FINANCIAL SANCTIONS: FREQUENTLY ASKED QUESTIONS

HM TREASURY FINANCIAL SANCTIONS: FREQUENTLY ASKED QUESTIONS (FAQs) August 2013 1 P age

Contents 1 INTRODUCTION... 8 1.1 A note on publication arrangements... 9 2 UK Financial Sanctions a guide for beginners... 10 3 The Sanctions and Illicit Finance Team (SIF)... 11 3.1 Who is responsible for sanctions policy in the UK... 11 3.2 Who is responsible for administration of financial sanctions in the UK?... 11 3.3 Who is responsible for trade sanctions in the UK?... 11 3.4 What is the role of the Financial Conduct Authority (FCA)?... 11 3.5 How can I contact HM Treasury about financial sanctions?... 12 3.6 What is the Treasury s response time to enquiries?... 12 3.7 How do I keep up to date with financial sanctions in the UK?... 13 4 Financial Sanctions the basics... 14 4.1 Why does the UK apply financial sanctions?... 14 4.2 What are financial sanctions?... 14 4.3 How do I know which financial sanctions are in force in the UK?... 15 4.4 What about other countries financial sanctions that may apply to me?... 15 5 Financial sanctions asset freezing and other measures... 16 5.1 What do financial sanctions measures involve?... 16 5.2 What does an asset freeze do?... 16 5.3 What are funds and economic resources?... 16 5.4 Are frozen funds confiscated by HM Treasury?... 16 5.5 Can somebody make funds available to a designated person?... 17 5.6 Can somebody make financial services available to a designated person?... 17 5.7 Can somebody make economic resources available to a designated person?... 18 5.8 Can somebody make funds available for the benefit of a designated person?... 18 5.9 Can somebody make financial services available for the benefit of a designated person?. 18 5.10 When is it prohibited to make an economic resource available for the benefit of a designated person?... 19 5.11 What is a significant financial benefit?... 19 5.12 Can licensed funds be spent on anything?... 20 5.13 Where can I find advice on indirectly making funds available to a designated person where funds are made available to an entity owned or controlled by a designated person?... 20 6 How do sanctions affect me?... 21 2 P age

6.1 How do sanctions affect me if I am a designated person?... 21 6.2 I have commercial dealings with a designated person.... 21 6.3 I am a private individual or charity.... 21 6.4 I am a student from a country against which financial sanctions are in force.... 22 6.5 What does freezing assets mean for a bank that holds funds?... 22 6.6 I am a lawyer acting for a designated person. Do I have to freeze their funds in my client account?... 22 7 Compliance and the Law... 23 7.1 What sanctions law applies in the UK?... 23 7.2 Are United Nations Security Council Resolutions and European Union Regulations directly applicable in UK law?... 23 7.3 Who must comply with financial sanctions in place in the UK?... 24 7.4 Do financial sanctions apply to the subsidiaries of UK companies outside the UK?... 24 7.5 What reporting requirements exist for relevant institutions?... 24 7.6 What powers does HM Treasury have to request information?... 24 7.7 What onward disclosure is allowed?... 25 7.8 What are the consequences for failure to comply with information requests?... 25 7.9 Is it an offence to make funds available to a target of financial sanctions legislation?... 25 7.10 Circumvention of sanctions... 26 7.11 What are the penalties for committing an offence under financial sanctions legislation?. 26 7.12 I have carried out a transaction that is subject to financial sanctions; what should I do?.. 26 7.13 What if I did not know I was breaching a prohibition?... 26 8 Sanctions targets designated persons... 27 8.1 What is a designated person?... 27 8.2 Should the assets of other persons who are owned or controlled by a designated person be frozen?... 27 8.3 How can I tell if a company is owned or controlled by a designated person?... 27 8.4 What is the Consolidated List of Targets?... 28 8.5 What is the relevance of the AKA s on the Consolidated List?... 28 8.6 Is HM Treasury s Consolidated List of targets the same as that published by the European Union or the United States Treasury s Office of Foreign Assets Control (OFAC)?... 28 8.7 Where can I find the Consolidated List?... 29 8.8 What formats is the Consolidated List available in?... 29 8.9 How do I know what has changed when the Consolidated List is updated?... 29 8.10 How often is the Consolidated List updated?... 30 3 P age

8.11 How soon should a business implement changes to the Consolidated List?... 30 8.12 Why can t I access up-to-date lists or notices?... 30 8.13 Does the European Union maintain its own consolidated list of targets?... 30 8.14 Does HM Treasury have a web-based Consolidated List search engine?... 30 9 Challenging a designation decision... 31 9.1 How do I challenge my listing if I am listed by the UK?... 31 9.2 How do I apply to be removed or delisted from the United Nations Al-Qaida and Taliban list or other UN sanctions listing?... 31 9.3 How do I apply to be removed or delisted from an EU sanctions listing?... 31 10 Licences and exemptions... 32 10.1 What is an exemption?... 32 10.2 What is a licence?... 32 10.3 What types of licences are available?... 32 10.4 What activities might a licence cover?... 32 10.5 What is a basic expense of an individual?... 33 10.6 How do I apply for a licence?... 33 10.7 How long does it take to obtain a Treasury licence?... 34 10.8 Do I have to pay HM Treasury for a licence?... 34 10.9 Who can apply for a licence?... 34 10.10 Where can I find out more about the general licences in force?... 34 10.11 What should I do with any licence issued to me?... 34 10.12 Can I check that a licence is valid?... 34 10.13 When can a licence be changed?... 35 10.14 What do I do with a licence that concerns a delisted person?... 35 10.15 What can I do if a licence application is refused?... 35 10.16 Iran authorising and notifying transfers... 35 11 Financial sanctions the regimes... 36 11.1 How many regimes are in force?... 36 11.2 Where do I find details of the financial sanctions regimes in force in the UK?... 36 12 Sanctions business policies and procedures... 37 12.1 What policies and procedures do I need to put in place?... 37 12.2 What software do I need to buy?... 37 12.3 What should I tell a customer whose account is frozen?... 38 12.4 Do I need to make reports to the Treasury?... 38 4 P age

12.5 I have policies and procedures in place for anti-money laundering (AML) reasons are they relevant or sufficient?... 39 13 Target matches and name matches... 40 13.1 What is the difference between a name match and a target match?... 40 13.2 What are the reporting requirements for target matches?... 40 13.3 How often do I need to scan my customer database for possible target matches?... 40 13.4 Should an institution always contact HM Treasury if it has found a name match or a possible target match?... 40 13.5 Can I assume a UK-regulated financial services firm is not a designated person?... 41 14 Other advice and guidance... 42 14.1 Is any other financial sanctions guidance available?... 42 14.1.1 The Financial Conduct Authority... 42 14.1.2 The Joint Money Laundering Steering Group [JMLSG]... 42 14.1.3 Lloyds Insurance Market... 42 14.1.4 The Law Society... 43 14.1.5 HM Revenue and Customs [HMRC]... 43 14.1.6 The Gambling Commission... 43 14.1.7 The Royal Institute of Chartered Surveyors... 43 15 ANNEX A. Glossary of definitions.... 44 16 ANNEX B. Further Guidance for designated persons under Terrorism / Al Qaida regimes.... 46 16.1.1 Can I be paid interest on my bank account/savings?... 46 16.1.2 Can someone pay a cheque, or transfer funds, into my frozen account?... 46 16.1.3 Can I take out insurance?... 46 16.1.4 Can I invest my funds?... 46 16.1.5 Can I have a debit card?... 46 16.1.6 Can I have a pre-paid card?... 47 16.1.7 Can someone give/lend me money?... 47 16.1.8 Can someone give my spouse/partner money?... 47 16.1.9 Can someone buy me a drink/meal?... 47 16.1.10 Can I accept a gift?... 47 16.1.11 Can someone lend me something?... 47 16.1.12 Can I borrow a Pay As You Go Oyster card from a friend?... 47 16.1.13 Can someone pay my bill?... 48 16.1.14 Can I take employment?... 48 5 P age

17 ANNEX C: trade sector advice... 49 17.1 GENERAL COMMERCIAL ISSUES... 49 17.1.1 Can I make payments to a designated person?... 49 17.1.2 A designated person owes my business money. Can I write off the debt?... 49 17.1.3 A designated person owes my business money. Do I need a licence to pursue the debt? 49 17.1.4 I ve got a garnishee Order nisi/absolute against a designated person. Can the Treasury provide me with details of frozen accounts?... 49 17.1.5 Is a licence required to exercise a right of set off?... 49 17.1.6 Do financial sanctions mean I cannot trade with persons or entities in countries subject to financial sanctions?... 50 17.1.7 How can sanctions affect my ability to export goods?... 50 17.1.8 I want to sell humanitarian goods, medicines etc to a country subject to financial sanctions. Will financial sanctions affect that?... 50 17.2 BANKING... 51 17.2.1 I have a designated person as a customer what should I do?... 51 17.2.2 Do I need a licence to close a frozen account and transfer any balance to the customer?... 51 17.2.3 Can I apply interest to an overdrawn, loan or mortgage frozen account?... 51 17.2.4 Are financial institutions expected to know if a credit received for a frozen account relates to a prior contract? What obligation is there on the bank to investigate the source of credits to frozen accounts?... 51 17.2.5 Can firms lend money or provide credit to a designated person?... 52 17.2.6 Can I apply interest to frozen accounts?... 52 17.2.7 I am a bank. Can I credit funds transferred to the account of a designated person?.. 52 17.2.8 Can I credit funds received from a designated person to their frozen account?... 52 17.3 INSURANCE... 53 17.3.1 What is the general effect of sanctions on insurance businesses?... 53 17.3.2 What should an insurer do if an existing customer becomes a designated person after the inception of cover?... 53 17.3.3 What is the position if a policy holder names a designated person as a beneficiary?. 54 17.3.4 As an insurer I may not know the identity of every beneficiary of the cover I provide, because the business is managed under a delegated authority or bordereau arrangement. What should I do?... 54 17.3.5 As an insurer, I may only receive partial information from third parties. What should I do? 54 6 P age

17.3.6 I provide pensions or other products to an employer, and may not know who the relevant employees are. What should I do?... 55 17.3.7 I am a reinsurer. What do sanctions mean for me?... 55 17.3.8 I am an insurance agent or broker. What do sanctions mean for me?... 55 17.3.9 The Syrian and Iranian insurance bans refers to compulsory or third party insurance. What does the term compulsory mean in this regard?... 55 17.4 Motor insurance... 55 17.4.1 Does a firm providing a complimentary vehicle or temporary hire car in relation to a motor vehicle insurance policy to a designated person require a licence?... 55 17.5 LEGAL SERVICES... 57 17.5.1 We are a firm of solicitors acting for a designated person. Do we need a licence?... 57 17.5.2 Do solicitors acting for a designated person who is funded by legal aid or by other third parties require a licence to deal with those funds?... 57 7 P age

