The past two months have seen much in the way of political and civil strife in the Ukraine, as Russian forces moved into the Crimea and Eastern regions. After a series of economic sanctions against Russia were instituted by the US in March and early April 2014, by April 28th, the Treasury Department announced additional sanctions on seven (7) Russian officials and seventeen (17) entities that are owned, controlled by, or have supported senior Russian government officials. This action by the US has specifically aimed to stop Americans with doing any business with the listed officials and entities. More restrictions are yet to come, including penalties assessed to the Russian defense, high technology, and engineering and energy sectors.
The effect of these ongoing sanctions on the US financial industry – from mutual and hedge fund managers, to broker-dealers, investment advisers and individual investors – cannot be overstated. Avoiding sanction violations and fines, as well as monitoring regulatory breaches and security threats, are among the concerns facing firms and their compliance professionals. Of particular concern, however, are the ramifications of these sanctions on mitigating risks associated with anti-money laundering (“AML”) with foreign entities.
Firms of all kinds should reassess their current anti-money laundering procedures within their company policies and procedures (“P&P”) manual, particularly focusing on the process in which new or prospective clients are checked against two important lists:
- The Treasury’s Office of Foreign Assets Control (“OFAC”) list of Specifically Designated Designated Nationals and Blocked Persons (“SDN”), using the Financial Industry Regulatory Authority’s (“FINRA’s”) OFAC Tool, located here: http://apps.finra.org/rulesregulation/OFAC/1/default.aspx.
- The Financial Action Task Force (“FATF”) lists, used for identifying businesses located in or transacting with a country of potential risk: http://www.fatf-gafi.org/.
If a client or potential client appears on the OFAC SDN list, the firm’s Chief Compliance Officer (“CCO”) should take additional steps, including further investigation and, if applicable filing a SAR report. Be sure to run Client lists against the OFAC SDN list and the FAFT list on a periodic basis to ensure ongoing compliance.
For further information on this and other related subjects, please contact us at email@example.com or (619) 298-2880.