Financial Crime World

UN Imposes Sanctions on Countries Aiding Terrorism

The United Nations has designated several countries as high-risk nations that provide funding or support for terrorist activities. As a result, banks are required to implement strict measures to prevent transactions with these countries.

High-Risk Countries

According to the UN’s list of high-risk countries, the following nations have been identified:

  • Iraq
  • Democratic Republic of the Congo
  • Libya
  • North Korea
  • Sudan and South Sudan
  • Syria
  • Central African Republic
  • Somalia

Banking Procedures for CSO Clients

Banks are obligated to apply sanctions and embargo schemes for their clients operating in these countries, including CSO (Civil Society Organization) clients. This means that banks may refuse to make specific transfers or freeze funds, and in some cases, terminate the banking relationship altogether.

The bank’s procedures for CSO clients include:

  • Informing authorities of suspicious transfers
  • Refusing to make a specific transfer or freezing all or certain funds
  • Terminating the banking relationship with the client

Professional Secrecy and Reporting Obligations

Banks are also required to maintain professional secrecy on customer-related facts and evaluations, and may only disclose information if:

  • Legally required
  • The customer has consented
  • Authorized by law

In addition, banks have specific reporting obligations to inform governments on civil society banking in certain circumstances. However, there are no specific reporting obligations in this context.

Additional Measures

Some banks have implemented additional measures due to the Russian sanctions, including restrictions on transactions with certain Russian banks and state-owned enterprises.

Implications for CSO Clients

As a result of these regulations, CSO clients operating in high-risk countries may face challenges in maintaining their banking relationships. It is essential for CSOs to understand the implications of these regulations and take necessary steps to comply with them.

Source: European Center for Not-for-Profit Law (ECNL) and PILnet