1 INTRODUCTION These FAQs have been produced to help businesses and others understand both the UN/EUmandated country sanctions regimes and the domestic terrorism measures that apply in the UK. These FAQs do not supersede or replace the legal requirements, and do not constitute legal advice. If you are NOT familiar with UK financial sanctions you will find it helpful to read the summary in Part 2 as an introduction to the issues. These FAQs should be read in conjunction with the relevant sanctions specific legislation that applies in each sanctions regime, and which is available via the list of current sanctions regimes at: https://www.gov.uk/government/organisations/hm-treasury/series/financial-sanctions-regimespecific-consolidated-lists-and-releases These FAQs are structured as follows; Part 2 a guide for beginners provides a high level summary Part 3 explains the role of the Sanctions and Illicit Finance team at HM Treasury Part 4explains the basic provisions Part 5 deals with asset freezing and other measures Part 6 asks about sanctions may affect you? Part 7 deals with compliance and the law Part 8 deals with sanctions targets or designated persons Part 9 explains how to challenge a designation decision Part 10 deals with licences and exemption Part 11 explains about the financial sanctions regimes Part 12 discusses the policies and procedures businesses might need Part 13 discusses target matches and name matches Part 14 deals with advice and guidance from other sources. In addition, Part 15 includes a short glossary, Part 16 offers further advice specifically for persons designated under the Terrorism and Al Qaida regimes, and Part 17 includes advice on general commercial questions and points for the banking, insurance and legal sectors. These FAQs deal with financial sanctions, such as asset freezing measures. They do not cover other sanctions measures such as export restrictions or travel bans. Nor do they cover the financial measures associated with export and import restrictions, such as prohibitions on the provision of financing or financial assistance connected with prohibited transactions. COUNTRY SANCTIONS. Country sanctions refers to the various country-specific financial sanctions regimes that apply in the UK under a UN or EU mandate. These target institutions or people in, or linked to, specific countries. 8 P age

TERRORIST ASSET FREEZING. The UK operates certain terrorism linked financial sanctions, under UNSCR 1373 (2001) (terrorism) and UNSCR 1988 (2011) (Al-Qaida). The policy objective of the terrorist asset freezing measures is to impose those controls that are necessary to protect against terrorist finance risks. MEANING OF PERSON IN THESE FAQ S. In these FAQ s we use the term person to refer to a legal or natural persons, that is to say individual people or entities of any sort. 1.1 A note on publication arrangements It is our intention to review these FAQs on a six monthly basis, and to publish revised versions where necessary. August 2013 Financial Sanctions, HM Treasury 9 P age

2 UK Financial Sanctions a guide for beginners This is a very high level summary of how financial sanctions work in the UK, and is designed to serve as a starting point, before users go the main body of these FAQs. This section provides a brief introduction to UK Financial Sanctions. You should read this section first if you are not familiar with UK financial sanctions. Like other advanced economies, the UK operates a range of financial sanctions. These may follow action at the United Nations, European or domestic (UK) level, because of human rights abuses or other violations of international norms of behaviour, or to minimise the risk of terrorism within the UK. Financial sanctions effect designated person individuals or entities. Those designated persons ( sanctions targets ) are listed in the Consolidated List published on the Gov.UK website. Financial sanctions invariably include asset freezing measures these mean that funds are frozen by the bank or other institutions involved. Unless licensed by the Treasury a designated person can neither access those funds (ie spend them or pay them away) nor can they be paid or given funds or economic resources. In some cases (domestic terrorism designations and dealing with Syria and Iran) there are additional restrictions on providing designated persons with financial services or insurance. If a person (whether a designated person or not) needs a licence for example to make or receive a payment that is blocked by UK financial sanctions - they should write to HM Treasury setting out the facts. A series of forms is available to help licence applicants provide the necessary information. Businesses should have policies and procedures to ensure that they comply with their obligations under sanctions. Where a business carries out checks it may find that it has a customer with a name (or other details) identical or similar to those of a designated person. Where this is the case the business needs to decide as far as possible whether their customer is actually the designated person or not. If the business decides their customer is a designated person they should freeze the funds (but not send them to HM Treasury) and report the full facts to HM Treasury using this email address: financialsanctions@hmtreasury.gsi.gov.uk If, after examination of all the information they may already have, OR can acquire through additional enquiries, business remains unsure whether a person is designated they should report all the facts to HM Treasury. HM Treasury operates telephone and email enquiry services, but you should study the relevant law and the full body of theses FAQs before submitting an enquiry. 10 P age

3 The Sanctions and Illicit Finance Team (SIF) 3.1 Who is responsible for sanctions policy in the UK The Foreign and Commonwealth Office (FCO) is responsible for overall policy on international sanctions including the scope and content of international sanction regimes. There is a general explanation of sanctions and embargoes here: https://www.gov.uk/sanctions-embargoes-and-restrictions 3.2 Who is responsible for administration of financial sanctions in the UK? HM Treasury is the competent authority for the purposes of administering financial sanctions in force in the UK. This means it administers the UK, EU and UN regimes that require the freezing of funds and economic resources that belong to or which are owned, held or controlled by persons who are subject to asset freezes, and also administers restrictions on transfers of funds and on the provision of certain financial services. HM Treasury is therefore responsible for: the implementation and administration of international (i.e. UN and EU) financial sanctions in effect in the UK; domestic designations under the Terrorist Asset-Freezing etc. Act 2010; licensing exemptions to financial sanctions; and issuing authorisations in respect of other financial restrictions. The Treasury produces a range of financial sanctions related material for businesses and others, including these FAQs. That material is available via the Gov.uk website here: https://www.gov.uk/government/organisations/hm-treasury/series/financial-sanctions-regimespecific-consolidated-lists-and-releases 3.3 Who is responsible for trade sanctions in the UK? The Department for Business, Innovation and Skills is the UK department responsible for trade sanctions, such as bans on weapon exports. For an overview of export controls see: https://www.gov.uk/sanctions-embargoes-and-restrictions 3.4 What is the role of the Financial Conduct Authority (FCA)? The FCA regulates the financial services industry in the UK. Its aim is to protect consumers, ensure the industry remains stable and to promote healthy competition between financial services providers. The FCA has rule-making, investigative and enforcement powers that are used to protect and regulate the financial services industry. 11 P age

The FCA s Handbook of Rules and Guidance requires, among other things, that banks establish and maintain effective systems and controls to prevent the risk that they might be used to further financial crime, including sanctions violations. 3.5 How can I contact HM Treasury about financial sanctions? Enquiries concerning financial sanctions should be sent in electronic form to: financialsanctions@hmtreasury.gsi.gov.uk Enquiries can be submitted by post to: Financial Sanctions Sanctions & Illicit Finance HM Treasury 1 Horse Guards Road London SW1A 2HQ We prefer to receive written enquiries in electronic form (for example as an email or a PDF of a letter sent in an email), because that is how we manage and record enquiries. It is not necessary to send a paper copy of a letter sent electronically. Alternatively, if you have an enquiry about UK financial sanctions, you can call the Treasury Financial Sanctions helpline on 020 7270 5454. Please note HM Treasury is unable to offer assistance with complex enquiries over the telephone. We encourage all of those making enquiries, but especially those most familiar with these regimes such as lawyers and compliance staff in financial institutions, to considered the relevant legislation and guidance on the Treasury s website and form and set out their own view on the issue in their enquiries. 3.6 What is the Treasury s response time to enquiries? HM Treasury aims to respond to general enquiries within two weeks of receipt, prioritising urgent correspondence as appropriate. However, at times due to large volumes of correspondence it is not possible to respond within this timeframe. At such times, the Treasury will send an interim reply to inform you of the status of your enquiry within two weeks of receipt of your original enquiry. You are strongly encouraged to look at the Treasury s website, including this document to see if this provides the answer to your enquiry before submitting questions to the Treasury. Please note that whilst the Treasury is willing to assist with enquiries, it does not provide legal advice and its views are not determinative of questions of law. It is recommended, where necessary, that independent legal advice is sought. 12 P age

3.7 How do I keep up to date with financial sanctions in the UK? HM Treasury operates a free subscription service which allows subscribers to receive updates whenever there are changes to financial sanctions effective in the UK. You can find out how to subscribe at http://engage.hm-treasury.gov.uk/fin-sanc-subscribe/ 13 P age

4 Financial Sanctions the basics 4.1 Why does the UK apply financial sanctions? The UK Government will apply financial sanctions either as part of international or European moves to bring pressure to bear on target groups or regimes (for example because of measures adopted by the United Nations) or to meet domestic policy objectives. The UK has an international law obligation to implement UN sanctions. In practice the EU implements UN regimes by means of a directly effective EU Regulation which immediately forms part of the UK s law upon its adoption. The UK enforces those measures by means of domestic regulations which impose criminal penalties for breaches of the EU Regulation. Sanctions are normally used by the international community for one or more of the following reasons: To encourage a change in the behaviour of a target country or regime; To apply pressure on a target country or regime to comply with set objectives; As an enforcement tool when international peace and security has been threatened and diplomatic efforts have failed; To prevent and suppress the financing of terrorists and terrorist acts. 4.2 What are financial sanctions? Financial sanctions are normally one element of a package of measures used to achieve one or more of the above objectives. Current financial sanctions measures typically take the form of targeted asset freezes on individuals or entities. Under Chapter VII of the United Nations (UN) Charter, the UN Security Council can take enforcement measures to maintain or restore international peace and security. Such measures range from financial sanctions to international military action. Article 41 of the UN Charter allows the Security Council to decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. The range of sanctions can vary from comprehensive financial and trade sanctions to more targeted measures such as arms embargoes, travel bans, financial or diplomatic restrictions. In the modern (post-world War 2) era, targeted sanctions are the norm. In addition, the European Union applies sanctions in pursuit of the specific objectives of the Common Foreign and Security Policy (CFSP) as set out in the Treaty of the European Union. Sanctions in the CFSP framework include the interruption or reduction of financial relations with third countries and restrictions against specific individuals or entities. They also include the interruption or reduction of diplomatic relations, restrictions on admission and other measures not affecting financial relations with third countries. Restrictive measures are applied by the EU either in implementation of sanctions adopted by the UN Security Council in accordance with Chapter VII of the UN Charter or autonomously within the framework of the CFSP. 14 P age

Finally the UK may apply domestic financial restriction measures. In practice it does this to respond to certain terrorism threats. 4.3 How do I know which financial sanctions are in force in the UK? The Treasury publishes material on the gov.uk website about all of the current financial sanctions regimes that are in force in the UK see: https://www.gov.uk/government/organisations/hm-treasury/series/financial-sanctions-regimespecific-consolidated-lists-and-releases Under the individual entries for each country or regime there are details about the regime, crucial documents such as key UN and EU measures, UK legislation, Treasury notices, and a list of persons covered by the regime. You can keep in touch with the main changes to the UK sanctions regime by subscribing to the Treasury s Financial Sanctions subscription facility see paragraph 3.7. 4.4 What about other countries financial sanctions that may apply to me? You may be affected by foreign sanctions, which are sanctions operated by other countries, for example because of the ownership of your business by a foreign corporation, or because of where or how you carry on your business. In addition, the nature of much international trade finance means financial institutions encounter other financial sanctions regimes. HM Treasury cannot advise you on compliance with foreign sanctions. 15 P age

5 Financial sanctions asset freezing and other measures 5.1 What do financial sanctions measures involve? Financial sanctions invariably include an asset freezing regime. Asset freezes comprise two elements: A prohibition on dealing with the funds or economic resources belonging to or owned, held or controlled by a designated person, and A prohibition on making funds or economic resources available, directly or indirectly, to, or for the benefit of, a designated person. Certain financial sanctions may also involve: A prohibitions on providing or performing other financial services (see, for example, the Terrorism Asset-Freezing etc Act 2010, which prohibits the provision of unlicensed financial services such as insurance to designated persons ), or A prohibition on the provision of insurance or reinsurance to certain Governments or public bodies, or those acting on their behalf. (See the Syrian and Iranian (proliferation) regimes for details). 5.2 What does an asset freeze do? An asset freeze prevents anyone dealing with funds or economic resources which belong to, or which are owned, held or controlled by, a designated person. Deal with, in relation to funds, (see the glossary for definition of funds ), includes to move, transfer, alter, use, allow access to, or deal with in any way that would result in any change in the funds volume, amount, location, ownership, possession, character, destination, or any other change that would enable the funds to be used. This also includes the management of securities (shares, bonds, etc) and other assets. Deal with, in relation to economic resources, (see the glossary for definition of economic resources ) means exchange, or use in exchange, for funds, goods or services. It is not prohibited for a designated person to use the economic resource for normal use within the law (e.g. using their car to do the shopping) but a designated person could not sell or use the resource to generate funds (e.g. by selling the car or using it for a taxi or courier business) without a licence from the Treasury (see Section 10). 5.3 What are funds and economic resources? We define these more fully in the glossary (see section 15). Funds refers to financial assets and benefits of every kind, including for example, cash, cheques, money orders and other payment instruments as well as deposits, securities and other financial assets. Economic resources means assets of every kind. 5.4 Are frozen funds confiscated by HM Treasury? Frozen funds are NOT confiscated, sequestered or otherwise held by HM Treasury. 16 P age

