UN, EU and Other Sanctions
This information has been prepared to assist firms in their development of appropriate and effective compliance arrangements in relation to sanctions.
Please note that the information on this webpage is supplemental to, and is not intended to supersede any of, the requirements of any applicable legislation relating to sanctions, the Handbook for Financial Services Businesses on Countering Financial Crime and Terrorist Financing (”FSB Handbook”) or the Handbook for Legal Professionals, Accountants, and Estate Agents on Countering Financial Crime and Terrorist Financing (“PB Handbook”) (collectively the “Handbooks”), nor is it intended to supersede any information or requirements stipulated by the States of Guernsey, Alderney or the Chief Pleas of Sark.
For further information regarding sanctions legislation and the associated obligations, please refer to the sanctions webpage of the States of Guernsey which can be accessed at: www.gov.gg/sanctions.
From time to time, changes to applicable legislation, the Handbooks or requests for clarification received by the Commission will warrant the amendment of this webpage. It is therefore recommended that firms monitor the Commission’s website for news about any updates to this webpage.
What Are Sanctions?
A sanction is a measure adopted against a country, regime or individual believed to be violating international law. Sanctions are political trade restrictions put in place with the aim of maintaining or restoring international peace and security.
Why Are Sanctions Used?
Sanctions are put in place for a number of reasons. All recent UN and EU sanctions contain information as to their intended aim or purpose. The ultimate objective of a sanction varies according to the situation. For instance, an arms embargo and a ban on the export of certain items or raw materials could be aimed at supporting a peace process and restricting the financing of weapons by the combatants. Sanctions may also be aimed at preventing weapons from falling into the wrong hands, disrupting terrorist operations, or trying to change the policies and actions of the target.
Examples of objectives that sanctions measures may seek to achieve are:
- A change in the conduct of a particular country, regime or person.
- Placing pressure on a country, regime or individual to comply with set objectives.
- As a punitive measure when peace and security are threatened.
- Deterring, preventing and suppressing terrorist financing and terrorist acts.
Types Of Sanctions
Sanctions tend to take the form of restrictive/coercive measures, and may involve:
- The freezing of funds.
- The withdrawal of financial services.
- Bans or restrictions on trade.
- Bans or restrictions on travel.
- Suspension from international organisations.
Information Sources – Sanctions And Embargoes
Further general information about the nature and scope of sanctions can be found at the following websites:
|UN Security Council Sanctions Committee||www.un.org/sc/committees/index.shtml|
|HM Treasury in the UK||www.gov.uk/sanctions-embargoes-and restrictions|
|Office of Foreign Assets Control (OFAC)||www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx|
|States of Guernsey||www.gov.gg/sanctions|
The Bailiwick’s Sanctions Regime – General
The Bailiwick’s sanctions legislation gives domestic effect to measures taken by the UN and/or the EU. Although the Bailiwick’s sanctions regime is based on legislation that broadly mirrors equivalent legislation in the UK, it is completely separate from, and operates independently of, the UK regime.
There is no single piece of legislation that sets out the sanctions regime in the Bailiwick. Each measure, or set of measures, is contained in their own specific statutory instrument. Each statute will specify what can and cannot be done under the terms of that sanctions measure.
A list of the sanctions legislation applicable to the Bailiwick can be found at: http://www.gov.gg/sanctions.
The Bailiwick's Sanctions Regime – Terrorist Financing
The Bailiwick has enacted a number of pieces of legislation that implement sanctions measures dealing specifically with terrorist financing.
- The Terrorist Asset-Freezing (Bailiwick of Guernsey) Law, 2011
- The Afghanistan (Restrictive Measures) (Guernsey) Ordinance, 2011
- The Afghanistan (Restrictive Measures) (Alderney) Ordinance, 2011
- The Afghanistan (Restrictive Measures) (Sark) Ordinance, 2011
- The Al-Qaida (Restrictive Measures) (Guernsey) Ordinance, 2013
- The Al-Qaida (Restrictive Measures) (Alderney) Ordinance, 2013
- The Al-Qaida (Restrictive Measures) (Sark) Ordinance, 2013
The provisions dealing with sanctions in the Handbooks will be updated as part of the Handbook revision project. In the interim, an instruction has been issued to both financial services businesses and prescribed businesses advising them of the changes to the above legislation and requiring that they comply with the updated requirements. The Instruction includes a revised UN, EU and Other Sanctions Chapter for the Handbooks, to replace current content. A copy of the replacement chapters has also been published on the GFSC website.
