The FCA has published a set of findings from a review of firms’ sanctions systems and controls, warning that, although financial firms have made progress in preventing sanctions breaches (with £37bn worth of assets frozen in the UK as of last year), gaps remain. The Office of Financial Sanctions Implementation (OFSI) and the Office of Trade Sanctions Implementation (OTSI) implement financial and trade sanctions. The FCA supports them through its role supervising firms within the financial services sector. This includes checking they have adequate sanctions systems and controls. The FCA is now sharing the good and poor practice it has identified to help all firms further strengthen their sanctions controls.
Since February 2022, the FCA has proactively assessed the sanctions systems and controls of over 150 firms across a range of financial services sectors. The FCA previously looked at firms’ sanctions systems and controls in 2023. In its latest review, the FCA found:
- Repeated examples of firms exhibiting strong controls and identifying potential sanctions breaches before they occurred.
- The most common root causes of reported sanctions breaches were weaknesses in due diligence, alert management, transaction and name screening, as well as the management of frozen assets and compliance with licences.
- Firms face challenges in detecting and preventing specific breaches of trade sanctions.
- The range of controls used for trade sanctions compliance – related to bans on the export and import of goods, technologies and services – was greater than those used for financial sanctions.
- The report discusses findings in relation to breach reporting, and the key themes in breaches, governance and oversight (with examples of good and poor practice and a brief case study), risk assessments, due diligence and ongoing monitoring, screening, data and testing, evasion detection and investigation, asset freezing and licence compliance.
The report sets out what the FCA expects from firms, its next seps, and a list of useful resources to read in conjunction with the report.