The Office of Financial Sanctions Implementation’s Threat Assessment Report looks at key threats in respect of compliance by UK financial services institutions – including insurers, banks, and auditors, which are deemed to be professional enablers – in response to an increase in DPs using third parties to evade sanctions, particularly Russia related sanctions. The report identifies that between February 2022 and February 2024, 65% of all suspected sanctions breaches were reported by UK financial services firms.
The report underscores the importance of keeping a watchful eye and robust due diligence systems against common compliance issues like improper maintenance of frozen assets, inaccurate ownership assessments and reporting obligations.
OFSI’s report highlights the evolving nature of sanction risks, such as an increase in payments by UK financial services firms to superyacht staff or the shift in intermediary jurisdictions involved in suspected breaches. The report states the UAE and Luxemburg have overtaken BVI and Cyprus as the most referenced countries in suspected breaches in the last 2 years. Firms operating transactions or with clients linked to these jurisdictions are encouraged to review their compliance processes in light of the ‘high risk’ activities and red flags identified in the report. The report contains useful case scenarios illustrating how DPs, through complex structures, leverage firms to receive and make payments in breach of sanctions.
Firms operating in the financial sector are encouraged to be proactive and adopt a risk-based approach and to assess their sanctions controls, as well as to identify and report any (past) suspected breaches promptly.
Link to the Report : OFSI Threat Assessment Reports – GOV.UK
Contact Elborne Mitchell LLP’s sanctions and regulatory teams should you need advice or assistance on sanctions and compliance issues.
Marina Soares Ingles
Solicitor at Elborne Mitchell LLP