This means that HM Treasury cannot pay the liabilities of a designated person using frozen funds (although it may be possible for certain liabilities to be met out of frozen funds, if a licensing ground is available). A freeze just means the funds must stay where they are and cannot be dealt with unless under licence. 5.5 Can somebody make funds available to a designated person? No - it is a criminal offence to knowingly or with reasonable cause to suspect make funds available, directly or indirectly, to a designated person. Making funds indirectly available to a designated person would involve the funds being routed via a third party. So, for example, it would be a criminal offence to give funds to a designated person s friend knowing or suspecting that some or all of the funds will be given to the designated person. However, the Treasury can issue a licence exempting certain transactions from the restrictions of the asset freeze. If an appropriate licence has been issued by the Treasury, then the funds can be made available as set out in that licence. Gifts, loans, or any other transactions that give designated persons the control of funds will be prohibited without a licence from the Treasury. Gifts, in this context, can include (but are not limited to) seasonal gifts and birthday presents to designated persons, where the gift would come within the definition of funds (or, in certain circumstances, an economic resource - see below at 5.7). A gift voucher would be classed as funds in this context. If the designated person is owed some money, both parties would need to be included in a Treasury licence for the debt to be settled. For example, if the designated person is a landlord, both they and their tenant would need to be covered by a licence for rent payments to be made the designated person to receive the funds and to make any payments out that they need to make, and the tenant to make funds available to the designated person. 5.6 Can somebody make financial services available to a designated person? Under the Terrorist Asset-Freezing etc Act 2010, there is a prohibition on making financial services available to a designated person. There are some general licences for certain categories of insurance (see https://www.gov.uk/government/publications/counter-financing-of-terrorismgeneral-licenses) but it is otherwise prohibited for anyone to make financial services (e.g. banking, insurance or investment services) available to a person designated under the Terrorist Aasset- Freezing etc. Act 2010 without a licence. This restriction on providing financial services is not included in legislation covering people designated under other regimes. However, other prohibitions may be engaged in the provision of financial services. For example it is not prohibited to provide banking or insurance services to a designated person (subject to the prohibitions on insurance or reinsurance under the Syria and Iran (proliferation) regimes), but any funds should be frozen by the financial services provider and only released to the designated individual in accordance with a licence from the Treasury. Similarly, the provision of investment services will be prohibited under the prohibition on dealing with a designated person s funds as this would result in a change in the funds volume, amount, location, or character. 17 P age

5.7 Can somebody make economic resources available to a designated person? For a definition of economic resources, see the GLOSSARY. It is a criminal offence to make economic resources available, directly or indirectly, to a designated person knowing or suspecting that the designated person is likely to exchange them for or use them to generate funds, goods or services. It is not, however, prohibited for someone to make an economic resource available to a designated person for their everyday non-business use, where such use will not result in the designated person generating funds, goods or services. For example, these measures would not prevent someone lending or giving a designated person a bicycle, e.g. for recreation purposes. However, if the person knew or suspected that the designated person would use it to obtain money (e.g. by finding paid employment as a courier or by selling it), this would be prohibited. Note that engaging in any conduct which circumvents the prohibitions of the asset freeze is a criminal offence. Thus if someone gave a designated person a bicycle in good faith for them to use for their own personal use as transport, rather than to generate income, but the designated person then sold the bicycle, the designated person would be committing a criminal offence, even though the person who gave them the bicycle would not be. 5.8 Can somebody make funds available for the benefit of a designated person? It is a criminal offence for a person to knowingly, or with reasonable cause to suspect they are doing so, make funds available to a third party in circumstances where a designated person thereby obtains or is able to obtain a significant financial benefit. The aim of this prohibition is to prevent designated persons having access to significant additional funds because third parties make payments which the designated person would otherwise have to make. It is not intended to prohibit all payments to non-designated third parties which may benefit a designated person, but only those where there is a significant financial benefit. So, for example, where a person settles a debt owed by a designated person to a third party, that person has allowed the designated person to receive a financial benefit (as the designated person no longer has to pay the debt). Whether this benefit is significant or not will depend on the facts of the case, taking account, for example, of the income and assets of the designated person and the size of the debt (see 5.11 below). The definition of financial benefit is broad. It includes, for example, the discharge of a financial obligation (a debt, commitment or liability) for which the designated person is wholly or partly responsible. A designated person would be likely to obtain a significant financial benefit if a third party paid the household bills of a designated person, such as rent or mortgage, utility bills, or met the cost of regular shopping where the designated person would otherwise be meeting or contributing to these, however there is no set threshold at which a financial benefit is considered significant : it will depend on the facts of each case (see 5.11 below). 5.9 Can somebody make financial services available for the benefit of a designated person? Under the Terrorist Asset-Freezing etc Act 2010 (TAFA), there is a prohibition on making financial services available for the benefit of a designated person. Note, however, that the insurance general licence allows insurance providers to provide insurance policies to designated person. The licence can be found here: 18 P age

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/223429/finsanc_g eneral_licence_insurance_provision.pdf. There are no express restrictions on providing financial services for the benefit of persons designated under other sanctions regimes, although, as set out in 5.6 above, other restrictions may well in effect prevent the provision of financial services. It would be prohibited under the Terrorist Asset-Freezing etc Act 2010 for someone to provide financial services to a third party for the benefit of a designated person if that designated person thereby obtains a significant financial benefit. A third party could not, therefore allow a designated person to make transactions through their bank account: this would be a breach of this prohibition and an offence of circumventing the asset freeze. It would also be prohibited for a TAFA-designated person to be a named driver on a car insurance policy without a licence from HM Treasury if he thereby gains a significant financial benefit, e.g. by not having to take out his own insurance. 5.10 When is it prohibited to make an economic resource available for the benefit of a designated person? The prohibition makes it a criminal offence for a person to knowingly, or with reasonable cause to suspect they are doing so, make economic resources available to a third party in circumstances where a designated person obtains or is able to obtain a significant financial benefit. The definition of financial benefit is broad. It includes, for example, the discharge of a financial obligation (a debt, commitment or liability) for which the designated person is wholly or partly responsible. The aim of this prohibition is to prevent designated persons gaining access to additional funds through the provision of economic resources to others. It is not prohibited for someone to make economic resources available for the benefit of a designated person unless the designated person obtains a significant financial benefit. So, for example, if someone lent their car to a member of the designated person s family, for the purpose of driving the designated person as a passenger this would clearly be for the benefit of the designated person. However, this would only be prohibited if the designated person obtained a significant financial benefit from being so driven, e.g. if the designated person no longer had to spend significant funds on public transport/taxis. As set out above, the repayment of a loan or discharge of any other financial obligation on behalf a designated person comes within the definition of financial benefit for this purpose. So if someone gave their car to a third party in settlement of a debt owed to that third party by a designated person this would be prohibited (as the designated person would no longer have to pay the debt and therefore would obtain a significant financial benefit from having the economic resource (the car) made available to the third party on his behalf). 5.11 What is a significant financial benefit? There is no set threshold at which a financial benefit is considered significant. It will depend on the facts of each case, e.g. the individuals assets and income, past history and activities. In this context, it should be noted that a small amount of money can be significant in terrorist financing terms given the relatively low cost of terrorist attacks. 19 P age

If there is any doubt, HM Treasury s guidance may be sought although it is ultimately for parties to satisfy themselves as to whether the benefit should be considered significant. 5.12 Can licensed funds be spent on anything? Under the Terrorist Asset-Freezing etc. Act 2010, unless otherwise stipulated in the licence, licensed funds can be used in any lawful way. Under other UN and EU regimes, there are specific exemptions under which licences can be issued. If the licence requested does not fall within one of the exemptions, then the licence cannot be issued by HM Treasury. Before asking HM Treasury to issue a licence under these regimes, you should first look at the UN security Council Resolution or EU Regulation under which the designated person is designated and ascertain whether an exemption applies. All regimes allow for the licensing of payments to meet the basic expenses of designated persons. If in doubt, HM Treasury s advice may be sought. 5.13 Where can I find advice on indirectly making funds available to a designated person where funds are made available to an entity owned or controlled by a designated person? Advice issued by the EU is available at: http://register.consilium.europa.eu/pdf/en/13/st05/st05993.en13.pdf 20 P age

6 How do sanctions affect me? It is your responsibility to comply with financial sanctions. You may want to seek independent legal advice if you consider it necessary. Sanctions might affect you if: You are involved in any sort of financial business with OR making funds or economic resources available to or for the benefit of any of the targets of financial sanctions; You deal with or have any designated persons as customers, suppliers, bankers, financiers or investors. 6.1 How do sanctions affect me if I am a designated person? The effect of financial sanctions on you will depend on the scope of the sanctions measure concerned and your proposed activity. But generally financial sanctions will restrict your ability to make or receive payments, carry out investments or conduct any other dealing with your funds or economic resources. If you are a designated person you will not (without a licence) be able to deal with money, so you cannot take money from your bank account unless you have been provided with a licence. Nor can you use any cash or prepaid, debit or credit cards. If you are designated under the Terrorist Asset-Freezing etc. Act 2010 ( TAFA 2010 ) you should read part 16. You will only be able to access financial services where the provider is licensed. There is more about the supply of insurance to designated persons in paragraphs 17.3 and 17.4. 6.2 I have commercial dealings with a designated person. Financial sanctions will restrict your ability to make payments to or deal with funds of a designated person without a licence. It will also restrict the designated person s ability to make payments to you from funds owned, held or controlled by them, without a licence. See also paragraph 17.1. It is a matter for the commercial judgement of a bank whether it continues to provide banking services to businesses dealing with designated persons etc. 6.3 I am a private individual or charity. Private individuals or charities may find financial sanctions affect certain transactions, such as sending money or economic resources or assets to a designated person or other persons via a designated person, or they may have to comply with reporting or (in the case of Iran) notification or authorisation requirements. Targeted financial sanctions generally include humanitarian exemptions or licensing grounds because they do not seek to interrupt humanitarian payments, or effect humanitarian bodies or agencies, or humanitarian transactions such as the sale or donation of hospital equipment, drugs or medicines etc. This is because targeted financial sanctions are not designed or intended to worsen the position of the poor or patients in need of hospital and medical care, drugs and medicines etc. 21 P age

