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In a recently published letter to the Treasury Select Committee, the UK’s Financial Conduct Authority (FCA) has provided an update on the sanctions regime and where its concerns lie.
“Issues we have identified tend to be around the effectiveness of firms’ customer sanctions screening process, at onboarding and on an ongoing basis,” the FCA has warned in a new letter to the House of Commons Treasury Select Committee, while also highlighting weaknesses "found in firms’ real-time payment screening”.
Mel Stride, the Treasury Select Committee’s chair, had previously written to the FCA to query its sanctions regime in light of the recent ramp-up in sanctions due to Russia’s invasion of Ukraine.
Among questions posed to the financial regulator was whether there were any payment, electronic money and crypto-asset firms subject to sanctions in the UK.
The FCA pointed out that there have been no such firms identified, but it has found firms that have ownership links with entities or individuals who are on the consolidated list of those sanctioned.
According to the FCA, interactions with firms have also highlighted that the implementation of sectoral sanctions can often be challenging.
The FCA has now said that it is “testing the steps” when it comes to the sanctions regime to ensure that firms are meeting their obligations.
The FCA also noted the size of the firm and/or sector it operates in has not been an issue in terms of whether it has been compliant.
Rather, differences depend on whether firms operate manual or automated sanctions screenings. “On that basis, we sent a tailored communication to those firms that operate manual screening processes to ensure that the approach remained appropriate in the context of the rapidly evolving Russian sanctions regime,” the FCA has said.
The City watchdog has also taken steps to ensure professional body supervisors understand the expectations of the sectors, warning them that if deficiencies are picked up on, the Office for Financial Sanctions Implementation must be informed.
