Regulated firms need to do more to deter sanctions breaches, says the FCA.
The regulator says that financial firms have made progress in preventing sanctions breaches – with £37 billion worth of assets frozen in the UK as of last year - but gaps in the system of deterrence remain.
Since February 2022, the FCA says it has "proactively assessed" the sanctions systems and controls of over 150 firms across a range of financial services sectors.
The Office of Financial Sanctions Implementation (OFSI) and the Office of Trade Sanctions Implementation (OTSI) implement financial and trade sanctions. The FCA supports them through its role supervising firms within the financial services sector. This includes checking they have adequate sanctions systems and controls.
This week the FCA has signed a Memorandum of Understanding (MoU) with OTSI. It sets out the arrangements for cooperation and the sharing of intelligence between the two organisations.
There is already an MoU between the FCA and OFSI.
In its latest review of sanctions deterrence, the FCA found:
• Repeated examples of firms exhibiting strong controls and identifying potential sanctions breaches before they occurred.
• The most common root causes of reported sanctions breaches were weaknesses in due diligence, alert management, transaction and name screening, as well as the management of frozen assets and compliance with licences.
• Firms face challenges in detecting and preventing specific breaches of trade sanctions.
• The range of controls used for trade sanctions compliance - related to bans on the export and import of goods, technologies and services - was greater than those used for financial sanctions.
The regulator is sharing good and poor practice it identified to help all firms further strengthen their sanctions controls.
Reports from firms continue to relate primarily to the Russian sanctions regime, but the FCA also saw reports relating to Libya and, increasingly, Iran and North Korea.