HM Treasury will treat applications for humanitarian licences (for humanitarian fund transfers, payments for drugs and medicines etc) as a priority. HM Treasury reminds businesses that the clear wish of the international community, specifically expressed in sanctions measures with humanitarian provisions, is NOT to prevent the passage of humanitarian funds or goods. Accordingly banks or other financial institutions should feel able to safely undertake humanitarian transactions if they are sensibly managed. Other financial sanctions administrators (such as the US Treasury s Office of Foreign Assets Control, OFAC) publish their own guidance on humanitarian assistance and related exports. See also paragraph 17.1.8 about humanitarian transactions. 6.4 I am a student from a country against which financial sanctions are in force. Students may experience difficulties in receiving funds, including sponsorship, from countries where financial sanctions are in force for a range of reasons, such as disruption to employers or government departments that pay support, disruption to their family where they receive support from that source, shortages of funds, or disruption to access to the international banking system, as well as interruption to the operation of designated banks. Not all of those problems (for example shortage of funds, or administrative difficulties) will be as a result of financial sanctions. Sanctions might affect the ability of commercial sponsors or governments to pay students educational or living expenses. HM Treasury will consider licence applications in such cases as a matter of priority. But remember that a licence only permits payments to be lawfully made; a licence does not mandate or require that a payment is made. It is a matter for the commercial judgement of a bank whether it continues to provide banking services to students who are nationals of countries subject to financial sanctions measures. 6.5 What does freezing assets mean for a bank that holds funds? In practical terms, accounts or other funds held must be frozen (or blocked). They can only be dealt with, for example released or paid away by the financial institution (or any other person) that holds them, under the authority of a licence issued by HM Treasury. An asset freeze does not affect the ownership of funds. 6.6 I am a lawyer acting for a designated person. Do I have to freeze their funds in my client account? Yes, funds held must be frozen (or blocked). They can only be dealt with, for example released or paid away by you under the authority of a licence issued by HM Treasury. 22 P age

7 Compliance and the Law NOTE: For the details of each specific financial sanctions regime, please refer to the relevant EU Regulation and the UK s enforcing regulations. Legislation is available via the regime-specific publications at: https://www.gov.uk/government/organisations/hm-treasury/series/financial-sanctions-regimespecific-consolidated-lists-and-releases 7.1 What sanctions law applies in the UK? There is no single over-arching piece of financial sanctions legislation in the UK. With the exception of the domestic Terrorism and Terrorist Financing regime, which is implemented by primary domestic legislation, for every individual financial sanctions regime there are two types of legislative instruments: (1) an EU Regulation which imposes obligations on UK persons to freeze the assets of designated persons, refrain from making funds and economic resources available to them and any other financial prohibitions or restrictions. The EU Regulation will either implement a UN-mandated regime or an autonomous EU regime; and (2) a set of UK regulations made under section 2(2) of the European Communities Act 1972, which enforces the EU Regulation by making it a criminal offence in the UK to breach the EU Regulation s measures. Under the Terrorism and Terrorist Financing regime there is: (1) an EU Regulation, 2580/2001, which gives effect to UN Security Council Resolution 1373(2001), and which imposes specific financial sanctions against certain listed targets; and (2) The Terrorist Asset-Freezing etc. Act 2010 which (a) enforces the asset freezes in respect of the EU-listed targets and (b) provides HM Treasury with powers unilaterally to freeze the funds and economic resources of those suspected or believed to be involved in terrorist activities, and restricts the making available, directly or indirectly, of funds, financial services, and economic resources to, or for the benefit of such persons. 7.2 Are United Nations Security Council Resolutions and European Union Regulations directly applicable in UK law? EU Regulations imposing and/or implementing sanctions are part of Community law and have direct effect in the Member States. EU Regulations either implement UN sanctions regimes or implement autonomous EU regimes. A set of UK Regulations made under section 2(2) of the European Communities Act 1972 is required to introduce criminal penalties for breaches of the EU Regulation into UK law. The EU Regulation implements the sanctions and the UK Regulations enforce them. 23 P age

United Nations Security Council Resolutions are not directly applicable in UK law. However, under the United Nations Charter, member states are called upon to give effect to any measures decided upon by the Security Council. The EU implements the 27 Member States UN obligations by adopting an EU Regulation, which gives effect to the UN measures in UK law. A set of UK Regulations is required to introduce criminal penalties for breaches of the EU Regulation. 7.3 Who must comply with financial sanctions in place in the UK? All individuals (irrespective of their nationality) and all legal entities (whether incorporated or established under UK law or under the law of any other jurisdiction) who are within the UK s territory must comply with both EU and UK sanctions regulations that are in force. Any British national or British legal entity established or incorporated under UK law whose activities are conducted outside the UK s territory must also comply with the EU Regulation and the UK Regulations (or TAFA 2010). 7.4 Do financial sanctions apply to the subsidiaries of UK companies outside the UK? The UK Regulations do not apply to subsidiaries operating wholly outside the UK and which are not British legal entities established or incorporated under UK law. If the subsidiary is incorporated under EU law, it will remain subject to the EU Regulation. If it is incorporated under the laws of a non-eu country, is outside the territory of the EU, and does not do business in the EU, it will not be subject to EU sanctions even though its parent company is. 7.5 What reporting requirements exist for relevant institutions? Reporting requirements are covered specifically in the relevant UK country sanctions regulations. The general position is that relevant institutions must inform the Treasury as soon as practicable if it knows, or has reasonable cause to suspect, that a person (i) is a designated person, or (ii) has committed an offence under the licensing, contravention or circumvention provisions of the regulations, and the information or other matter on which the knowledge or suspicion is based came to it in the course of carrying on its business. (A relevant institution means an FCA authorised business, or an equivalent EEA firm, or any form of money service business (foreign exchange bureaux, money transmitter or cheque casher)). 7.6 What powers does HM Treasury have to request information? Information powers are covered specifically in the relevant UK country sanctions regulations. The general position is that HM Treasury may ask any person in or resident in the UK to furnish any information he has or controls, or to produce any document in his possession or control, which they may require for the purpose of ensuring compliance with sanctions law. Any person to whom such a request is made must comply with it within the required time and in the manner specified, subject to the obligations of legal professional privilege. This includes the power to take copies of, or extracts from, any document produced and to request an explanation of the document. 24 P age

There are similar powers under TAFA 2010 and the other terrorism measures. 7.7 What onward disclosure is allowed? HM Treasury carefully protects all of the confidential, commercially sensitive or personal information it receives in carrying out its sanctions roles, but it may need to share information with third parties, for example to satisfy itself that licence requests can be met. It will only do so where data protection or any other law does not prohibit this. Information provided to HM Treasury under the exercise of its information powers may only be further disclosed to other parties in limited circumstances, in accordance with the relevant EU Regulation. The circumstances where HM Treasury may disclose any information obtained by them under the relevant UK Regulations or TAFA 2010 are to any third party with the consent of the person who, in their own right, is entitled to the information or to possession of the document, copy or extract; to any person who is set out in the Schedule to the relevant UK Regulations, including any person holding or acting in any office under or in the service of the Crown in respect of the UK Government; for the purpose of giving assistance or co-operation, pursuant to the relevant EU Regulation, to (in the case of UN-mandated regimes) any organ of the UN or the Council of the European Union, the European Commission or the Government of a Member State ; or with a view to the institution of, or otherwise for the purposes of, any proceedings for an offence under the relevant UK Regulations or TAFA 2010. 7.8 What are the consequences for failure to comply with information requests? Any person who: without reasonable excuse, refuses or fails within the time and in the manner specified (or, if no time has been specified, within a reasonable time) to comply with any request made under the relevant UK Regulations/TAFA 2010; intentionally furnishes false information or a false explanation to any person exercising his powers under the relevant UK Regulations/TAFA 2010; or with intent to evade the provisions of the relevant UK Regulations/TAFA 2010, destroys, mutilates, defaces, secretes or removes any document, is guilty of an offence. 7.9 Is it an offence to make funds available to a target of financial sanctions legislation? This is covered specifically in each relevant Regulation and in the terrorism measures. In general terms, any person to whom the relevant Regulation applies who, without a valid Treasury licence, makes any funds, economic resources or, in some circumstances, financial (or related) 25 P age

services available directly or indirectly to or for the benefit of persons listed under the relevant law is guilty of an offence. 7.10 Circumvention of sanctions Circumventing financial sanctions or enabling or facilitating their contravention is prohibited. Specific details can be found in each relevant UK Regulation and in the terrorism measures. 7.11 What are the penalties for committing an offence under financial sanctions legislation? Any person guilty of an offence under the relevant UK Regulations shall be liable on conviction to imprisonment and/or a fine. The maximum term of imprisonment is currently two years in EU regimes (seven years under the Terrorist Asset-Freezing etc. Act 2010). Where any corporate body is guilty of an offence under the relevant UK Regulations, and that offence is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, that person as well as the body corporate is guilty of that offence and is liable to be proceeded against and punished accordingly. 7.12 I have carried out a transaction that is subject to financial sanctions; what should I do? If you find that you have carried out an economic transaction that was prohibited by sanctions (for example by dealing with a designated person s funds without a licence), you should contact Financial Sanctions at HM Treasury to regularise the position. You might also need to contact your regulator, such as the Financial Conduct Authority (FCA), if you are separately regulated by them. You may also wish to take independent legal advice. 7.13 What if I did not know I was breaching a prohibition? A person does not commit an offence if they did not know and had no reasonable cause to suspect that the funds, economic resources or financial services were being made available, directly or indirectly, to or for the benefit of a designated person. 26 P age

8 Sanctions targets designated persons 8.1 What is a designated person? A designated person, sometimes referred to as a listed person or a sanctions target, is a person listed in a financial sanctions regime, typically in a UN Security Council Resolution or EU Regulations. The body that decided that the person or entity should be listed will be the UN Security Council or the European Council. Only under the terrorism regime does the Treasury have a unilateral power to list people for asset freezes. Designated persons are persons whose assets are frozen and to whom it is prohibited to provide funds or economic resources, or, in certain circumstances, insurance or other financial services. 8.2 Should the assets of other persons who are owned or controlled by a designated person be frozen? Generally financial sanctions apply to specifically designated persons. However, there may be cases where the assets of persons who are not expressly listed as a designated person may nevertheless have to be treated as frozen. This is because a sanctions regime may target a list of named persons and other, unnamed, persons that are, for example, owned or controlled by the named persons. This will be a matter of case-by-case analysis and if in doubt, HM Treasury should be consulted. Anyone expressly listed as subject to UK financial sanctions will be listed in our Consolidated List. See paragraph 8.3 for advice on ownership and control. 8.3 How can I tell if a company is owned or controlled by a designated person? It can be unclear whether an unlisted person and its assets are owned or controlled by a designated person. There is no absolute legal rule as to when an entity is owned or controlled by another. The matter must be subject to a case-by-case evaluation, taking into account the degree to which the entity concerned is owned or controlled. When considering whether a company is owned or controlled, it may helpful to bear in mind section 1162 of the Companies Act 2006, under which a company is a parent undertaking in relation to a subsidiary undertaking if: It holds a majority of the voting rights in it; or It is a member (i.e. shareholder) of it and has the right to appoint or remove a majority of its board; or It has the right to exercise dominant influence over it by virtue of provisions contained in the subsidiary undertaking s articles of association or a control contract; or 27 P age

It is a member of it and controls alone, under an agreement with other shareholders or members, a majority of its voting rights; or It has the power to exercise, or actually exercises, a dominant influence or control over it or both of them are managed on a unified basis. In addition to the analysis above, advice issued by the EU is available at: http://register.consilium.europa.eu/content/out?lang=en&typ=entry&i=smpl&doc_id=st%20906 8%202013%20INIT 8.4 What is the Consolidated List of Targets? HM Treasury publishes a Consolidated List of designated persons (i.e. named sanctions targets), which is available at: https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets It is a list of persons (individuals and entities) that have been designated as being subject to financial sanctions by the United Nations and/or the European Union and/or domestically by the UK under specific legislation. Other countries may publish their own lists of financial sanctions targets, but only the Consolidated Llist published by HM Treasury contains the designated persons that are the subject of financial sanctions in force in the UK. The Treasury publishes the list as part of its efforts to facilitate compliance with financial sanctions measures in the UK. Where there is a legal basis for an asset freeze in the UK, the name of the target will be included on the Treasury s Consolidated List. Collectively, the individuals and entities are called financial sanctions targets and other persons are generally prohibited from engaging in financial dealings with them. 8.5 What is the relevance of the AKA s on the Consolidated List? The Consolidated List can include known alternative names also known as or AKA s. If you are checking against the Consolidated List you should check against the main or usual name (the prime alias) AND the AKA s. The AKA s represent alternative names. In some cases HM Treasury may also publish or refer to other nicknames or noms de guerre. These are intended to assist firms seeking to decide if, for example, a customer is a designated person but they are not AKA s in the sense that is explained above. 8.6 Is HM Treasury s Consolidated List of targets the same as that published by the European Union or the United States Treasury s Office of Foreign Assets Control (OFAC)? No- these are all different lists. While there is typically some commonality amongst the lists they are not necessarily the same; nor should one expect them to be the same as they serve different purposes. 28 P age

