Russian sanctions – how can your law firm keep on top of sanction checks?

Brian Rogers, Regulatory Director at Access Legal, writes on the subject of Russian sanctions – how can your law firm keep on top of sanction checks?

With the Ukraine crisis still ongoing, the UK has been forced to impose a series of sanctions on Russia, associated people and companies under the Sanctions and Anti-Money Laundering Act 2018.

Nearly all business sectors have been affected in one way or another, with law firms in particular needing to be proactive regarding how their internal and external policies and client guidance may change.

Firms must ensure they are updating any policies or procedures relating to the new rules and check that their clients don’t fall within the sanctions regime, and if they do, act in an appropriate way.

How can law firms ensure compliance with sanction checks?

Sanctions currently in place include asset freezing, further import and export control and regulation on international client communications. It is common for law firms to work globally, so having to work around different sanctions in other countries could prove difficult.

To keep on top of these altering policies, firms can undertake sanction checks. These checks can normally be completed by referring to the UK Sanctions List, however the legal sector can look at something more specific to them including ensuring conducting source of funds and wealth checks, having thorough client and matter risk assessments and providing staff support.

Source of funds and wealth checks are undertaken by law firms before they accept new clients to ensure their financial status has been obtained in the correct way. A client’s source of funds and source of wealth will need to be investigated to show that assets have not been secured through criminal activity, such as money laundering.

The Solicitors Regulation Authority (SRA) have been undertaking research to tackle such criminal activity and found that, across the UK, there were 273 reports of potential money laundering breaches last year, some resulting in fines and some reported to the National Crime Agency.

As regulators are wanting to be even more secure now that further sanctions are in place, firms will be under the microscope with their due diligence and the evidence they can provide to show they have carried out source of funds and wealth checks.

The more a law firm understands its clients, the better. This is why risk assessments need to be carried out when any new client or matter is undertaken, and any new or updated risks identified are shown in the firm-wide risk assessment.

The recent Ukraine crisis has shown how policies and procedures can suddenly change so by knowing how to manage risk, internally and externally, will make firms feel more secure when having to make these changes. The SRA would expect to see some comment in a firm-wide risk assessment about what, if any, impact this situation has on a firm; if, none, a comment should be made to this effect.

Finally, firms need to look inward and make sure their staff feel reassured and supported – staff will want to be kept up-to-date on how the new sanctions may affect them directly.

How will these checks shape the future?

Since the invasion in February, there have already been sanction developments, continuing to put everyone in troubling and uncertain times. The legal sector must keep an eye on these changes to ensure firms aren’t exposed to new risks.

By offering more regular training to staff on sanctions, anti-money laundering and compliance, firms will allow them to play their part in ensuring obligations are met. Undertaking courses in risk assessments, client background checks, CQS obligations, and SRA regulations can help in ensuring processes are put in place and knowledge gained to enable the tracking of current and future global situations.

The invasion in Ukraine has been an important reminder for law firms to get on top of their assessments and be ready for any other sudden changes. Not everything can be predicted but if all obligations are being met and procedures are up-to-date, they can be ready to act when needed.

Kindly shared by Access Legal

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