1. Financial Sanctions – Implications for Legal Sector/Arbitration
Pete Maydon
Deputy Head
Office of Financial Sanctions Implementation
HM Treasury
International Arbitration and Economic Sanctions Seminar
7 September 2016
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2. Office of Financial Sanctions Implementation (OFSI)
Est. 31 March 2016 as part of HM Treasury
Continues and builds on the work of HMT’s Sanctions and Illicit Finance (SIF) team
OFSI’s principle aims are to:
increase awareness of and compliance with financial sanctions;
ensure that sanctions breaches are rapidly detected and effectively addressed; and
provide a professional service to the public and industry on financial sanctions issues.
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3. What are financial sanctions?
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Sector
Financial Sanctions
There are a number of reasons why financial sanctions may be imposed:
Coerce a regime, or individuals within a regime into changing their behaviour or aspects of it by increasing the cost on them to such an extent that they decide to cease the offending behaviour;
Constrain a target by trying to deny them access to key resources needed to continue their offending behaviour, including the financing of terrorism or nuclear proliferation;
Signal disapproval of a target as a way of stigmatising and potentially isolating them, or as a way of sending broader political messages to international or domestic constituencies;
Protect the value of assets that have been misappropriated from a country, until such point as they can be repatriated.
Depending on the measures involved financial sanctions can target individuals, entities, or entire countries.
Entity
Individual
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4. What do financial sanctions do?
An asset freeze prohibits…
dealing with the funds or economic resources belonging to or owned, held or controlled by a designated person
making available funds or economic resources, directly or indirectly to, or for the benefit of, a designated person
‘Dealing with’
move, transfer, alter, use, allow access to, exchange or deal with in any way that would result in any change in the volume, amount, location, ownership, possession, character, destination or any other change that would enable the funds to be used.
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5. What do financial sanctions do?
Funds includes…
financial assets and benefits of every kind – including cash, cheques, money orders, deposits, securities, and financial assets.
Economic Resources are…
assets of every kind
Provision of services
Does this involve making funds or economic resources available or otherwise enabling the prohibitions to be breached?
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6. Other financial sanctions
Other financial sanctions can include…
Prohibition on the provision of financial services
Provisions of insurance or reinsurance
Restrictions on financing and raising capital
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7. Does provision of arbitration breach sanctions?
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8. Does provision of arbitration breach sanctions?
YES!
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9. Does provision of arbitration breach sanctions?
…possibly
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10. Does provision of arbitration breach sanctions?
Parties involved
Is a sanctioned person involved?
Are you dealing with a designated persons funds?
A DP’s funds should be frozen: a licence will be required to allow a DP to pay for arbitration/legal services.
If you hold funds for a DP, a licence will be required to return unused funds (generally to a frozen account).
Will the outcome involve dealing with a DP’s funds/resources?
Will a designated person derive an economic benefit?
Does this involve making funds or economic resources available to/for a DP?
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11. Does provision of arbitration breach sanctions?
Will a designated person derive an economic benefit?
Is someone else paying for services from which a DP will/may benefit?
Could the activity aid sanctions evasion?
or otherwise enable the asset freezing prohibitions to be breached?
Does the activity engage other financial sanctions?
Insurance, capital markets, and financial services restrictons.
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12. Does provision of arbitration breach sanctions?
If the answer to any of the above is “yes”, a licence will be required before the activity can take place.
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13. OFSI Licences Licensing grounds (found in the legislation)
Basic expenses
Extraordinary expenses
Legal fees
Routine maintenance of funds / assets
Some prior contracts
Humanitarian
Approval processes
UK approval processes – policy, legal and Ministerial
EU and UN – may need to be notified or asked to approve a licence. Can add at least 14 days.
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14. Licence applications: top tips
Read OFSI’s guide to financial sanctions and the relevant legislation
Identify the most appropriate licencing ground
Use the licence application form on our website
Provide a clear description of the payment chain and who is involved
Apply for the licence well before you need it
Be available to discuss the application
Make sure your bank is aware of the situation
A licence only permits an otherwise prohibited act
It doesn’t compel a person to make a payment
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15. Legal sector and compliance
The legal sector must comply with financial sanctions
Compliance needs to be inline with regulations and licence conditions
Guidance available from:
OFSI
Law Society
Joint Money Laundering Steering Group (JMLSG)
Suspected breaches must be reported to OFSI
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16. New Powers Policing and Crime Bill
Harmonisation of criminal penalties across all financial sanctions regimes
Alternative enforcement tools…
Deferred Prosecution Agreements (DPAs)
Serious Crime Prevention Orders (SCPOs)
Administrative fines
Implementation of UN listings ‘without delay’
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17. Further information
Read our guide to financial sanctions:
Sign up to our free alerts:
Monitor the consolidated list:
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18. Contact us
Web:
Helpline:
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