The latest of OFSI’s Threat Assessment Reports focuses on financial services. The report is aimed at helping UK businesses to prioritise the highest risks in their approach to financial sanctions compliance. It has based the report on threats to sanctions compliance involving UK financial services firms since February 2022.
The report notes that most financial sanctions breaches will involve regulated firms in some capacity, and says that over 65% of breach reports OFSI has received in the review period have come from financial services firms – and 80% of those come from banks and PSPs.
OFSI’s conclusions on key threats and issues are:
- that some firms have probably not disclosed breaches at all or in a timely way;
- most non-compliance is linked to several common issues including not properly maintaining frozen assets, breaching licence conditions and inaccurate ownership and UK nexus assessments;
- the key threats come from the sanctions on Russia – which account of 87% of reports and 75% of recent designations;
- Russian Designated Persons are almost certainly turning to new enablers to try to breach UK sanctions, and these enablers are highly likely to have used UK non bank PSPs in relation particularly to assets like property and super-yachts;
- a small number of enabler have probably attempted to front for Russian DPs; and
- there is increased likelihood that enablers have used cryptoassets to breach the sanctions restrictions.
The report also notes several third countries which enablers are targeting to use as intermediaries.
OFSI also notes that where there is a sanctions breach report there may also be a need for a SAR and reminds firms to use the appropriate reporting codes if reporting to the NCA.