The Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) provides a legal basis empowering UK regulatory authorities to request information from the public. Pursuant to regulation 16 of SAMLA, sanctions regulations may make provisions: (i) requiring persons of a prescribed description to inform an appropriate authority of prescribed matters or to create and retain registers or records (ii) authorising an appropriate authority to require persons of a prescribed description to provide information or produce documents of a prescribed description or (iii) authorising the disclosure of information about the purposes for which information held in connection with anything done under or by virtue of the regulations may be used or about the persons to whom any such information may be disclosed.
For example, such provisions are included in the Russia (Sanctions) (EU Exit) Regulations (the “Regulations”). Specifically regulation 72(7) of the Regulations enables the Treasury to request a person to provide information for the purpose of (amongst other things): (i) determining the nature and amount or quantity of any funds or economic resources owned, held or controlled by or on behalf of a designated person (ii) determining the nature and amount or quantity of any funds, financial services or economic resources made available directly or indirectly to, or for the benefit of, a designated person, or (iii) monitoring the compliance with or detecting evasion of asset freeze measures.
Mandatory Reporting Requirements for Relevant Firms
The obligation to report as part of HM Treasury’s annual review of frozen assets is separate to the mandatory obligation on relevant firms to report certain transactions to the Office of Financial Sanctions Implementation (“OFSI”). As a general rule under UK sanctions laws, UK persons have a mandatory requirement to report certain transactions to OFSI informing OFSI if they know or reasonably suspect a person is a designated person or has committed offences under financial sanctions regulations, where that information is received in the course of carrying on their business. This report must be submitted by relevant firms to OFSI as soon as practicable using the form on Gov.UK: https://www.gov.uk/guidance/suspected-breach-of-financial-sanctions-what-to-do.
In the specific context of UK sanctions targeting Russia, this obligation is set out under regulation 70 of the Regulations which places an obligation on relevant firms to inform the Treasury as soon as practicable if (i) it knows or has reasonable cause to suspect, that a person is a designated person or has committed an offence under the Regulations and (ii) the information or other matter on which the knowledge or cause for suspicion is based came to it in the course of carrying on its business.
Regulation 71 of the Regulations defines a “relevant firm” as including the following:
(a) a person that has permission under Part 4A of the Financial Services and Markets Act 2000 (permission to carry on regulated activity);
(b) a person engaged in the business of making, supplying, selling (including selling by auction) or exchanging—
(i) articles made from gold, silver, platinum or palladium, or
(ii)precious stones or pearls.
(h) a cryptoasset exchange provider; and
(i) a custodian wallet provider.
In contrast to the mandatory reporting obligations set out under regulation 70 of the Regulations, it is worth noting that the power to request information under regulation 72(7) of the Regulations (as outlined above) extends to both relevant and non-relevant firms. We note that this power to request information is also mirrored in several other UK sanctions regimes.
On 2 September 2022, HM Government – through the Treasury – exercised its power to request information by issuing a financial sanctions notice to request all persons that hold or control funds or economic resources belonging to, owned, held or controlled by a designated person, to provide OFSI with a report with the details of such assets. Essentially, the notice requires both relevant and non-relevant firms to provide an annual report with the details of assets that are frozen under UK sanctions.
This means that any firm that holds assets that are frozen in the UK, will be required to complete this report and submit it to OFSI by Friday 11 November 2022. All firms that have previously reported frozen assets should also complete such a report and submit it to OFSI by the set deadline.
All returns need to be made, using the prescribed template from the GOV.UK website, to firstname.lastname@example.org. The template can be found here.
If you have any questions regarding completing the frozen assets reporting form or how to comply with UK sanctions generally, please get in touch with a member of our team.
Authored by Aline Doussin and Simi Malhi.