Lists Of Sanctioned Entities And Individuals
As part of its compliance arrangements, a firm must ensure that it has in place appropriate and effective policies, procedures, systems and controls to identify prospective and existing customers who may be the subject of a sanction.
The rules in the Handbooks require that when determining whether an individual or legal person is the subject of a sanction, the full list of financial sanction targets must be consulted. This list may be found in the financial sanctions section of the HM Treasury website at:
The list is kept up to date and includes all persons whose designation is effective in the Bailiwick, other than persons designated by the Policy Council under the Terrorist Asset Freezing (Bailiwick of Guernsey) Law, 2011, who are separately listed on the States of Guernsey website at www.gov.gg/sanctions.
The HM Treasury’s Asset Freezing Unit in the UK offers a free subscription facility for notification by e-mail when a financial sanctions-related release is published. The facility can be accessed at: engage.hm-treasury.gov.uk/fin-sanc-subscribe/.
The Afghanistan and Al–Qaida Ordinances give effect to designations of listed persons made by the EU which in turn implement United Nations Security Council designations. The lists can be accessed at:
Notwithstanding the Bailiwick’s independent sanctions regime, trans-jurisdictional issues may arise at times. Many transfers of funds will be made to or from another jurisdiction that operates a sanctions regime and in such cases a licence, authorisation, or notification may be required in both jurisdictions.
In addition, the legislative frameworks of some jurisdictions contain provisions that have extra-territorial effect, so that they may apply to some of the parties on the grounds of nationality or place of incorporation even if the jurisdiction in question is not involved in that transaction.
The United States of America’s Office of Foreign Assets Control (OFAC) publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups and entities, such as terrorists and narcotics traffickers designated under programmes that are not country-specific. Collectively, such individuals and companies are called "Specially Designated Nationals" or "SDNs". Their assets are blocked and U.S. persons are generally prohibited from dealing with them. Bailiwick firms should be aware, in particular, of sanctions implemented by OFAC. OFAC regulations can be applied to:
- U.S. citizens and permanent resident immigrant regardless of where they are located.
- Persons and entities within the United States.
- Persons and entities trading in U.S. Dollars.
- U.S. incorporated entities and their foreign branches.
- In the cases of certain sanctions, such as those regarding Cuba and North Korea, all foreign subsidiaries owned or controlled by U.S. companies.
- Foreign persons in possession of U.S. origin goods in some cases.
OFAC also maintains a list which can be found at: www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx. This list is regularly updated.
OFAC also offers a free online search engine at: sdnsearch.ofac.treas.gov.
Disclosure And Reporting Requirements
Under the legislation referred to above, financial services businesses are obliged to make a report to the Policy Council if they know or have reasonable grounds to suspect that a person is a listed entity or has committed a breach of the relevant asset freezing provisions. There are also some specific reporting obligations applicable to other sanctions regimes. Further information is available on the States of Guernsey website at www.gov.gg/sanctions.
These obligations in addition to the suspicious activity reporting regime under the Disclosure (Bailiwick of Guernsey) Law 2007, as amended and the Terrorism and Crime (Bailiwick of Guernsey) Law 2002, as amended. Holding an account for a sanctioned party, rejecting or processing a transaction (whether or not in breach of sanctions prohibitions) which involves a sanctioned party, is not in itself grounds for submitting a disclosure of suspicion of money laundering and/or terrorism financing to the Financial Investigation Unit under those Laws.
However, if dealings involving a sanctioned party give rise to knowledge or suspicion that another person is engaged in money laundering or terrorist financing, or if there are reasonable grounds for such knowledge or suspicion, a disclosure should be made in the form and manner prescribed by the Disclosure (Bailiwick of Guernsey) Regulations 2007, as amended or the Terrorism and Crime (Bailiwick of Guernsey) Regulations 2007, as amended.
