Financial Crime World

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EU Best Practices for Effective Implementation of Restrictive Measures

In a bid to curb illicit financial activities and ensure compliance with international sanctions, the European Union has issued guidelines for effective implementation of restrictive measures.

Monitoring Transactions and Accounts

Entities and individuals must be vigilant in monitoring their transactions and accounts to detect potential breaches of financial sanctions. This includes:

  • Identifying and reporting suspicious transactions
  • Freezing assets and funds linked to designated persons or entities

The guidelines emphasize that a designated person may use various tactics to circumvent financial sanctions, such as:

  • Registering assets under associates’ or family members’ names
  • Using non-designated persons’ bank accounts for holding funds

Such actions can constitute a breach of the prohibitions or circumvention of financial sanctions and may result in criminal prosecution.

Preserving Frozen Property or Funds

The guidelines also highlight the importance of preserving frozen property or funds upon receipt of a freeze order. Covered persons and government agencies must:

  • Immediately preserve the subject assets
  • Serve a copy of the notice of the freeze order to the owner or holder of the property or funds

Failure to comply with a freeze order can result in imprisonment ranging from six months to four years, as well as fines of up to Five Hundred Thousand Pesos (PHP500,000). The Anti-Money Laundering Council (AMLC) may also impose administrative sanctions on erring covered persons.

Notice of Freeze Order

The “Notice of Freeze Order” refers to AMLC Resolutions Nos. TF-01 and TF-02, which were published on the AMLC website in October 2012. These resolutions are regularly updated whenever the Consolidated List is updated by the UN Security Council.

However, the AMLC is authorized to issue additional TF Resolutions directing the freeze of accounts or assets that are not in the name of designated persons but are found to be owned or controlled by them.

Filing a Return

Covered persons and government agencies are required to file a return under specific circumstances, including:

  • Instances where there is a target match
  • Potential target matches
  • When the AMLC directs the freeze of assets and funds linked to a person or entity acting for or in behalf of those designated under the Consolidated List

The detailed electronic return (E-return) must specify information such as:

  • Account numbers
  • Names of account owners or holders
  • Time of freezing
  • Balance of accounts
  • Related accounts
  • Explanations for identifying related accounts

Non-compliance with the requirement to submit a return within 24 hours from receipt of a freeze order can result in a Less Serious Violation under the AMLC Rules of Procedure in Administrative Cases, punishable by a monetary penalty.

Reporting Obligations

Entities and individuals must report suspicious transactions to the authorities, as well as freeze assets and funds linked to designated persons or entities. Failure to comply with reporting obligations can have serious consequences, including:

  • Criminal prosecution
  • Financial penalties

By implementing these EU best practices, governments and financial institutions can effectively prevent illicit financial activities and ensure compliance with international sanctions.