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THE MAIN ASPECTS OF THE SANCTIONS AND ANTI-MONEY LAUNDERING ACT

November 2019 - Crime. Legal Developments by Rahman Ravelli Solicitors.

More articles by this firm.

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

The sanctions-related provisions of the Sanctions andAnti-Money Laundering Act, which received Royal Assent on 23 May 2018, are notyet in force. The date on which the provisions come into force will bedetermined by regulation, presumably around the time of the UK’s departure fromthe European Union.

But when these provisions come into force, they will give theUK government much wider powers to implement sanctions: financial sanctions,trade sanctions and immigration sanctions. This is likely to mean manyorganisations facing new challenges in terms of sanctions compliance. Althoughthe 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 aboutthem 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 inbreach of its international obligations if it did not introduce the measures inthe Act once it withdrew from the European Union (EU). As the UK is a member ofthe United Nations, it is obliged to implement sanctions passed by resolutionsof the UN Security Council. At present, as a result of the EU’s Common Foreignand Security Policy, UN measures are implemented through EU Regulations andhave direct legal effect on all member states (as are the sanctions madeautonomously 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 bytransposing it into national law. Yet this would be inadequate when it comes tosanctions, 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 beable post-Brexit to both lift sanctions that should not be in force anymore andimpose new ones as part of its international obligations. Yet the Act alsogives the UK government the power to devise and operate its own sanctionsregime.

 

Sanctions Powers under the Act

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

·        further the prevention of terrorism in the UK orelsewhere

·        be in the interests of national security

·        be in the interests of international peace andsecurity

·        further a UK government foreign policy objective

·        promote the resolution of armed conflicts or protectionof civilians in conflict zones

·        deter gross violations of human rights, promote compliancewith international human rights law or international humanitarian law

·        contribute to multilateral efforts to preventthe spread and use of weapons and materials of mass destruction

·        promote respect for democracy and the rule oflaw

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

Compliance Difficulties with the Act

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

Designation by description can only be made if:

        The description of persons specified must ensurethat a reasonable person would know whether they fell within it

·        At the time the description is specified, it isnot possible for the Minister to identify and designate by name all the personsfalling within that description.

·        The Minister has reasonable grounds to suspect thatwhere the specified description is members of a particular organisation, thatthe organisation is an “involved person” or, in the case of any other specifieddescription, that any person falling within that description would necessarilybe “an involved person”. An involved person means someone who is or has beeninvolved in an activity specified in the regulations or someone who iscontrolled by, acting on behalf of or associated with such a person.

Section 43 of the Act requires the Minister to issueguidance about any prohibitions and requirements that are imposed by theregulations.

This can include guidance relating to:

·        best practice for complying with theprohibitions and requirements

·        the enforcement of the prohibitions and requirements

·        circumstances where the prohibitions andrequirements do not apply.

Section 44 of the Act offers protection from civilproceedings for acts carried out in the reasonable belief that they comply withregulations made under the Act. While this is one protection that the Actoffers, the wider picture is far from totally reassuring. As yet, the exacttype of guidance that can be expected and the way that the Section 44protection will be applied are unclear. When the uncertainties about howdesignation by description will function are also considered, manyorganisations may struggle to ensure compliance without seeking specialistadvice.

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 reportingrequirements set out in existing financial sanctions legislation to cover certainbusinesses or professions, including auditors and tax advisers. Such professionals in the UK should report to the Office ofFinancial Sanctions Implementation (OFSI); the body that helps to ensure thatfinancial sanctions are properly understood, implemented and enforced in theUnited Kingdom.

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

·        authorising an authority to require persons of aprescribed description to provide information

·        for powers to inspect and copy prescribedinformation and related powers of entry.

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

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

Response to the Act

This legislation has prompted much discussion with someconsidering aspects of it to be controversial; most notably regarding the newpowers the government is receiving. Much will ultimately depend on how the Actis used. While it does appear to be more comprehensive than the EU legislationthat is in place, the UK government has expressed a wish to continue to workclosely with EU members and other international partners on sanctions afterBrexit has been finalised.