool used by governments to influence and target a country, specific person, legal entity and/or organisation by placing restrictions and controls (both financial and non-financial) on the movement of goods, services, and money. The primary objectives of sanctions are to deter bad behaviour, enforce economic punishment on a targeted country and force rehabilitation or change the behaviour of that country and the success of sanctions depends on their enforcement and effectiveness. The Isle of Man is committed to complying with its international obligations in respect of sanctions which are incorporated into its AML/CFT legislation. Additional focus has been given to sanctions in recent years due to ongoing global conflicts, including the Russian invasion of Ukraine.
In anticipation of the forthcoming FSA project, organisations should ensure they have robust and effective policies and procedures in place in respect of AML/CFT compliance in relation to sanctions giving attention, amongst other things, to: -
- understanding the scanning logic used by their screening provider – is it reliable and relevant to the organisation? How does the screening provider keep it up to date? Is it of good quality?
- knowing what lists the screening provider uses – sanctions lists are compiled and maintained by governments and international organisations such as the US’ Office of Foreign Assets Control (OFAC), the UK’s Office of Financial Sanctions Implementation (OFSI) & the European Union’s Security Council Consolidated List. These lists identify individuals, companies and organisations that are subject to sanctions for a variety of reasons including involvement in war, money laundering, terrorism, human rights abuses, and proliferation.
- ensuring that there are documented procedures in place which cover what is screened, when is screening carried out, is it automatic or manual, how is it evidenced, what to do if there are possible or positive matches and also what to do if a breach of sanctions is identified.
- is compliance testing in respect of sanctions up-to-date, relevant and documented? What was the outcome of the most recent test? Were any issues identified which needed addressing and how have these been dealt with.