A year on from the start of the war in Ukraine, the EU has implemented a 10th package of sanctions against Russia. The EU says its latest series of export bans, covering goods and services worth more than €11bn, aims to deprive the Russian economy of critical technology and industrial goods.
The latest package includes:
- export bans on electronics, specialised vehicles, machine parts, spare parts for trucks and jet engines, as well as goods used in the construction sector that can be directed to the military, such as antennas and cranes
- further restrictions on the export of dual-use goods and advanced technology, including 47 electronic components that can be used in Russian weapons systems such as drones, missiles, helicopters
- export restrictions on specific rare earth materials and thermal cameras.
For AML compliance, a practice will be expected to have ‘sanction-tested’ its clients
Sanction testing
During an ACCA anti-money laundering (AML) compliance review, a practice will be expected to have ‘sanction-tested’ its clients. There are effectively two requirements to check: the general prohibition on the provision of accounting and other services to nationals of sanctioned countries, and the specific prohibitions on doing business with certain named persons and entities. It is an offence to breach sanctions.
The general prohibition covers the provision of accounting, bookkeeping, audit, trust and company services, including company formation, and some other professional services, directly or indirectly to a Russian person or business that has an establishment in Russia.
Complying with the specific prohibitions involves a search of the EU’s consolidated financial sanctions list. A practitioner can download the list, and then use the find function (Ctrl-F on a PC, Command-F on a Mac) to search for the name of a client or potential client on the list, taking care to try all possible alternative spellings or trading names.
The AML risk assessment for an at-risk client must be updated annually
A practice’s know your client policies will need to clearly confirm that services provided to a client are not caught by the general prohibition and that the client or their business is not on the EU sanctions list. The AML risk assessment for an at-risk client must be updated annually to determine if the sanctions list needs to be searched again or if the services that the practice provides have come in scope of sanctions since the list was last checked.
Only clients that supply potentially military or dual-use (civil and military) products or that have historical connections with sanctioned countries will fall into the category of those needing to be checked annually. Although all clients should have their risk assessment updated annually, sanction testing is only needed for new clients before the engagement starts and thereafter only if they are an at-risk person or business.
Suspicious activities
The National Crime Agency in the UK has recently detailed some examples of suspicious activity reports (SARs) it received. The examples highlight the work of law enforcement agencies in utilising SAR intelligence to initiate investigations and informing existing ones. They include attempts to launder the proceeds from the sale of drugs, trade-based money laundering, and the use of cryptocurrency to launder criminal proceeds.
The UK Financial intelligence Unit has also issued revised and updated guidance on submitting better-quality SARs. This leads the person making a suspicious activity report through the questions they need to answer in the SAR, including who is doing what, who with, when, why, where and how. The SAR then needs to clearly indicate the reason for suspicion, a description of the property concerned (including value where possible), and the prohibited act in question.