HM Treasury s Consolidated List consists of the names of targets that have been listed under United Nations, European Union and the UK measures which have legal effect in the UK. Lists provided by non-eu administrations should include names listed under United Nations sanctions regimes but may not include names listed under European Union imposed sanction regimes (unless they have been additionally listed in those jurisdictions). In addition, other lists may include names where domestic sanctions or other measures are in place in that jurisdiction. The European Union consolidated list only includes names of individuals and entities that are listed in annexes to various EU Regulations. This excludes any targets listed independently by the UK under the TAFA 2010. 8.7 Where can I find the Consolidated List? The Consolidated List is available at: https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets 8.8 What formats is the Consolidated List available in? To assist institutions the Consolidated List of targets is available in the following formats: HTML - A basic file format used on the Internet; XLS - A file type for documents created using Microsoft EXCEL, a spreadsheet package; TXT - An alternative text file to Word; CSV - Comma Separated Values, the spreadsheet equivalent of.txt for word processors; and PDF A widely used document format. The lists are accessible in all formats via permalinks. Please refer to the Consolidated List Format Guide for further information. The format guide (which is being updated) is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/205843/fin_sanc_ consolidated_list_format_guide.pdf Users should remember that these lists are updated from time to time you should always use the most up to date version of the list. 8.9 How do I know what has changed when the Consolidated List is updated? HM Treasury publishes notices on the gov.uk website whenever there are new listings of designated persons, when designated persons are de-listed, when listings are changed, or when there are other significant changes to financial sanctions. The Treasury s usual practice is to publish the details of persons added or delisted and also to make the changes to individual entries clear. 29 P age

8.10 How often is the Consolidated List updated? There is no predetermined timetable for updating the Consolidated Lst. Updates are dependent on when there are changes (i.e. additions, deletions or amendments) to the list of individuals and entities targeted by the UN, EU and UK. The Treasury issues an email notification at the same time as the publication of financial sanctions notices and as the Consolidated List is updated. Details of how to subscribe to the Treasury s free subscription service which allows subscribers to receive updates whenever there are changes to financial sanctions effective in the UK can be found at paragraph 3.7. 8.11 How soon should a business implement changes to the Consolidated List? Changes to the individuals and entities subject to financial sanctions are usually announced in notices issued by HM Treasury. The notice will usually explain when the changes are legally effective. Businesses need to implement such changes (or put new versions of the Consolidated List into effect) as soon as practical. 8.12 Why can t I access up-to-date lists or notices? Frequent or regular users of gov.uk website may inadvertently access out of date versions of the Consolidated List or may be unable to access new notices. Where that is the case it may be helpful to refresh your browser to access the most up to date information. Alternatively you may need to clear your cookies that is remove records of previously visited websites that your computer system may have automatically retained. 8.13 Does the European Union maintain its own consolidated list of targets? Yes. The European Union has a list of EU sanctions regimes available from its website at: http://eeas.europa.eu/cfsp/sanctions/docs/measures_en.pdf The European Union also makes available a list of EU sanctions targets, which is available at: http://eeas.europa.eu/cfsp/sanctions/consol-list_en.htm This includes names of persons (individuals and entities) that are listed in annexes to various EU Regulations. The EU list is not necessarily as up to date, in terms of amendments, as the Treasury s Consolidated List. 8.14 Does HM Treasury have a web-based Consolidated List search engine? No, this type of facility is not currently available. Users of HM Treasury s website must search the Consolidated List using either normal search tools or manually. Most Microsoft and Apple programs have a search function to scan a given file or document for particular text. 30 P age

9 Challenging a designation decision 9.1 How do I challenge my listing if I am listed by the UK? Under section 26 of TAFA 2010 a designated person may appeal to the High Court or, in Scotland, the Court of Session, any decision of the Treasury to make or vary, or not to vary or revoke, an interim or final designation, or to renew a final designation. Under section 27 of the Act a designated person or anyone else affected by a decision of the Treasury other than decisions to which section 26 applies may apply to the High Court or, in Scotland, the Court of Session, for the decision to be set aside. The address for service of legal correspondence for the Treasury is: The Treasury Solicitor s Department One Kemble Street London, WC2B 4TS. Phone: 020 7210 3000. DX number: 123242 Kingsway. 9.2 How do I apply to be removed or delisted from the United Nations Al-Qaida and Taliban list or other UN sanctions listing? Requests for delisting (where a person is listed by the United Nations) should be sent to the United Nations focal point for delisting. There is more about the focal point at this address: http://www.un.org/sc/committees/dfp.shtml Alternatively a person may petition their state of residence or citizenship. If you wish to petition the UK, send the petition with the details specified by the UN to Sanctions Team International Organisations Department Foreign and Commonwealth Office Room E.302 King Charles Street London, SW1A 2AH 9.3 How do I apply to be removed or delisted from an EU sanctions listing? You should write in the first instance to the EU at: relex-sanctions@ec.europa.eu 31 P age

10 Licences and exemptions 10.1 What is an exemption? Some activities which would otherwise amount to a breach of the asset freezing requirements are automatically exempted under the legislation. For example, funds due to designated persons in relation to contractual or other obligations entered into prior to the designated persons listing can be credited to the designated person s frozen account. 10.2 What is a licence? A licence is a written authorisation from HM Treasury to allow an activity which would otherwise be prohibited. A licence may include associated reporting requirements or other conditions. 10.3 What types of licences are available? Licences allow activity that would otherwise be forbidden to be lawful, so that transactions can be legally carried out. Generally there are two sorts of licence: 1. General licences. These are available to every potential beneficiary subject to whatever terms or conditions apply under the sanctions regime concerned; so a general licence allows every transaction, or category of transaction, that is described in the licence to be lawful, whoever the persons who are engaging in them. General licences are publicly identified and are available on the gov.uk web pages. 2. Individual or specific licences. These are granted to specific parties, and may permit specific transactions or types of spending for example. They are not usually published. 10.4 What activities might a licence cover? Licences can be granted for a range of purposes. The permitted purposes are typically set out by the UN or EU, and may include the allowing the release of frozen funds to pay obligations due by the designated person under a contract entered into prior to their listing, to meet bank charges, to cover basic household or business expenses and reasonable legal costs. It should be noted that it is not within the Treasury s gift to issue a licence for a transaction that is not capable of being authorised under any of the prescribed licensing grounds in the EU Regulation. Licences can also allow other arrangements to permit transactions and protect third parties who are not sanctions targets for example to allow staff salaries to be paid, to allow humanitarian transactions, and to allow the assets of designated persons to be safeguarded and managed. The terms of the relevant EU Regulation typically prescribe the circumstances in which licences can be issued and the conditions that need to be satisfied in order for HM Treasury to issue a licence. Treasury will only issue a licence for a transaction which is capable of being authorised under the prescribed licensing grounds in the relevant legislation. When considering whether to issue a licence, Treasury will have regard to the policy objectives of the relevant regime. Treasury licences include the Treasury logo, are numbered, dated and signed Financial Sanctions. They are issued electronically in PDF format. 32 P age

Iran (nuclear proliferation) authorisations are issued as emails not as pdf documents. Treasury licences do not cover activities in other jurisdictions. If you or the activity you are seeking to have licensed, are subject to more than one sanctions regimes (because of overseas ownership for example) you may need to apply to the overseas authorities for a separate licence from them. Treasury licences do not cover trade imports or exports subject to trade sanctions. 10.5 What is a basic expense of an individual? Where a licence is issued under an exemption for the purpose of meeting basic expenses, basic expenses are commonly defined as: payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges, or exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services, or fees or service charges for routine holding or maintenance of frozen funds or other financial assets or economic resources 1 Basic expenses are therefore considered to cover expenditure which is necessary to maintain basic everyday needs only. In licensing basic expenses the Treasury will consider what is reasonable to meet the everyday needs of a person in the position of the designated person, taking account of any specific needs of the individual and their family. However, HM Treasury will not necessarily licence the full amount requested to allow the designated person to continue to lead a lavish lifestyle, particularly where this would defeat the purpose of the designation. 10.6 How do I apply for a licence? Applications for licences must be made in writing, specifying (when appropriate) the relevant licensing ground in the EU Regulation, and emailed to financialsanctions@hmtreasury.gsi.gov.uk All applications should ensure that the licence application sets out clearly the grounds on which a licence is being sought and provide all relevant information, full details of the transaction and supporting documentation. Please also explain any genuinely urgent circumstances. Under certain regimes there are dedicated licence application forms: where those exist they should be completed. Otherwise the generic application should be used. The LIBYA licence application form is here: https://www.gov.uk/government/publications/licence-applications-libya A number of forms for IRAN (PROLIFERATION) notifications, licence applications, and related guidance are available here https://www.gov.uk/government/publications/license-applications-iran 1 UNSCR 1452, paragraph 1(a) 33 P age

A generic licence application form is available via the following link. This application form should be used when applying for non-terrorism related licences (other than where a Libya or Iran form is appropriate). https://www.gov.uk/sanctions-embargoes-and-restrictions If you seek a licence about a contract between yourself and another party it would be good practice to liaise with the second party, to ensure that all of the licensing needs of all the parties can be addressed through one application. 10.7 How long does it take to obtain a Treasury licence? Licence applications are dealt with as quickly as possible. It is not possible to provide an exact timeframe as this will depend on the application itself, whether further information is required, whether liaison with other parties is required and where appropriate that the requisite UN/EU notification or approval procedures are followed. The generic licence application form suggests licence applications should be submitted at least four weeks before the licence is needed. HM Treasury cannot guarantee that licences will be issued within four weeks of an application being received. In all cases, the Treasury will aim to keep applicants informed of progress. 10.8 Do I have to pay HM Treasury for a licence? No. There is no charge made by HM Treasury to issue a financial sanctions licence. 10.9 Who can apply for a licence? Any person affected by financial sanctions can apply for a licence. Note that the licence will only allow the transaction to take place where it would be otherwise prohibited by the sanctions and does not mandate it, so the consent of the owner of the relevant assets will still be required for the transaction to take place. 10.10 Where can I find out more about the general licences in force? There is more about general licences, including details of the current general licences, here: https://www.gov.uk/government/publications/counter-financing-of-terrorism-general-licenses 10.11 What should I do with any licence issued to me? You should keep any licence granted to you safe. Your bank or other parties to a transaction may ask to see a copy of the licence. You can pass copies to those parties. However you should consult with HM Treasury before sharing any licence with parties outside the immediate transaction, such as foreign governments. 10.12 Can I check that a licence is valid? Individual licences are not routinely published. HM Treasury will, exceptionally, confirm that a licence is valid if you have genuine concerns that a licence is not still valid or has been altered. 34 P age

