Supervision Department - AML/CFT
Training
Sanctions and Asset Freezing - Matches and Escalation
-
Sufficient resources are available to identify ‗false
positives‘.
- After a breach, as well as meeting its formal
obligation to notify the
Asset Freezing Unit, the
financial institution considers whether it should
report the breach to the
regulator.
- The financial
institution does not report a breach
of the financial sanctions regime to the Asset
Freezing Unit:
this could be a criminal offense.
-
An
account is not frozen when a match with the
Consolidated List is identified. If, as a
consequence, funds held, owned or controlled by a
designated person are dealt with or made available
to the designated person,
this could be a criminal
offense.
-
A
lack of resources prevents a financial institution
from
adequately analyzing matches.
-
No audit trail of decisions where potential target
matches are judged to be false positives.
Examples of GOOD Practice
2
When a customer‘s name matches a person on the Consolidated List it will often be a ‗false
positive‘ (e.g. a customer has the same or similar name but is not the same person). Financial
Institutions should have procedures for identifying where name matches are real and for freezing
assets where this is appropriate.
Self-assessment questions:
• What steps does your financial institution take to identify whether
a name match is real? (For
example, does the financial institution look at a range of identifier information such as name, date
of birth, address or other customer data?)
• Is there a
clear procedure if there is a breach? (This might cover, for example, alerting senior
management, the Treasury and the FSA, and giving consideration to a Suspicious Activity Report.)
Examples of POOR practice
Supervision Department - AML/CFT Training
Sanctions and Asset Freezing - Weapons and Proliferation
- A
bank has identified if its customers export goods
to
high-risk jurisdictions, and subjects transactions
to
enhanced scrutiny by identifying, for example,
whether goods may be subject to export restrictions,
or end-users may be of concern.
- Where
doubt exists, the
bank asks the customer to
demonstrate that appropriate assurances have been
gained from relevant government authorities.
- The financial institution has considered
how to
respond if the government takes action under the
Counter Terrorism Act 2008 against one of its
customers.
- The financial institution
assumes customers selling
goods to countries of concern will have checked the
exports are legitimate, and
does not ask for
evidence of this from customers.
- An
insurer has not identified whether
EU
Regulation 961/2010 affects its relationship with
its customers.
- A financial institution knows that its customers
deal with individuals and entities from high-risk
jurisdictions but
does not communicate with those
customers about relevant regulations in place and
how they affect them.
Examples of GOOD Practice
2
Alongside financial sanctions, the government imposes controls on certain types of trade in order to achieve
foreign policy objectives. The export of goods and services for use in nuclear, radiological, chemical or
biological weapons programs is subject to strict controls. Financial Institutions‘ systems and controls should
address the proliferation risks they face.
Self-assessment questions:
•
Does your
financial institution finance trade with high-risk countries? If so, is
enhanced due
diligence carried out on counter parties and goods? Where doubt remains, is evidence sought from
exporters that the trade is legitimate?
•
Does your financial institution have
customers from high-risk countries, or with a history of
dealing with individuals and entities from such places? If so, has the financial institution reviewed
how the sanctions situation could affect such counter parties, and discussed with them how they may
be affected by relevant regulations?
•
What
other business takes place with high-risk jurisdictions, and what
measures are in place to
contain the risks of transactions being related to proliferation?
Examples of POOR practice
Supervision Department - AML/CFT Training
Sanctions and Asset Freezing - Case Study
Examples of GOOD Practice
2
In August 2010, we fined Royal Bank of Scotland (RBS) £5.6m for deficiencies in its systems and controls
to prevent breaches of financial sanctions.
•
RBS failed adequately to screen its customers – and the payments they made and received – against
the sanctions list, thereby running the risk that it could have facilitated payments to or from
sanctioned people and organizations.
•
The bank did not, for example, screen cross-border payments made by its customers in sterling or
euros.
•
It also failed to ensure its ‗fuzzy matching‘
software remained effective, and, in many cases, did not
screen the names of directors and beneficial owners of customer companies.
Examples of POOR practice