Financial Crime World

Sanctions Compliance in Financial Services: Key Takeaways

The Financial Conduct Authority (FCA) has released Guidance highlighting key findings from their assessments of sanctions systems and controls in financial services firms. These takeaways are essential for both UK-regulated firms and EU operators to ensure compliance with regulatory requirements.

Governance and Oversight

  • Senior Management Responsibility: Senior management is ultimately responsible for ensuring compliance with sanctions.
  • Understanding Sanctions Compliance Processes: Senior management must have a detailed understanding of sanctions compliance processes.

Stress Testing and Horizon Scanning

  • Assessing Potential Sanctions Exposure: Firms should assess their potential sanctions exposure to the expansion of existing sanctions regimes and to the extension of sanctions to new jurisdictions and regimes.
  • Monitoring Regulatory Updates: Firms must stay up-to-date with regulatory changes to ensure they are compliant.

Skills and Resources

  • Resource Compliance Functions Appropriately: Firms need to resource their compliance functions appropriately to process sanctions alerts promptly.
  • Adequate Staffing: Firms should have sufficient staff to handle the workload of processing sanctions alerts.

Screening Capabilities

  • Understanding Settings on Automated Tools: Firms must have a detailed understanding of settings on screening and other automated monitoring tools.
  • Ensuring Appropriate Settings: Ensure these settings are appropriate for the firm and align with regulatory requirements.

Customer Due Diligence (CDD) and Know Your Customer (KYC)

  • Accurate Beneficial Ownership Information: CDD and KYC are key foundations to sanctions compliance, and firms should collect accurate beneficial ownership information.
  • Proper Verification Processes: Firms must have proper verification processes in place to ensure the accuracy of customer information.

Reporting Breaches

  • Timely and Accurate Reporting: Firms must report potential sanctions breaches to the FCA in a timely and accurate manner.
  • Compliance with Regulatory Requirements: Firms should comply with regulatory requirements for reporting breaches.

Conclusion

Regulatory expectations are high, and firms should continue to monitor their systems and controls for sanctions compliance. By following these key takeaways, financial services firms can ensure they are in compliance with regulatory requirements and minimize the risk of sanctions breaches.