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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

Sanctions and Anti-Money Laundering Act 2018 Summary

Author: Syedur Rahman  25 October 2019
4 min read

Syedur Rahman of Rahman Ravelli outlines the powers and obligations created by the Act that are set to come into force when Brexit is completed. 

The sanctions-related provisions of he Sanctions and Anti-Money Laundering Act, which received Royal Assent on 23 May 2018, are not yet in force. The date on which the provisions come into force will be determined by regulation, presumably around the time of the UK’s departure from the European Union.

But when these provisions come into force, they will give the UK government much wider powers to implement sanctions: financial sanctions, trade sanctions and immigration sanctions. This is likely to mean many organisations facing new challenges in terms of sanctions compliance. Although the precise date for the introduction of these provisions has not yet been set, it would be in the best interests of such organisations if they found out about them in advance and, if necessary, sought advice from relevant legal experts.

Reasons for the Act

The Act became a necessity due to Brexit. The UK could be in breach of its international obligations if it did not introduce the measures in the Act once it withdrew from the European Union (EU). As the UK is a member of the United Nations, it is obliged to implement sanctions passed by resolutions of the UN Security Council. At present, as a result of the EU’s Common Foreign and Security Policy, UN measures are implemented through EU Regulations and have direct legal effect on all member states (as are the sanctions made autonomously by the EU). 

The UK plans, under the European Union (Withdrawal) Act 2018, to maintain EU law as it is on the date of withdrawal from the EU by transposing it into national law. Yet this would be inadequate when it comes to sanctions, as this is an area that undergoes regular change. 

The Sanctions and Anti-Money Laundering Act 2018 is the means by which the UK government will be able post-Brexit to both lift sanctions that should not be in force anymore and impose new ones as part of its international obligations. Yet the Act also gives the UK government the power to devise and operate its own sanctions regime.

Sanctions Powers under the Act 

Section 1 of the Act confers broad powers on the Secretary of State and the Treasury (“an appropriate Minister”) to impose sanctions regulations that are considered appropriate for compliance with a UN obligation, for compliance with any other international obligation or for a purpose that would:

  • further the prevention of terrorism in the UK or elsewhere
  • be in the interests of national security
  • be in the interests of international peace and security
  • further a UK government foreign policy objective
  • promote the resolution of armed conflicts or protection of civilians in conflict zones
  • deter gross violations of human rights, promote compliance with international human rights law or international humanitarian law
  • contribute to multilateral efforts to prevent the spread and use of weapons and materials of mass destruction
  • promote respect for democracy and the rule of law

Whereas the existing EU regime focuses on imposing sanctions that are necessary, the Act gives power to impose sanctions that are considered appropriate. This is, in effect, a lower requirement, which makes it possible for the UK government to use sanctions more extensively. But a Minister can only impose sanctions regulations on such discretionary grounds if he or she has determined there are good reasons to pursue that purpose and that imposing sanctions is a reasonable course of action for that purpose – and they must put an explanatory report detailing these reasons before Parliament.

Compliance Difficulties with the Act

One significant aspect of the Act is that it not only allows for named persons to be targeted for sanctions – it also allows for persons to be selected for sanctions based on description.

Designation by description can only be made if:

  • The description of persons specified must ensure that a reasonable person would know whether they fell within it
  • At the time the description is specified, it is not possible for the Minister to identify and designate by name all the persons falling within that description.
  • The Minister has reasonable grounds to suspect that where the specified description is members of a particular organisation, that the organisation is an “involved person” or, in the case of any other specified description, that any person falling within that description would necessarily be “an involved person”. An involved person means someone who is or has been involved in an activity specified in the regulations or someone who is controlled by, acting on behalf of or associated with such a person.

Section 43 of the Act requires the Minister to issue guidance about any prohibitions and requirements that are imposed by the regulations.

This can include guidance relating to: 

  • best practice for complying with the prohibitions and requirements
  • the enforcement of the prohibitions and requirements
  • circumstances where the prohibitions and requirements do not apply.

Section 44 of the Act offers protection from civil proceedings for acts carried out in the reasonable belief that they comply with regulations made under the Act. While this is one protection that the Act offers, the wider picture is far from totally reassuring. As yet, the exact type of guidance that can be expected and the way that the Section 44 protection will be applied are unclear. When the uncertainties about how designation by description will function are also considered, many organisations may struggle to ensure compliance without seeking specialist advice.

Reporting Obligations

In August 2017, the European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017 came into force. They expanded the scope of the reporting requirements set out in existing financial sanctions legislation to cover certain businesses or professions, including auditors and tax advisers. Such professionals in the UK should report to the Office of Financial Sanctions Implementation (OFSI); the body that helps to ensure that financial sanctions are properly understood, implemented and enforced in the United Kingdom.

Under the Act, further obligations can be imposed.  Regulations made under the Act can make provision:

  • for persons of a prescribed description to inform an authority of prescribed matters and to retain certain records
  • authorising an authority to require persons of a prescribed description to provide information
  • for powers to inspect and copy prescribed information and related powers of entry.

The full reach of any measures that are imposed cannot be known yet but the requirements they introduce could be extensive.

The Act enables regulations to be made in order to enforce the obligations outlined above. These regulations may create criminal offences punishable up to a maximum of 10 years imprisonment - an increase from the maximum of seven years imprisonment which may be imposed for breaches of financial sanctions under the Policing and Crime Act 2017.

Response to the Act

This legislation has prompted much discussion with some considering aspects of it to be controversial; most notably regarding the new powers the government is receiving. Much will ultimately depend on how the Act is used. While it does appear to be more comprehensive than the EU legislation that is in place, the UK government has expressed a wish to continue to work closely with EU members and other international partners on sanctions after Brexit has been finalised.

Read our guide:  Sanctions - How We Help Business Avoid The Pitfalls.

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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.

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