10.13 When can a licence be changed? Licences are issued in the light of the known facts of a particular case. HM Treasury may amend a licence where the circumstances change or new types of transaction are contemplated. Where a licence amendment is sought the applicant should make an application setting out the need and the basis for the change. 10.14 What do I do with a licence that concerns a delisted person? Where a licence has been issued to allow a business to deal with a designated person and that designated person is subsequently delisted, the licence is null and void since there is no legal prohibition under sanctions law that continues to require disapplication by licence. It will nevertheless be prudent to retain a copy of the licence in case there are enquiries about the basis on which any transaction took place when sanctions applied. 10.15 What can I do if a licence application is refused? HM Treasury will usually provide an explanation for any decision to refuse a licence. If you want HM Treasury to reconsider a decision to refuse a licence you should set out the new facts or analysis you want HM Treasury to consider. Where a licence is not granted, the transaction concerned cannot legally proceed. 10.16 Iran authorising and notifying transfers Special provisions apply to the transfer of funds to and from Iranian persons or entities and between EU financial or credit institutions and any Iranian bank, financial or credit institution. These are explained on the Iran (nuclear proliferation) pages on gov.uk, at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/203243/fin_sanc_ guidance_on_prior_authorisation_or_prior_notification.pdf 35 P age

11 Financial sanctions the regimes 11.1 How many regimes are in force? The number of regimes can change from time to time. A full list of the financial sanctions regimes in force is available here: https://www.gov.uk/government/organisations/hm-treasury/series/financial-sanctions-regimespecific-consolidated-lists-and-releases 11.2 Where do I find details of the financial sanctions regimes in force in the UK? The gov.uk website lists all the current financial sanctions regimes see paragraph 11.1. Each entry on the list of current regimes gives access to full details of that regime, including the relevant UN and EU decisions, UK legislation, and Treasury information. 36 P age

12 Sanctions business policies and procedures NOTE; The Financial Services Act 2012 received royal assent at the end of 2012, and came into force on 1 April 2013. The Act created a new regulatory framework for financial services. It abolished the Financial Services Authority (FSA). The Act gives the Bank of England responsibility for financial stability, bringing together macro and micro prudential regulation, creates a new regulatory structure consisting of the Bank of England's Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority (FCA). The FCA now regulates firms and financial advisers, but a number of publications by the FSA remain relevant and are referred to below. 12.1 What policies and procedures do I need to put in place? Generally sanctions regulations do not impose specific policy and procedure requirements. Rather, sanctions legislation criminalises sanctions violations. The Financial Conduct Authority (FCA) as part of its objective of enhancing the integrity of the UK financial system includes a requirement on firms to protect themselves from being misused from Financial Crime which includes compliance with the UK financial sanctions regime. Other regulators may also have similar requirements on firms they supervise. All businesses (including non-financial businesses) may find it helpful to look at Financial Crime: A Guide for Firms produced by the FCA. Section 7 of Part I 2 of this guide gives an overview of the FCA s expectations of Financial Services firms along with examples of good and bad practice and some self-assessment questions. Part 2 of the Guide includes a summary of the 2009 thematic review into financial services firms approach to UK financial sanctions 3. They have also published a very short guide to financial sanctions for small firms. See: http://www.fsa.gov.uk/smallfirms/resources/pdfs/sanctions.pdf&sa=u&ei=8pxuuadqh4tupjmdgy AO&ved=0CB4QFjAA&usg=AFQjCNH9k71SqNXltfkMUMeRKujDC8XWOw There is more about financial sanctions guidance in paragraph 14.1, including links to material published by the FCA. 12.2 What software do I need to buy? HM Treasury does not require businesses to buy particular software to fulfil their financial sanctions commitments. Businesses may find it cost-effective to buy in specialised software or other services from third parties where, for example, it considers a significant amount of checking against HM Treasury s Consolidated List is called for. 2 http://fshandbook.info/fs/html/handbook/fc/link/pdf 3 http://www.fca.org.uk/your-fca/documents/fsa-sanctions-final-report 37 P age

It is always for individual businesses whether to buy specialised software or services, or who to buy them from. Businesses may buy information or software from separate sanctions data providers and screening software providers. Overall, firms should ensure that their combined systems are effective. If you decide that individual checks using an e-verification provider or purchasing screening software is appropriate for your business, you should understand its capabilities and limits and make sure that it is tailored to your business needs and risk profile. Some issues to consider would include: Does the search facility you have signed up for include the UK consolidated sanctions list? Most e-verifiers will have the option to include searches against the UK Consolidated List in the packages they provide, but some simpler anti-money laundering checks may not automatically include this option. A check against a list of politically exposed persons (PEPs) is not the same as a sanctions search. How often does the search facility or screening software update the list? Does the search facility or screening software provide for fuzzy matching? Fuzzy matching helps to identify any situations where the designated person s identifiers are misspelled, incomplete, or missing. They are often tolerant of multinational and linguistic differences in spelling, formats for dates of birth, and similar data. Other screening protocols which may be of use include name reversal and number removal screening. Both the FSA and the JMLSG 4 have recommended the benefits of using fuzzy matching. 12.3 What should I tell a customer whose account is frozen? Businesses are not legally required to advise customers that their account has been frozen. The listing authority will have made efforts to inform the designated person that they have been designated and what that means for them. The Consolidated List is a public document and there is no prohibition on discussing a customer s listing with them (as compared to the prohibitions relating to tipping off under the anti-money laundering regime). It will generally be good practice to tell the customers involved that they are subject to financial sanctions such as an asset freeze, and to explain the effect of any restrictions to them, and how to contact the Financial Sanctions Team at HM Treasury. When discussing matters with your customer you should still be aware that it is a criminal offence to circumvent, or enable or facilitate circumvention of sanctions. 12.4 Do I need to make reports to the Treasury? The detail of reporting requirements will usually be announced in a notification issued by the Treasury. Certain businesses are subject to statutory reporting requirements see paragraph 13.2. 4 See 14.1.2 38 P age

If you are not subject to statutory reporting requirements HM Treasury nevertheless welcomes a report if you become aware that you or your customer is dealing with the funds or assets of a designated person. You should provide details of such frozen assets when you make a report. 12.5 I have policies and procedures in place for anti-money laundering (AML) reasons are they relevant or sufficient? While there are some apparent similarities, it is important to remember there are also significant differences between money laundering and sanctions policy and practice. Anti-money laundering systems are focussed on knowing who your customer is and not receiving or dealing with funds that are the proceeds of crime. Only certain businesses under the Money Laundering Regulations 2007 are required by law to have such systems in place. Compliance with sanctions means that you also need to consider to whom payments are being made and funds may be from an entirely legitimate source. All UK individuals and businesses must comply with financial sanctions requirements. Your anti-money laundering client due diligence systems may help to provide you with full identification details to assist you with checking your clients against the Consolidated List and ascertaining whether you have an actual target match or simply a name match see paragraphs 12.2 and 13.1. Your ongoing monitoring systems for anti-money laundering compliance may assist you in ascertaining whether your clients become a designated person during the course of your business relationship. However, compliance with your anti-money laundering obligations will not of themselves ensure that you are compliant with your financial sanctions obligations. 39 P age

13 Target matches and name matches 13.1 What is the difference between a name match and a target match? A target match is where you are satisfied that the transaction or account held is that of a specific person who is a target of financial sanctions. A name match is where you have matched the name of an account holder with the name of a target included on HM Treasury's Consolidated List. This does not necessarily mean that the account holder is one and the same as the target. If you have a name match you need to decide, using the information you have about the account holder, whether they are a sanctions target or not. There is more about this below. 13.2 What are the reporting requirements for target matches? All relevant institutions [see glossary] are required to inform HM Treasury of all funds that they have frozen in accordance with the relevant legislation and provide all relevant information necessary for ensuring compliance with the legislation, subject to the obligations of legal professional privilege. Under existing financial sanctions legislation applicable in the UK, a relevant institution is guilty of an offence if it knows or has reasonable cause to suspect that a person is a listed person or has committed an offence under the legislation, and the institution does not disclose the information to HM Treasury as soon as is reasonably practicable after that information comes to its attention. 13.3 How often do I need to scan my customer database for possible target matches? Your internal policy and procedures should determine the frequency of scanning. It is each individuals' or institutions' responsibility to comply with the relevant legislation. However, if you fail to identify and block a target account, this may lead to a breach of the legislation. It should be noted that a critical aspect of the listing of a target is that the target s assets must be frozen immediately, before they can be removed from UK jurisdiction. 13.4 Should an institution always contact HM Treasury if it has found a name match or a possible target match? You are not obliged to contact HM Treasury about name matches, as name matches are not necessarily target matches. Positive target matches should always be reported to HM Treasury. In the event that you identify an account as that of a target of financial sanctions then the account must be frozen and details reported to Financial Sanctions. The more likely scenario is that you may identify a name match with one of the persons included on the Consolidated List. In such cases, you should conduct your own enquiries assessing your Know Your Customer or Customer Due Diligence information, customer profile and undertaking appropriate due diligence to assess against the details available on the listed person. 40 P age

You may also find it helpful to access the publicly available information about designated persons on the United Nations sanctions website at http://www.un.org/sc/committees/list_compend.shtml. The European Union also publishes a Consolidated List of EU sanctions targets at http://eeas.europa.eu/cfsp/sanctions/consol-list_en.htm Both the UN and EU lists may offer helpful additional background in the form of narrative reasons for the listing of the target concerned. INTERPOL also publish Special Notices concerning certain designated persons which include photographs. These are available via this link: http://www.interpol.int/interpol-expertise/notices/special-notices If, after assessing all available information, you are unable to determine whether a customer is indeed a listed person and wish to seek guidance from HM Treasury then you should contact the Treasury by e-mail to: financialsanctions@hmtreasury.gsi.gov.uk All relevant information held in respect of the customer would be required i.e. full name, date and place of birth, occupation, address, family details etc, and copies of any identifying documents (passports etc) seen when the account was opened or later, together with details of the possible listed target match (including Group ID number). 13.5 Can I assume a UK-regulated financial services firm is not a designated person? No, it is possible that a person regulated by a recognised UK or EU supervisory or regulatory authority could still be a designated person. Therefore businesses should be alive to this possibility, and should not rely entirely on their regulated status in deciding whether sanctions checks are appropriate. 41 P age

14 Other advice and guidance 14.1 Is any other financial sanctions guidance available? A number of third parties have produced guidance for their members or for businesses they monitor or supervise. 14.1.1 The Financial Conduct Authority The Financial Services Authority produced a range of material see paragraph 12.1. The Financial Conduct Authority (FCA) assumed the financial crime prevention role of the FSA in 2013. The FCA has published in April 2013 its document Financial Crime: A Guide for Firms. This is in 2 parts; Part 1 provides the main guidance and is available here : http://media.fshandbook.info/handbook/fc1_20130401.pdf Part 2 summarises the lessons identified in earlier thematic reviews, including those conducted by the FSA. Part 2 is available here: http://media.fshandbook.info/handbook/fc2_20130401.pdf Both parts of the Guide include material on sanctions. In July 2013 the FCA also published a Thematic Review on Bank s control of financial crime risks in trade finance. Part 3.7 of the Review looks specifically at sanctions issues. The Review is available here: http://www.fca.org.uk/news/tr13-03-banks-control-of-financial-crime-risks-in-trade-finance 14.1.2 The Joint Money Laundering Steering Group [JMLSG] The JMLSG is a group of financial services trade bodies, produces detailed anti-money laundering guidance, and as part of that it produces specialist guidance on compliance with the UK financial sanctions regime. See section 4 of Part III of the JMLSG Guidance published in October 2010. http://www.jmlsg.org.uk/industry-guidance/article/jmlsg-guidance-current 14.1.3 Lloyds Insurance Market The Lloyds Insurance Market provides advice to market participants on financial sanctions, and that material can be accessed here: http://www.lloyds.com/the-market/operating-at-lloyds/regulation/economic-trade-and-financialsanctions 42 P age

