Financial Crime World

Here is the converted article in markdown format:

Assets and Benefits Under Sanctions: What You Need to Know

The global fight against terrorism financing and money laundering requires vigilance from financial institutions, businesses, and individuals alike. As part of this effort, the United Nations Consolidated List and domestic designation lists identify individuals and entities subject to targeted financial sanctions (TFS). This article outlines the assets and benefits affected by TFS, as well as the reporting requirements for banks, financial services providers, and designated non-financial businesses and professions (DNFBPs).

Assets and Benefits Under Sanctions

The following types of assets are under sanctions:

  • Cash, checks, claims on money, drafts, money orders, and other payment instruments
  • Deposits with financial institutions or other entities, balances on accounts, debts, and debt obligations
  • Publicly- and privately-traded securities and debt instruments, including stocks, shares, certificates representing securities, bonds, notes, warrants, debentures, and derivatives contracts
  • Interest, dividends, or other income on or value accruing from or generated by assets
  • Credit, right of set-off, guarantees, performance bonds, or other financial commitments
  • Letters of credit, bills of lading, bills of sale
  • Documents showing evidence of an interest in funds or financial resources

Other Assets

In addition to the above-mentioned assets, TFS also applies to “other assets” that are not funds but can be used to obtain funds, goods, or services. These may include tangible or intangible items, such as goods, materials, and equipment.

Dealing with Funds and Other Assets

Dealing with funds means moving, transferring, altering, using, accessing, or otherwise dealing with funds in any way that would result in a change to their volume, amount, location, ownership, possession, character, or destination. Similarly, dealing with other assets means using them to obtain funds, goods, or services in any way, including by selling, hiring, or mortgaging them.

If you identify a positive match with an individual or entity on the UN Consolidated List or a domestic designation list, you are generally prohibited from rendering financial or related services directly or indirectly. These services include activities related to financial institutions or designated non-financial businesses and professions (DNFBPs).

Extended Prohibitions

The prohibitions also apply to associated individuals and entities that are owned or controlled by a designated person, even if they do not appear on the sanctions list.

Ownership and Control

  • “Owned” means having a legal entitlement, either directly or indirectly, to 25% or more of an entity. If this criterion is met, and the owner is also a designated individual or entity, then TFS will also apply to the entity owned by the designated individual or entity.
  • “Controlled” means exercising influence, authority, or power over decisions about financial or operational matters, including through trusts, agreements, arrangements, understandings, or practices. Satisfaction of at least one of several criteria is sufficient to establish control, including having the right to appoint or remove a majority of an entity’s administrative, management, or supervisory body.

Reporting Requirements

Banks, FSPs, and DNFBPs must report to the Financial Intelligence Unit (FIU) any assets frozen or actions taken in compliance with TFS requirements, including attempted transactions. Specifically, you must submit a report if:

  • You find that one of your customers/clients is a designated individual or entity
  • You are otherwise in possession or control of a freezable asset
  • You are requested to provide a financial or related service prohibited by the Regulations

Circumvention and Breaches

It’s possible for designated individuals or entities to use other persons’ bank accounts or assets to circumvent TFS. Examples include registering assets in the name of associates or family members or using non-designated individuals’ or entities’ bank accounts to hold funds and facilitate transfers. Such actions may constitute a breach or circumvention of TFS and result in criminal prosecution or monetary penalties.