Author: Syedur Rahman
11 March 2022
3 min read
A joint statement published by the Office of Financial Sanctions Implementation (OFSI), the Bank of England and Financial Conduct Authority (FCA), summarises the legal and regulatory requirements on firms - and the action that firms can take - in relation to the risk of sanctions evasion via cryptoassets. It comes in the wake of Russia’s invasion of Ukraine, which has prompted the imposition of sanctions on Kremlin-linked individuals and entities.
The statement emphasises that financial sanctions regulations do not differentiate between cryptoassets and other forms of assets. Use of cryptoassets to circumvent economic sanctions is a criminal offence under the Money Laundering Regulations 2017 and regulations made under the Sanctions and Anti-Money Laundering Act 2018.
Firms are reminded that if they have concerns about sanctions evasion or money laundering, they need to consider their obligations to report suspicions to the UK Financial Intelligence Unit (UKFIU) at the National Crime Agency, under the Proceeds of Crime Act 2002. The importance is emphasised of companies and individuals checking the FCA register to identify whether any cryptoasset firms they do business with are registered – as is the need to check the equivalent register of the jurisdiction in which the cryptoasset firm is based.
If an individual or firm has knowledge or a reasonable cause to suspect that they are in possession or control of, or are otherwise dealing with, the funds or economic resources of a designated person they must:
The statement makes it clear that controls developed to identify customers and monitor their transactions under the Money Laundering Regulations 2017 can help with compliance. But it says that firms will need to implement additional sanctions-specific controls as and when appropriate.
It states that firms should consider:
Firms also need to look for possible “red flag indicators’’ that may suggest an increased risk of sanctions evasion.
The clear implication is that enhanced due diligence is required. Firms now have additional obligations regarding the verification of a customer’s wealth and/or source of funds. These are obligations above and beyond your standard know-your-customer checks.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.