Russian Sanctions: is your law firm meeting its obligations?
We have all seen the headlines related to the invasion of Ukraine by Russia, which has bought about the implementation of the most severe level of sanctions levied on the country and associated people and companies.
To protect your firm you must ensure you implement appropriate policies, controls and procedures relating to sanctions, which must include making appropriate checks on all your clients to ensure they don’t fall within the sanctions regime. And if they do, making sure you obtain the appropriate consent before you start acting for them.
Performing a sanctions check
Sanctions checks can normally be completed by checking the UK Sanctions List, or by using online client due diligence systems that link to the sanctions list.
To assist you we have listed a number of practical steps you can take to ensure you meet your obligations in relation to sanctions checks:
- Keep abreast of developments in Ukraine and the wider political implications for Russia. This applies particularly to your firm’s compliance officers (Money Laundering Reporting and Compliance Officers, Compliance Officers for Legal Practice) or those working within your compliance team, if you have one.
- Ensure you support your staff if they have any questions or suspicions.
- Update your Firm Wide Risk Assessment to reflect the fact that you have reviewed matters and made any appropriate changes to your policies, controls and procedures; even if you don’t deal with Russian clients you should make a note in your assessment that you have considered the issue. A number of people and organisations have been added to the Sanctions List but more are likely to be added, so ensure you update your assessment to reflect when you check the list so regulators can see that you are doing the right thing.
- If your firm acts for Russian clients you may want to check with your banks to see if they need to take any additional measures. For example, if you use a US bank it will need to comply with US sanctions as well as UK sanctions.
- You may decide not to accept matters involving Russian individuals or funds, and if this is the case you should make a relevant note in your assessment. Our advice is not to accept such instructions unless you have the appropriate expertise, sufficient knowledge about Russia and good levels of supervision for these matters.
- Countries that are regarded as allied to Russia, such as Belarus, Azerbaijan and China, may become subject to sanctions as well, so you need to check individuals/organisations from these countries if they are looking to instruct you
- If you accept instructions from Russia, Ukraine, Belarus, etc., we recommend that you treat them as high-risk and have appropriate supervision in place. You will need to apply a risk-based approach, but it is highly likely that Enhanced Due Diligence will need to be applied.
- Conduct thorough source of funds/wealth checks and pay particular attention where funds may have come from Russia or allied countries.
- Don’t rely on the big banks to undertake client due diligence checks, especially as some of them have recently been found guilty of money laundering offences. This includes failing to apply appropriate client due diligence checks.
- Although it is for you to decide whether you want to rely on others (estate agents, banks, etc) to carry out client due diligence checks on your behalf, we do not recommend it. Especially as you would remain liable for any errors/omissions made by them.
- Your opening client and matter risk assessments must be very thorough and detailed, and ongoing monitoring must be undertaken to take account of new developments.
We are in very troubling times, and things are likely to change very fast, so you must keep abreast of developments to ensure you don’t expose your firm to new and developing risks. Key to this is training your staff more regularly on sanctions and money laundering matters so they are able to play their part in ensuring compliance obligations are met. Take a look at our specialist law firm courses to find out more.
Special thanks go to our team of compliance experts for helping put this blog together.
