When the cross-government review kicked off, it aimed to improve and facilitate compliance by making sure entities in the UK know what sanctions exist and how to comply with them. It also wanted to maximise the deterrent effect of enforcement and to bring new spark to the cross-government toolkit, enabling robust enforcement action supported by the right capabilities and capacity.

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To centre focus on practical actions, the government sought targeted engagement with trade associations, lawyers, experts in the maritime sector, finance, manufacturing and technology companies with exposure to trade sanctions. Experts from think tanks, universities and parliamentarians from multiple governments were also included.

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The main themes identified by this targeted engagement make for interesting reading. The contributors felt that:

• Different sectors are at different levels of maturity with sanctions, which might displace risk from one sector to another unintentionally
• Direct engagement between government and industry can’t be provided everywhere, so efforts should focus on the sectors least aware of their obligations specifically related to Russia sanctions
• Guidance should be more organised, modernised and searchable with clear signposts and sanctions should be detailed in a single list
• ‘Thematic’ guidance and FAQs were useful to industries without specialised compliance advice (including where firms are too small to pay for that specialism)
• Ownership and control model might generate a disadvantage for the UK industry and control determinations are concerning with further guidance needed
• Enforcement action should be published— but with a view to learnings and remedial actions taken instead of ‘name and shame’
• Those obliged to report sanctions should see how sanctions deliver foreign policy purposes ‘on the ground’ though public visibility of decisions to vary or reevoke sanctions
• Government departments need to be joined up to maximise intelligence from across the system
• Recruitment and secondment from the private sector would support learning opportunities and retention of expertise should be prioritised
• Learn from JMLIT to increase collaboration between government and industry
• Consider earlier information sharing on sanctions action with key financial institutions
• Government might benefit from incentivising more reports (though this might generate many low-grade reports and may cause more distraction than value)
• More focus urged on professional services enablers who can build dense circumvention structures

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Many of these items are common sense suggestions which would support a more robust sanctions model going forward and a few of them (around information sharing in particular) are commonly voiced requests from the financial industry. To add to these, PSPs may see more transactions but struggle with reduced context compared to traditional banks with a long history of KYC and KYB across lifecycles. Newly obliged entities like art market actors will need support to get on top of an increasingly complex series of sanctions and smaller firms in particular may struggle with establishing what compliance looks like because that expertise can be expensive.

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Off the back of the cross-government review, the government has committed to a series of actions across three pillars in compliance, deterrence and toolkit development.

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What Banks Should Look For

Long gone are the days of just name screening to locate sanctions matches. While name screening should continue, banks and PSPs should be looking closely at transactions with high risk third countries and countries which border those under heavy sanctions regimes.

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Customer travel patterns and shared networks might indicate enabling activity, while businesses in high- risk industries, including related to dual use goods, should be carefully considered for sanctions risk as part of due diligence. Sanctions risks should be considered at every touchpoint with customers.  

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If you’re concerned you have increased exposure (particularly for Russian sanctions), reach out to DCM and chat with us about how we can help. We can get your policies and processes for sanctions up to scratch and deliver tried and tested advice on controls to keep your firm— and your customers— safe.