Prospect of further sanctions against Russia underlines importance of ongoing client monitoring

The prospect of further sanctions being imposed on Russia in addition to those recently brought in by the UK, the US and the EU has underlined the importance of ongoing client monitoring, according to a leading anti-money laundering expert.

Commenting after the EU’s High Representative for Foreign Affairs, Josep Borrell, said that more sanctions against Russia were an option, Martin Cheek, managing director of SmartSearch, said: “The situation on sanctions against Russia is constantly evolving.

“Just days after sweeping new sanctions against Russia were announced by the UK, the US, and the EU, it has been made clear that another round of sanctions could be instigated by the EU, with the bloc’s top diplomat Josep Borrell declaring that: ‘Sanctions are always on the table.’

“This highlights why regulated companies in the UK cannot rely upon having previously successfully screened clients, and underlines the importance of undertaking ongoing monitoring to accurately identifying newly sanctioned individuals and entities.”

He warned: “Those businesses that are not using an electronic verification system which provides monitoring and updates will not be getting alerts to flag up any new additions to sanctions or PEP lists.

“Given the speed at which new sanctions are being introduced, they are running the risk of breaching sanctions and as a result being subjected to punitive action including hefty fines.”

Mr Cheek - whose company SmartSearch has a market-leading digital monitoring service featuring over 1,100 worldwide sanctions and PEP (politically exposed persons) lists – said it was important that regulated sectors took a proactive approach to avoiding involvement with individuals and entities on sanctions and PEP lists.

“The Russian invasion has meant sanctions are now very much in the public eye, and businesses need to recognise they could be affected by the recent strengthening of the UK’s sanctions policy and also by further sanctions that might be brought in at a later date,” he said.

“Under the Economic Crime Act that was fast-tracked through parliament, breaches of financial sanctions are designated a strict liability civil offence, punishable by fines of up to £1m.

“Even when no financial penalty is imposed, companies found to have breached sanctions can be named and shamed.”

Last week saw the UK and US impose co-ordinated asset freezes against Russia’s largest bank, Sberbank, and Credit Bank of Moscow.

The UK has targeted a further eight Russian oligarchs, and has banned all new outward investment in Russia, as well as the export of key oil refining equipment, and the import of Russian iron and steel products.

The US has prohibited new investment in Russia, and has sanctioned members of the Russian elite including foreign minister Sergei Lavrov and senior members of Russia’s security council.

The EU formally adopted its fifth package of sanctions on Friday, which includes a ban on transactions with all four Russian banks and bans on the import of coal, wood, and chemicals.

The UK, The US and the EU have also imposed sanctions on Vladimir Putin’s two adult daughters.

Pressure is mounting for sanctions to be introduced against Russia’s natural gas and oil supplies, with Putin’s former chief economic adviser, Dr Andrei Illarionov, telling the BBC that this would end the war in Ukraine within a month.

Asked ahead of a meeting of foreign ministers in Luxembourg if the EU was ready to consider a Russian oil embargo, Josep Borrell, declared: “Sanctions are always on the table. Ministers will discuss which are the further steps.”

Published: 12 April 2022