David McLean Joint Deputy Head of the Office of Financial Sanctions Implementation

Transcription

1 David McLean Joint Deputy Head of the Office of Financial Sanctions Implementation International Compliance Association 10 th Annual Conference April 2018

2 OFSI helps ensure financial sanctions are properly understood, implemented and enforced in the UK Operational since March 2016 the competent authority for financial sanctions in the UK We raise awareness of financial sanctions and legal responsibilities We develop compliance tools We consider licence applications We assess suspected breaches and ensure robust enforcement We take civil enforcement action ourselves and work with law enforcement agencies on criminal cases We designate, monitor and licence groups and individuals under UK counter-terrorism legislation Issue licences Raise awareness and promote compliance Detect / resolve breaches

3 Developments in the last year Implementation Outreach Compliance Licencing New Regimes Venezuela and Mali Sanctions Bill UN without delay New DPRK sanctions, inc. vessels Revised and republished core guidance Published first sectorspecific guidance Targeting at risk sectors to raise awareness Over 100 speaking/events meetings listening to sanctions community and affected sectors 133 suspected breaches reported in 2017, value as reported circa 1.4bn Monetary Penalties powers from April 2017 Increase in maximum criminal penalty to seven years in prison Extension of criminal offence for not reporting information on breaches to relevant professions and business Set out clear grounds for applying for licences in new guidance Dealing with high volume of queries for Russia 883/2014 Working closely with banks and others on technical issues

4 Counter-proliferation and proliferation finance Counter-proliferation preventing the acquisition of weapons of mass destruction. Sanctions against Iran and North Korea. The UK has a long-standing commitment to Counter Proliferation and has been active in disrupting those seeking to procure proliferation-sensitive goods and those funding such activity in the UK and globally. UK s National Counter-Proliferation Strategy 2020: Influencing intent: encouraging all states to adhere to norms on the possession and use of particular weapons, and to demonstrate the consequences of breaching those norms; Controlling access: controlling access to materials and knowledge globally to make it as hard as possible for states or terrorists to acquire or develop capabilities; Disrupting networks: disrupting illicit attempts to circumvent controls.

5 General Counter-Proliferation Red Flags and Warning indicators Individual/company: o o o is name match (OFSI s consolidated list) is partial match uses overly complex/unreliable payment arrangements Refusal to do business followed by request for same service from slightly different individual/company Multiple requests for same quantities of services/items, at same time, from number of different individuals/companies Use of banks in areas of proliferation concern State German correspondent bank UK exporter British Virgin Islands (BVI) company Latvian bank

6 Counter Proliferation Sanctions Scenarios Either individually or in groups: Consider the scenario in five minutes: Think about how you would approach it from your compliance perspective identify risk factors associated with the scenario and areas that warrant further investigation Present these risk factors back and discuss Then: More information which prompts further due diligence consider due diligence processes and what course of action you would recommend the business takes

7 Scenario 1: Dalian Port You are the compliance team in a fund that has substantial investment in various infrastructure projects around the world. Your fund has a controlling share of the Dalian Port Group. The port has a number of terminals including: Oil and liquefied chemicals terminal Coal terminal Container terminal Automobile terminal Ore terminal General cargo terminal Bulk grain terminal Passenger and roll-on/roll-off terminal, and Port value-added services and operations.

8 Scenario 1: Dalian Port Risk Factors Proximity to DPRK makes it the closest large hub for export for DPRK (including manufactured goods, coal/chemicals etc). The proximity to DPRK also means they are likely to be visited by ships from DPRK and also could provide services to ships from DPRK. In addition such ports are a key transit point for sanctioned high end manufactured goods including items with applications in DPRK or other rogue Nuclear and Ballistic Missile programs.

9 New information prompts further due diligence You receive media reporting that ports in China are a key economic lifeline for DPRK (principally for coal exporters). The media reporting specifies a number of alleged DPRK front companies and legitimate companies who are involved both wittingly and unwittingly. What enhanced due diligence measures would you undertake?

10 High risk indicators and behaviours specifically associated with DPRK Elaborate trade-based payment schemes Sale/export of natural resources via China Indirect payment routes Offshore shell companies Professional facilitators Smuggling Liaoning-based Banking Surge cycles brief flurries of business activity, long periods of dormancy Lots of companies sharing owners/managers/phones/employees Substantial financial activity unrelated to business area Lack of online presence Source: FinCEN (US Treasury)

11 Scenario 2: Middle Eastern Venture Capital You are the compliance team in a venture capital firm called OFSI Ventures that has bought a company that specialises in investing in Middle Eastern tech start-ups called EWP based in the UAE. EWP has a number of investments including a ride hailing company in Lebanon a mobile payments service in UAE that is widely used in the Arabian Peninsula for Business to Business transactions and the conversion of gold into foreign currency.

12 Scenario 2: Middle Eastern Venture Capital Risk Factors Wide use of the mobile payments service across areas with a proximity to Iran makes it possible for the transactions to be used in either the procurement of proliferation sensitive technologies or the payment of individuals associated with the Iranian regime and the historic use of precious metals to evade financial controls. In addition this has applicability to the terrorist financing.

13 New information prompts enhanced due diligence You receive information that the two founders of the mobile payments service are Iranian nationals who attended Malek Ashtar University (Sanctioned entity COUNCIL REGULATION (EU) No 267/2012) This institution has been deemed to have links with the Iranian nuclear program. What enhanced due diligence measures would you undertake?

14 What if I think I m dealing with a sanctions target? Review all the information you have about them are they on OFSI s consolidated list? Consider asking them for more information (if not risk to yourselves) Consider if they may be owned or controlled by a designated person If still unsure, contact OFSI immediately If you are dealing with an individual/firm subject to sanctions, you must: freeze their funds and assets immediately and inform OFSI not deal with or make funds or economic resources available to them (unless there is an exemption in the legislation that you can rely on or you have a licence from OFSI) don t do anything that would circumvent the asset freeze 14

15 Further information Website: OFSI Helpdesk: / ofsi@hmtreasury.gsi.gov.uk Alerts: OFSI s guidance: Official