14.1.4 The Law Society The Law Society provides advice in its anti-money laundering practice note http://www.lawsociety.org.uk/advice/practice-notes/aml/#1 and in advice articles: http://www.lawsociety.org.uk/advice/articles/ 14.1.5 HM Revenue and Customs [HMRC] HMRC provides advice on sanctions compliance in its anti-money laundering guidance for High Value Dealers, Money Services Businesses and Trust and Company Service Providers. You can access that advice via this link: http://www.hmrc.gov.uk/mlr/your-role/resposibilities.htm#5 14.1.6 The Gambling Commission The Gambling Commission provides advice in its anti-money laundering guidance for casinos: http://www.gamblingcommission.gov.uk/gambling_sectors/casinos/operating_licence_holders_- _wh/key_information_for_the_casino/prevention_of_money_laundering.aspx 14.1.7 The Royal Institute of Chartered Surveyors The Royal Institute of Chartered Surveyors provides advice in its anti-money laundering guidance for Surveyors, Property Professionals, Relocation Professionals and Residential Managing Agents: http://www.rics.org/global/rics%20money%20laundering%20guidance%20july%202011.pdf 43 P age

15 ANNEX A. Glossary of definitions. These definitions do not constitute legal advice. TERM USED DESIGNATED PERSON ECONOMIC RESOURCES FUNDS LICENCE PERSON RELEVANT INSTITUTION Interpretation In this context, a designated person is an individual or entity listed by the UN/EU or HM Treasury as subject to financial sanctions. Economic resources means assets of every kind, whether tangible or intangible, movable or immovable, (such as goods, property, or rights) which are not funds themselves but can be used to obtain funds, goods or services. Funds means financial assets and benefits of every kind, including but not limited to: cash, cheques, claims on money, drafts, money orders and other payment instruments; deposits with financial institutions or other entities, balances on accounts, debts and debt obligations; publicly and privately traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts; interest, dividends or other income on or value accruing from or generated by assets; credit, right of set-off, guarantees, performance bonds or other financial commitments; letters of credit, bills of lading, bills of sale; documents evidencing an interest in funds or financial resources; any other instrument of export-financing. A written authorisation provided by the Treasury (or any other competent authority of a member state) which permits a certain transaction or activity which would otherwise be a breach of sanctions law. A reference to persons means legal and natural persons, that is to say individuals and any incorporated or unincorporated entity such as a company or partnership, but also including other businesses and groups like voluntary bodies (charities etc). Sanctions regulations define a relevant institution as (a) a person who has permission under Part 4 of the 2000 Act* (permission to carry on regulated activities); (b) an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to the 2000 Act (EEA passport rights) which has permission under section 15 of that Schedule as a result of qualifying for authorisation under section 12 of that Schedule(f) to accept deposits; or (c) an undertaking which by way of business operates a currency exchange office, transmits money (or any representations of monetary value) by any 44 P age

means or cashes cheques which are made payable to customers. * ie the Financial Services and Markets Act 2000. In practice, this will now mean a Financial Conduct Authority authorised business, or an equivalent EEA firm, or any form of money service business (foreign exchange bureaux, money transmitter or cheque casher). TAFA 2010 The Terrorist Asset Freezing Act etc. 2010. 45 P age

16 ANNEX B. Further Guidance for designated persons under Terrorism / Al Qaida regimes. This part includes some examples of when the prohibitions are (or are not) engaged for nonlicensed activity. Note: These additional questions are meant to provide real-world examples of the asset freezing prohibitions. They should be read alongside the guidance on the prohibitions set out in section 5. In all examples below, the answer assumes that the designated person does not have a licence for the activity in question. 16.1.1 Can I be paid interest on my bank account/savings? Yes. The prohibitions are not contravened by a financial services provider crediting a frozen account with (a) interest or other earnings due on the account, or (b) payments due under contracts, agreements or obligations that were concluded or arose before the account was frozen. This is because of exceptions in the legislation for these specific transactions (see, for example, Terrorist Asset-Freezing etc. Act 2010, section 16(1)). A designated person is not permitted to move their account to one paying a higher rate of interest without a licence from the Treasury. 16.1.2 Can someone pay a cheque, or transfer funds, into my frozen account? Banks are allowed to credit funds to frozen accounts. The person giving you the cheque/transferring the funds will, however, be breaching the prohibitions if they do not have a licence and know or suspect that that they are making funds available a designated person. You will also need a licence to deal with such funds in any way. 16.1.3 Can I take out insurance? Yes. There are no restrictions on providing financial services to persons designated under regimes other than the Terrorist Asset-Freezing etc. Act 2010, for which there is a general licence. However, any payments by an insurance provider to any designated person will engage the prohibition on making funds available and funds can only be released to the designated person in accordance with a licence from the Treasury. 16.1.4 Can I invest my funds? No. This is prohibited because it would involve dealing with a designated person s funds (as it would result in a change in the funds volume, amount, location, or character). This would also contravene the prohibition on the provision of financial services for those designated under TAFA. 16.1.5 Can I have a debit card? Designated persons are not prohibited from having debit cards. Their use would need to be in accordance with a Treasury licence. The decision on whether to issue/maintain a debit card for an individual rests with the bank. For the reasons set out below a designated person could not be issued with a credit card. 46 P age

16.1.6 Can I have a pre-paid card? Designated persons would need a Treasury licence to pay money onto a pre-paid card and to use the money on it. It is a criminal offence for anyone else to pay funds onto a designated person s prepaid card without a licence as this is making funds available to them. 16.1.7 Can someone give/lend me money? No. Without a licence from HM Treasury this would be a breach of the prohibition on making funds available to a designated person. 16.1.8 Can someone give my spouse/partner money? There is no prohibition on someone making funds available to the wife of a designated person, unless the designated person obtains a significant financial benefit from those funds. So someone could make funds available to a designated person s spouse or partner unless they know/reasonably suspect that those funds will be used for the significant financial benefit of a designated person (e.g. to settle a loan for which the designated person is liable). 16.1.9 Can someone buy me a drink/meal? There is no prohibition on making economic resources available to a designated person unless that person is thereby able to obtain a significant financial benefit. In general therefore it would not be prohibited for someone to buy a meal or a drink for a designated person. Note, however, that the cumulative effect would need to be considered by the designated person: if one person were to frequently buy the designated person s meals or shopping, thereby saving the designated person a significant amount of money, this could amount to a significant financial benefit and would be prohibited. 16.1.10 Can I accept a gift? It is an offence for someone to make funds available to a designated person without a licence. Thus a designated person cannot accept a gift of cash, vouchers etc. However it is not prohibited to make economic resources available to a designated person unless the person making them available knows or suspects the designated person will use or exchange them for funds, goods or services. So a designated person can accept a non-cash gift if he doesn t sell it, use it for business, or otherwise exchange it, or use it in exchange, for funds, goods, or services. 16.1.11 Can someone lend me something? A designated person cannot be lent funds (e.g. cash, vouchers & other payment instruments). However, it would not be prohibited for someone to lend a designated person an economic resource for normal, lawful, non-income use. For example a designated person could borrow a lawn mower to cut their own grass but not to use it for a gardening business. 16.1.12 Can I borrow a Pay As You Go Oyster card from a friend? Yes, unless by lending you the Oyster card you get a significant financial benefit. For example it would not be prohibited to borrow someone s Oyster card for occasional travel, but it would be prohibited to use it on a daily basis if this alleviates the designated person form otherwise having to meet this significant expense. 47 P age

16.1.13 Can someone pay my bill? It is an offence to make funds available for the benefit of a designated person if they obtain a significant financial benefit. So it would be prohibited for someone to pay a significant bill for a designated person (e.g. their monthly energy bill if this would otherwise have to be paid by the designated person) but not, for example, to pay, on one occasion, for the designated person s reasonable share of a bill for a meal. 16.1.14 Can I take employment? There is nothing stopping a designated person from taking up employment. A licence will be required for the designated person to be paid any wages and may also be required for associated payments (e.g. pension contributions). 48 P age

17 ANNEX C: trade sector advice The following paragraphs provide more tailored advice for specific industry sectors. The first section below deals with general commercial issues, such as making payments to a designated person or being paid by a designated person. 17.1 GENERAL COMMERCIAL ISSUES 17.1.1 Can I make payments to a designated person? It may be possible to make payments due under contracts, agreements or obligations, which were concluded or arose prior to the date the person was designated subject to payment being made to a frozen account. This can take place without a licence because it is automatically exempted by the legislation. Before making such payments you should take steps to establish the facts, and in particular that the account is frozen as required by the sanctions legislation, in the first instance by seeking confirmation from the account holding institution. All other payments to a designated person require a licence. 17.1.2 A designated person owes my business money. Can I write off the debt? Should you wish to cancel or write off the debt obligations e.g. credit card balances, overdrawn accounts, mortgage or loan accounts, of designated persons you should submit a licence request to HM Treasury setting out full details of the loan in question, including the outstanding balance and what action, if any, you have taken to recover monies. This requirement arises because writing off a debt owed by a designated person may constitute allowing them to obtain a significant financial benefit, which sanctions prohibit. 17.1.3 A designated person owes my business money. Do I need a licence to pursue the debt? Pursuing debts owed by designated persons is not prohibited. A licence is not required to appoint a receiver or to transfer the administration activities related to pursuing a debt for example. However, a licence will be required for the eventual payment of the debt out of frozen funds and possibly other related activities e.g. appointing receivers, collecting rental payments or legal costs and other charges properly due from such funds during the course of recovery. 17.1.4 I ve got a garnishee Order nisi/absolute against a designated person. Can the Treasury provide me with details of frozen accounts? No. However, HM Treasury will consider an application for a licence to release funds from an identified frozen account. 17.1.5 Is a licence required to exercise a right of set off? Yes, in all likelihood. A right of set off ensures that the claims that two parties have against each other are satisfied, provide that payment of such claims is due. The exercise of that right, therefore, involves at least two claims between the same parties each of whom owes an amount to the other under separate contract. The set-off reduces one party s debt by deducting from the amount owed to that party by the other party and so could amount to the provision of a significant financial benefit to the listed party. 49 P age

17.1.6 Do financial sanctions mean I cannot trade with persons or entities in countries subject to financial sanctions? Financial sanctions do not impose general trade bans or restrictions on exporting to, or importing from, persons or entities in countries subject to financial sanctions. However, financial sanctions will impact if you are seeking to trade with a designated person or if the payment relating to trade is routed through a designated bank. Separately, the adoption of targeted financial sanctions against specific individuals or entities in a country may also heighten sensitivities about dealing with the country concerned and that may make it more difficult to make payments to or receive payments from that country. Exporters may experience other difficulties, for example in getting paid despite holding a licence. That may be due to importers facing shortages of funds, or exchange control or other restrictions in their jurisdiction. Those are outside the control of HM Treasury. Financial sanctions may, in practice, also be accompanied by other restrictions, such as trade sanction. There is more about other trade sanctions at: https://www.gov.uk/sanctions-embargoesand-restrictions 17.1.7 How can sanctions affect my ability to export goods? Trading with a designated person is likely to engage the financial sanctions prohibitions relating to funds and economic resources. Specifically financial sanctions prohibit making payments or economic resources available to that person and dealing with any payments they make. This means that goods, which will have an economic value, cannot be exported to that person. That is the case even if the contract for export was signed before the importer was designated; it is not within the Treasury s gift to license the release of economic resources to a listed person on the basis that they are owed under a prior contract. 17.1.8 I want to sell humanitarian goods, medicines etc to a country subject to financial sanctions. Will financial sanctions affect that? Modern smart or targeted financial sanctions do not usually seek to interrupt, for example, the export of medicines, foodstuffs or other humanitarian goods to countries against which financial sanctions may be in force. So, even where financial sanctions and other restrictions are in place there are generally exemptions for the export of humanitarian goods, medicines etc. Nevertheless UK exporters may still need a licence to supply goods (ie making economic resources available) or to be paid by or through a designated person. HM Treasury will consider licence applications in such cases as a matter of priority. 50 P age

