Sanctions Reporting Master Class on SARs and Sanctions

Sanctions Reporting Master Class on SARs and Sanctions Kenneth Baker BVI Financial Services Commission BVI Association of Compliance Officers Maria’s By The Sea, Tortola, BVI 8 th October 2019

Agenda § § § § Why do we have financial sanctions? Reporting obligations Licences granted by the Governor Sanction screening Ongoing monitoring Clear and demonstrable understanding of sanctions Risk of sanction breaches U. S. expands terrorist financing sanctions 2

Why do we have financial sanctions? Financial sanctions are restrictions put in place by the UN, EU, UK or [USA] to achieve a specific foreign policy or national security objective: • limit the provision of certain financial services • restrict access to financial markets, funds and economic resources Financial sanctions are generally imposed to: § Coerce a regime, or individual into changing behaviour; § Constrain a target by denying them access to key resources; § Signal disapproval by sending broader political message; § Protect the value of assets that have been misappropriated 3

Reporting obligations § Governor § Where UN/EU or UK sanctions involved § Know or have reasonable cause to suspect that a client § Is a designated person § Has committed an offence under the Regulations (Order in Council) § AMLTFCOP § Under s. 20 Requirements for enhanced customer due diligence § Should report the details of any relationship to the FIA and FSC 4

Licence granted by the Governor § § § Conduct certain transactions with consent - Secretary of State Grant a licence to authorize activity otherwise prohibited Grant a licence to approve list of activities Amend a licence granted Refuse an application for a licence Revoke licence 5

Sanction screening § Licensees should take adequate measures § § § Including effective sanction screening Appropriate to the nature and size of the business Applicable to new customers and payments Applicable to existing customers when new designations are published Capable to satisfy the BVI obligations from an AML perspective Capable to satisfy the EU/UK and [US obligations] § [US obligations are not supported by legislation - have real time monitoring] § [US obligations have significant reputational implications for the BVI] 6

Ongoing monitoring § Ongoing monitoring and testing should be conducted on a regular and frequent basis § Licensees are expected to understand their obligations § Licensees are expected to assess the effectiveness of their procedures § Whilst a frequency has not been prescribed, an annual or every few years is not likely to be effective § Testing should be performed frequently to have an effective sanctions regime 7

Clear and demonstrable understanding of sanctions Develop appropriate internal training for key staff Clarity around the ownership and accountability of the risk Ensure sanctions list are kept up to date Clear documentation of decisions taken with regards to sanctions § Seek licence where relationship exits and report appropriately § § 8

Risk of sanctions breaches § Statutory Order § £ 5, 000 § FSC can impose multiple AML fines for a sanctions breach § Personal fine – maximum $70, 000 per occurrence § Corporate fine – maximum $75, 000 per occurrence § Elevate your Risk Assessment Framework (RAF) rating 9

U. S. expands Terrorist Financing Sanctions § 10 September 2019 – President authorize Treasury Secretary to impose sanctions on non-U. S. financial institutions § The new executive order increases direct an indirect sanctions risk for non-U. S. financial institutions § More flexibility in targeting financial institutions that have knowingly conducted transactions with terrorists: § Blocking access to U. S. financial system § Prohibiting correspondent account, or § Imposing strict conditions on relationships 10

Thank You 11