Targeted Financial Sanctions: A Guide to Freezing Assets in Connection with Terrorism Financing and Money Laundering

Introduction

This document provides Guidance Notes on Targeted Financial Sanctions, specifically related to the freezing of assets in connection with terrorism financing and money laundering. The following guidelines aim to minimize the risk of diversion of funds to terrorism while protecting human rights.

General Principles

The key principles guiding targeted financial sanctions are:

• Minimizing the risk of diversion of funds to terrorism: Financial institutions must take steps to prevent the misuse of their services for terrorist financing activities.
• Protecting human rights: Institutions must balance anti-money laundering and combating the financing of terrorism (AML/CFT) requirements with the need to protect individual rights and freedoms.

Licensing

In certain circumstances, the Governor may grant licenses for exceptions to the freeze. A license is a written authorization from the Governor permitting an act otherwise prohibited under the sanctions.

Types of Licenses

Licenses can include:

• Additional reporting requirements: Institutions may be required to submit additional reports or documentation in connection with licensed transactions.
• Time limitations: Licenses may have specific time limitations, such as a limited duration or a requirement for renewal.

Application Requirements

To obtain a license, applicants must submit an application using the prescribed form and provide evidence to support their request. The following information must be provided:

• Licensing grounds being relied upon: Applicants must specify the relevant licensing grounds under which they are seeking permission.
• Full information on parties involved in the proposed transaction: Institutions must disclose detailed information about all parties involved in the transaction, including beneficial owners and intermediaries.
• Ultimate beneficiary of the transaction: The ultimate recipient of the funds or assets being transferred must be clearly identified.
• Complete payment route including account details: Applicants must provide a full breakdown of the proposed transaction, including the source and destination accounts.
• Amount (or estimated amount) of the proposed transaction: The value of the proposed transaction, whether actual or estimated, must be disclosed.

Urgent Applications

If an application is considered urgent, this must be clearly stated and supported by evidence establishing a basis for urgency. This may include documentation demonstrating that delay would cause significant financial harm or other adverse consequences.

Practical Tips

In addition to understanding licensing requirements, institutions should also consider the following practical tips when implementing targeted financial sanctions:

• Screen for full name, date of birth, address, and aliases: Ensure accurate identification of customers and transactions by screening against known lists of sanctioned individuals and entities.
• Use automated screening systems with caution and ensure they are calibrated to the institution’s needs: Automated systems can be effective tools for identifying potential risks, but they must be carefully calibrated to avoid false positives or negatives.
• Consider using fuzzy matching and alternative identifiers when defining screening rules: Utilize flexible matching algorithms that take into account variations in name, date of birth, address, and other identifier formats.

By following these guidelines and practical tips, financial institutions can effectively implement targeted financial sanctions regulations, minimize the risk of diversion of funds to terrorism, and protect human rights.