17.2 BANKING 17.2.1 I have a designated person as a customer what should I do? You must freeze (i.e. refrain from dealing with) their assets and report details of the assets to HM Treasury. Reports of frozen accounts etc should include the following details: The full name of the account holder or holders, including how the name is presented on any debit card etc; Details of the account holding institution the name and address of the bank etc, and its FSA reference number where applicable; The account sort code and number; Currency in which the account is maintained; The type of account (current, deposit, etc) and whether it is a primary account or subaccount; and The latest account balance/s. 17.2.2 Do I need a licence to close a frozen account and transfer any balance to the customer? You require a licence to do this if doing so involves transferring frozen funds out of the account and/or making funds available to the listed person. If closing an account involves no dealing with frozen funds or making funds available, it is not illegal and no licence is required. However, it is not a legal requirement that a listed person s account is closed; the requirement is simply that funds in it are not dealt with unless under the authority of a licence. The Treasury prefer that banks do not close listed persons accounts as the effect can be to lead to financial exclusion, and reduces the opportunities to monitor the finances of a designated person. 17.2.3 Can I apply interest to an overdrawn, loan or mortgage frozen account? Interest may continue to be applied to both credit and debit accounts without a licence as this is exempt under the legislation. 17.2.4 Are financial institutions expected to know if a credit received for a frozen account relates to a prior contract? What obligation is there on the bank to investigate the source of credits to frozen accounts? Financial sanctions regimes include a provision that allows financial institutions that receive funds from third parties to credit frozen accounts. Where crediting of funds is permitted, the institution is required to report details of the credit as soon as possible to the competent authority i.e. HM Treasury (unless the funds credited are in respect of interest or earnings on the account, in which case no reporting is required). Full information should be provided when reporting details of credits. If as part of your normal course of business you are aware of the background to the credit then this information should be provided also. 51 P age

Financial institutions are not however required to undertake separate investigations beyond what they could be expected to know as the receiving bank. 17.2.5 Can firms lend money or provide credit to a designated person? Loans and other forms of credit must not be made available to designated persons unless a licence is obtained. 17.2.6 Can I apply interest to frozen accounts? Yes. Interest may continue to be applied to both credit and debit accounts without a licence. 17.2.7 I am a bank. Can I credit funds transferred to the account of a designated person? The prohibition against making funds or economic resources available does not prevent financial or credit institutions that receive funds transferred by third parties to the frozen account of the listed person from crediting frozen accounts provided that any additions to such accounts are also frozen. Financial institutions are required to inform the Treasury of any such transactions without delay. 17.2.8 Can I credit funds received from a designated person to their frozen account? Financial or credit institutions that receive funds transferred by the designated person to their frozen account must hold those funds in suspense and apply for a licence to credit the funds to the frozen account. Where HM Treasury receive applications from restricted persons to allow them to pay funds their frozen account and license such activity, the licence will also be issued to the relevant financial or credit institution. Banks and other institutions must report credits to frozen accounts to HM Treasury. 52 P age

17.3 INSURANCE 17.3.1 What is the general effect of sanctions on insurance businesses? Generally sanctions do not ban the provision of insurance. However it is prohibited to provide insurance to: person designated under TAFA 2010, and certain state entities and persons in Syria and Iran. There are special provisions for the insurance supplied to designated persons- see below. There is more about the financial restrictions in force in respect of Iran, by virtue of their nuclear proliferation activities at: http://www.hm-treasury.gov.uk/fin_sanctions_iran_nuclear.htm There is more about the financial restrictions in force in respect of Syria at: http://www.hm-treasury.gov.uk/fin_sanctions_syria.htm and at https://www.gov.uk/sanctions-on-syria Additionally, sanctions prohibit the payment of funds to or for the benefit of designated persons, which would impact on the payment by the designated person and others of insurance premiums and the payment of claims to a designated person, which could not take place unless licensed. 17.3.2 What should an insurer do if an existing customer becomes a designated person after the inception of cover? If the designated person is listed under the domestic terrorism regime (the only regime under which it is prohibited to provide insurance to listed persons), two general licences are currently in place which cover insurance. General licences allow: the provision of insurance to designated persons, and the immediate and temporary provision of goods and services in respect of an insurance claim like courtesy cars or emergency hotel accommodation to designated persons. There is more information on general licences at: http://www.hm-treasury.gov.uk/fin_sanctions_general_licences.htm If someone is listed by the UN or EU under a country sanctions regime, the fact of their designation does not make any insurance cover that they enjoy at the time of their designation, or any cover that might be taken out after that date, illegal. However, if they are listed under the Syrian or Iran (proliferation) regimes, it may be illegal to provide them with cover regardless of their designation, because of the broad insurance bans referred to above. There is no legal requirement to discontinue cover to listed persons. Insurers making an assessment of whether they wish to discontinue cover to a designated person will wish to take into account the 53 P age

potential social harm that might be caused if they terminate a contract that is either not subject to any restriction or is permitted under a general licence. 17.3.3 What is the position if a policy holder names a designated person as a beneficiary? Sanctions prohibit the payment of funds to or for the benefit of designated persons. This would, without a licence, prevent the payment of benefits due under a policy to a beneficiary who is a designated person. 17.3.4 As an insurer I may not know the identity of every beneficiary of the cover I provide, because the business is managed under a delegated authority or bordereau arrangement. What should I do? The underwriting insurer should take reasonable measures to establish that any third party with whom it enters into a delegated authority or bordereau arrangement, understands their obligations to meet the UK financial sanctions obligations, including notification to the underwriting insurer of any target matches or frozen accounts. Whilst Insurers may not have knowledge of the identities of the underlying clients /customers and so be unable, themselves, to identify any potential sanctioned party exposure, the underwriting insurer should satisfy itself that the third party s systems and controls are commensurate with the UK financial sanctions obligation as they apply to the delegated activity. Insurers should consider measures such as making specific reference to sanctions compliance within their Terms of Business and/or from time to time requiring positive affirmation from their third parties of their financial sanctions systems and controls. 17.3.5 As an insurer, I may only receive partial information from third parties. What should I do? Insurers should undertake reasonable enquiries to identify whether the underlying clients or claimants may be sanctioned parties. Insurers should consider their arrangements with introducers and other parties to maximise the detail of information provided. Should this information then be sufficient to undertake adequate investigation, then the insurer should investigate the sanctioned party potential as it would in any other situation where such information is available. Where, for valid business reasons, this level of detailed information cannot be obtained, insurers may consider the following approaches: For UK focused business, it may be appropriate to compare the partial details received against those details, on the HM Treasury Consolidated List, relating to UK resident sanctioned parties (which would be a far lower number of cases than on the full list); Similarly, for non UK business, insurers may focus their investigations in respect of those entries on the HM Treasury Consolidated List that correspond to the jurisdiction where underlying client or claimant is suspected to reside. Where it is impossible to draw a conclusion due to non-availability of additional data the insurer may lack the requisite knowledge or suspicion to fall foul of any of the sanctions prohibitions. 54 P age

17.3.6 I provide pensions or other products to an employer, and may not know who the relevant employees are. What should I do? Subject to the precise arrangements it is likely that the contract will be with the employer. The employer then provides the benefits to the employees further to their contracts of employment. Insurers should initially focus on the employer when conducting their sanctions checks. Where specific employees are drawn to the insurers attention (either for special underwriting or for the direct payment of benefits) sanctions checks should be conducted. 17.3.7 I am a reinsurer. What do sanctions mean for me? The insurance bans in the Syrian and Iranian sanctions regimes apply equally to reinsurers. Reinsurers should satisfy themselves that they are not breaching these measures. 17.3.8 I am an insurance agent or broker. What do sanctions mean for me? Like all UK businesses, insurance brokers or agents must comply with financial sanctions because they are subject to the legal requirements of those sanctions to freeze assets of, and not to make funds or economic resources available to, designated persons, or to provide cover to those classes of persons and entities referred to in the Syrian and Iranian insurance prohibitions. Separately, agents and brokers may find that the underwriters for whom they act makes it a contractual requirement that the agent etc complies with UK sanctions or carries out certain sanctions checks. Generally these contractual arrangements will be an issue for the parties to the contract. Insurers themselves may want to undertake enquiries so as to be sure that agents or other intermediaries (to whom they pay commissions etc) are not themselves sanctioned entities. 17.3.9 The Syrian and Iranian insurance bans refers to compulsory or third party insurance. What does the term compulsory mean in this regard? Compulsory insurance includes not only insurance required by statute but also insurance obtained to meet any obligation covered by law (including regulations). It is the responsibility of the insurer to seek sufficient evidence that the cover sought by a designated entity contributes to satisfying a legal or regulatory requirement, both in terms of the nature of cover and extent of cover sought. 17.4 Motor insurance 17.4.1 Does a firm providing a complimentary vehicle or temporary hire car in relation to a motor vehicle insurance policy to a designated person require a licence? No. Whilst there is a prohibition on making economic resources available to a designated person, if the person providing the economic resource neither knows nor has reasonable cause to suspect that the designated person would be likely to exchange the economic resource, or use it in exchange, for funds, goods or services, the resource can be provided without breaching the prohibition (and therefore without a licence). 55 P age

HM Treasury consider that, in the normal course of this type of business, this test would be met and therefore the economic resource (e.g. the car) could be provided without a licence. This view also applies to all other financial sanctions regimes. However, firms should bear in mind that if there is knowledge or reasonable cause to suspect that the designated person would be likely to exchange the economic resource, or use it in exchange, for funds, goods or services then the economic resource should not be provided. In such circumstances firms should consider their reporting obligations under the financial sanctions legislation. The firm may also need to consider whether there is an obligation also to report under Proceeds of Crime Act 2002 or the Terrorism Act 2006. HM Treasury similarly considers that the payment for temporary complimentary/hire vehicles provided by insurance firms to designated persons in the normal course of this type of business would not amount to making funds available for the benefit of the designated person and therefore a licence is not required. This view applies to all financial sanctions regimes. 56 P age

17.5 LEGAL SERVICES 17.5.1 We are a firm of solicitors acting for a designated person. Do we need a licence? The provision of legal services does not require a licence. However, the payment of legal fees using frozen funds held on behalf of a designated person does require a licence because this involves dealing with funds that are required to be treated as frozen. 17.5.2 Do solicitors acting for a designated person who is funded by legal aid or by other third parties require a licence to deal with those funds? A licence is required both by the Legal Aid Agency and any other third party that pays the listed person s legal expenses on their behalf. This is because this breaches the prohibition on making funds available to an unlisted person (i.e. the solicitor) in circumstances in which the listed person obtains a significant financial benefit (the discharge of the financial obligation to his or her solicitor). A general licence permits the Legal Aid Agency (LAA) to make payments to solicitors representing a designated person where the LAA has assessed that the individual is eligible for legal aid, and for those funds to be applied by the solicitors to meet the legal costs incurred in the course of advising and representing the designated person listed under the Terrorist Asset Freezing or Al Qaida regimes. The general licence is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/227084/3._g4_- _Legal_Aid.pdf A general licence also allows third parties to meet the legal expenses of certain persons: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/227085/4._g5_- _3rd_party_payment_of_DP_Legal_Expenses.pdf Under the country sanctions regimes, the Treasury will consider applications for individual licences to be issued for third parties to pay listed persons legal bills and for solicitors to deal with frozen funds they hold in client accounts on behalf of listed persons in order to meet their fees. 57 P age