Solicitors in danger of breaching the UK sanctions regime must question not just who their client is but why they want to engage with a lawyer at all, the Solicitors Regulation Authority said today.

Firms in general must not undertake paid work for a designated person unless they have been granted a licence by the Office of Financial Sanctions Implementation.

But despite the risk of disciplinary action for breaching the sanctions regulations – and previous SRA warnings following the Russian invasion of Ukraine – the message appears to need repeating.

New guidance has therefore been published by the SRA setting out in detail what is expected of solicitors and firms. The regulator said there have been a number of changes to the regime in recent months and that law firms continue to have an important role to play in the government’s response to war in Europe.

The guidance stresses that financial sanctions compliance goes further than anti-money laundering rules and sets out a number of red flags to watch out for if clients are trying to get round the sanctions rules.

Due diligence, it states, involves more than checking a client’s identity and certainly goes beyond taking them at their word.

The guidance states: ‘In order to have confidence in the conclusions of due diligence, you need to be able to answer the question of "who" but also the more challenging questions of "how" and "why" in relation to the matter.

‘This is because as well as simply checking names against the sanctions list, you will need to consider the possibility that a designated person is exercising control over the individual or entity that is your client or the transaction counter-party.’

Client resistance to due diligence should act as a red flag, as should the use of corporate vehicles to obscure ownership and involvement of third parties, the guidance states. Other warning signs include the use of newly-opened accounts, a client changing their name by deed poll and a transaction being unusual, opaque, complicated or particularly large.

SRA chief executive Paul Philip said: ‘The sanctions regime applies to all firms that provide legal services, not just those that are captured by the anti-money laundering regulations. So some firms will need to take a closer look at, for example, implementing effective client due diligence measures.

‘The guidance lays out what we expect from the firms we regulate and provides advice on how best to meet these obligations.’

 

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