01 Aug 2017

New reporting requirements for certain businesses and professions

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On 8 August 2017, the European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017 (the "Regulations") will come into force, which will expand the scope of the reporting requirements set out in existing financial sanctions legislation to certain businesses or professions.

Businesses and professions affected

Previously only financial institutions were legally required to report to HM Treasury under financial sanctions legislation, but the Regulations will expand reporting requirements to accountants, law firms, tax advisers and others.

The Regulations define a "relevant business or profession" as:

(a) an auditor;
(b) a casino;
(c) a dealer in precious metals or stones;
(d) an estate agent;
(e) an external accountant;
(f) an independent legal professional;
(g) a tax adviser; and
(h) a trust or company service provider, operating in the United Kingdom.

These definitions apply to firms or sole practitioners where relevant.

In terms of scope, the Regulations amend statutory instruments which apply to the whole of the UK, and outside the UK to any UK national or any entity incorporated in the UK.

Reporting requirement

These businesses and professions will commit an offence (and may be liable to a fine and/or imprisonment) if they fail to comply with the reporting obligations set out in the relevant sanctions legislation.

This will mean that the relevant business or profession affected (as well as financial institutions) must inform HM Treasury if:

(a) it knows, or has reasonable cause to suspect, that a person:

i) is a designated person (and is therefore the subject of an asset freeze), or

ii) has committed a sanctions offence, and

(b) the information or other matter on which the knowledge or suspicion is based came to it in the course of carrying on its business.

Procedure

No formal consultation has been carried out in relation the Regulations, which were passed by the negative procedure, so they will automatically become law unless there is an objection from Parliament.  HM Treasury and the Office of Financial Sanctions Implementation (OFSI) are apparently engaging with the sectors affected to ensure that they fully understand the implications of this change and are given an opportunity to provide feedback on practical guidance and reporting mechanisms.

Conclusions

The Regulations, combined with the new monetary penalties for breaches of financial sanctions introduced on 1 April 2017 (as reported​ here), show that the UK Government is determined to ensure that sanctions are complied with and any breaches enforced in a proactive and wide-reaching manner.

The Regulations reinforce the need for businesses and professions to have thorough due diligence procedures in place and an understanding of when sanctions issues may arise and may require action.

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Sue Millar

Sue Millar
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Charlotte Murphy

Charlotte Murphy
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