Licensing Requirements – States Of Guernsey (Policy Council)
The Policy Council is, in most cases, the competent authority and licensing authority in relation to any activity that would otherwise be prohibited under the Bailiwick’s financial sanctions legislation. If an individual or institution wishes to make an application to release funds from frozen accounts, or to make funds, economic resources or financial services available to or for the benefit of a designated person they are advised to contact the States of Guernsey (Policy Council) in the first instance.
Consequences For Non-compliance With Sanctions Legislation
Non-compliance with sanctions legislation may result in prosecution for criminal offences and/or financial penalties. Prosecutions may take place not only against a firm, but also key individuals within a firm.
Non-compliance may result in assistance being given to finance or otherwise assist:
- Terrorism or terrorist organisations.
- The production, development or use of weapons, including chemical, nuclear and biological warfare (weapons of mass destruction).
- Political repression or human rights abuses within a state.
This, in turn, is likely to result in serious reputational damage to the firm, its senior management and the reputation of the Bailiwick as an international finance centre.
Compliance Arrangements And Sanctions – The Commission
When a firm fails to comply with applicable sanctions legislation, this may call into question the appropriateness and effectiveness of its compliance arrangements.
Firms should ensure that a review of their compliance arrangements includes an assessment of the appropriateness and effectiveness of the policies, procedures, systems and controls put in place to ensure that sanction targets are promptly identified, proceeds handled and reporting undertaken in compliance with the applicable regulatory requirements.
To do so, firms should focus on assessing where and how their business would be most likely to breach sanctions and develop the appropriate policies, procedures, systems and controls needed to mitigate those risks.
Compliance arrangements can be ineffective if sanctions and the risks associated with them are not properly understood. This can occur where a firm wrongly assumes that:
- The risks associated with sanctions targets (i.e. individuals and legal persons) can be mitigated through undertaking enhanced due diligence to the extent it would for politically exposed persons.
- Funds of sanctioned parties cannot be frozen because it may constitute “tipping off”.
- Sanctions are not required for clients who undertake transactions below the occasional transaction threshold or processes low value transactions.
- Sanctions screening is not necessary where a firm does not hold client money or deal with payments.
- Rating a customer as low risk means that sanctions screening is not required throughout the duration of that business relationship.
- All sanctions screening can be undertaken on a reactive basis (“trigger-based screening”).
- Sanctions do not apply to general or other types of insurance business therefore need not be monitored.
A firm’s compliance arrangements should incorporate consideration of sanctions and their related risks as part of:
- The formulation and review of its business risk assessment.
- The formulation of policies and procedures relating to customer risk assessments and their review. This should include procedures explaining additional enquiries to be undertaken where a possible sanctions target is identified.
- The formulation of monitoring processes. Sanctions screening on a retrospective basis, for example, would not be considered appropriate.
- The use of technology such as automated screening products. Firms should have a demonstrable understanding of the product’s capabilities along with its limitations. Firms should be able to show how the product is effective and appropriate, given the nature, size and complexity of the business. Review of these products and systems should form part of regular monitoring programmes and include consideration of resourcing to manage and investigate possible adverse findings.
- The use of third party providers. Where reliance is placed on a third party, effective monitoring should be undertaken by the firm to verify the effectiveness of the screening being undertaken by that party.
- Training of staff, senior management, the MLRO and the board.
- Record-keeping. Firms should be able to produce an audit trail of the sanctions screening it has undertaken and how it has responded to possible “hits”.
The Commission will try, where possible, to assist firms and individuals with general sanctions queries which relate to their compliance with the relevant sections of the two Handbooks.
Please address any sanctions related queries by email to [email protected] having first checked to ensure that your question is not answered by the guidance in this area.
The Commission will not be able to give fact-specific or legal advice on sanctions matters. It is recommended that, where necessary, independent legal advice is sought and/or reference is made to the States of Guernsey, Policy Council.
Please provide any feedback on this area of the website by email to [email protected].