FCG 7.1 Introduction

1Who should read this chapter? All firms are required to comply with UK2 financial sanctions2. The FCA’s role is to ensure that the firms it supervises have adequate systems and controls to do so. As such, this chapter applies to all firms subject to the financial crime rules in SYSC 3.2.6R or SYSC 6.1.1R. It also applies to e-money institutions and payment institutions and the cryptoasset sector2 within our supervisory scope.

1Firms’ systems and controls should also address, where relevant, the risks they face from weapons proliferators, although these risks will be very low for the majority of FCA-supervised 2 firms. FCG 7.2.5G, which looks at weapons proliferation, applies to all firms subject to our supervision2.

1Financial sanctions are restrictions put in place by the UK government or the multilateral organisations that limit the provision of certain financial services or restrict access to financial markets, funds and economic resources in order to achieve a specific foreign policy or national security objective.

1All individuals and legal entities who are within or undertake activities within the UK’s territory must comply with the UK financial sanctions that are in force. All UK nationals and UK legal entities established under UK law, including their branches, must also comply with UK financial sanctions that are in force, irrespective of where their activities take place.

2Under Principle 11 (PRIN 2.1.1R), we expect authorised firms to notify us if they (or their group companies, approved persons, senior management functions, appointed representatives and agents) are targets of UK sanctions or those of any other country or jurisdiction.

2For firms such as electronic money institutions, payment services firms, cryptoasset businesses and Annex I financial institutions, this is regarded as a material change of circumstance and we expect to be informed if you or any connected entities are targets of UK sanctions or those of any other country or jurisdiction.

1The Office of Financial Sanctions (OFSI) within the Treasury helps to ensure that financial sanctions are properly understood, implemented and enforced in the United Kingdom. HM Government publishes the UK Sanctions List, which provides details of those designated under regulations made under the Sanctions and Anti-Money Laundering Act. The list also details which sanctions measures apply to these persons or ships. OFSI 2 maintains a Consolidated List of financial sanctions targets designated by the United Nations and the United Kingdom, which is available from its website. If firms become aware of a breach, they must notify OFSI in accordance with the relevant provisions. OFSI have published guidance on complying with UK obligations and this is available on their website. See https://www.gov.uk/government/publications/financial-sanctions-faqs.

2Firms should also consider whether they should report sanctions breaches to the FCA. SUP 15.3 contains general notification requirements. Firms are required to tell us, for example, about significant rule breaches (see SUP 15.3.11R(1)). Firms should therefore consider whether a sanctions breach is the result of any matter within the scope of SUP 15.3 – for example, a significant failure in their financial crime systems and controls.

1Alongside financial sanctions, the government imposes controls on certain types of trade. As part of this, the export of goods and services for use in nuclear, radiological, chemical or biological weapons programmes is subject to strict controls. Proliferators seek to gain access to this technology illegally: aiding them is an offence under the Anti-Terrorism, Crime and Security Act 2001. Note that the Treasury can also use powers under the Counter Terrorism Act 2008 (see FCG Annex 1) to direct financial firms to, say, cease business with certain customers involved in proliferation activity.