New UK Sanctions Regime Takes Effect

The Brexit transition period is now over. The UK’s new, standalone sanctions regime, which applies throughout the UK and includes Northern Ireland, has officially come into force as of 11 p.m. on December 31.

• https://www.gov.uk/government/publications/sanctions-policy-after-31-december-2020

To provide financial institutions with guidance and ensure compliance, the UK’s Foreign, Commonwealth and Development Office has made two versions of its sanctions list available: a bridging document and a full, consolidated list of all sanctioned entities.

The bridging document only contains updates to specific administrative fields, such as regime, group type and other information, and is meant to facilitate adjustments to automated sanctions screening processes. Yet, while it may minimize the number of alerts generated, it’s important to note that it’s not a substitute for using the full, consolidated list.

• https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets/bridging-document

Nevertheless, there should be very few, if any, surprises. Throughout 2020, the Foreign, Commonwealth and Development Office issued regulations and guidance in preparation for the post-Brexit launch of its sanctions program, which comprises over 30 different sanctions regimes.

• https://www.pinsentmasons.com/out-law/news/brexit-uk-sanctions-different-their-eu-counterparts

Further, at first glance, there is significant overlap between the EU’s regulations and those issued by the UK — at least, for now.

The two regimes will likely diverge as the UK starts establishing its own foreign policy strategy.

For one, a standalone UK sanctions regime will apply.

• https://www.globalbankingandfinance.com/how-will-brexit-impact-sanctions-and-money-laundering-rules-in-the-uk-from-2021/

While currently composed primarily of designations that overlap with the EU and UN, the UK’s sanctions regime may soon deviate from those regimes as Brexit truly takes hold.

To give one example, the law firm, Clifford Chance, points to the UK’s willingness to unilaterally impose Magnitsky-style sanctions on Russian, Saudi, and Belarusian nationals.

• https://www.cliffordchance.com/insights/resources/blogs/regulatory-investigations-financial-crime-insights/uk-government-publishes-new-guidance-for-post-brexit-sanctions.html

The law firm also mentions that there will be differences in the sanctions regimes are applied:

• UK sanctions also encompass entities in which sanctioned entities have a 50% or more ownership or controlling interest.

Two other distinct characteristics of the regime are:

1. the UK’s ability to designate entities with only a description when singling them out by name isn’t practical, and
2. its authority to grant “general licenses” that allow specific companies to conduct limited business with sanctioned entities.

Both will increase the potential for ambiguity and may require financial institutions to conduct additional due diligence.

• https://www.ropesgray.com/en/newsroom/alerts/2020/01/UK-Sanctions-Post-Brexit