Sanctions on Russia and the new Economic Crime Bill

Pressure has been building on the UK Government to increase the pace and scope of sanctions following the crisis in Ukraine. This has reference to both Russian Financial Institutions and the individuals of wealth (Oligarchs) who are close allies of Putin.

Posted on March 9, 2022
Written by Clare Puplett

Sactions

In response, Prime Minister, Boris Johnson, is leading amendments to the Economic Crime Bill, to tackle the issue of wealthy Russians using the City of London for money laundering and the hiding of their ill-gotten gains, as reported by the BBC. The Bill is designed to expedite the process and Johnson has pledged that there will be “nowhere to hide” for foreigners attempting to launder money. All Parties agree with this strategy, with Labour calling for the deadline for property owners to register, to be cut from six months to 28 days. 

But where does all this leave the UK’s AML efforts and how can software actively help identify the potential risk from wealthy Russians hiding their dirty money in property in the City of London. In this blog we look at how NorthRow can support AML, PEPs and Sanction monitoring efforts as well as UBO verification.

Unprecedented Sanctions

Sanctions

With NATO countries unwilling to take an active part in the defence of Ukraine, for fear of all-out war, economic sanctions have been introduced on a level never seen before in history. They are the one tool that all nations can use to pressure Putin to desist. The BBC reports on the sanctions already imposed here.

Impact on UK AML

money in washing machine

The AML picture is ‘perhaps’ easier to manage. According to the most recent Basel AML Index (published in September 2021), the leaders of the ‘beware’ table were (not unexpectedly) Haiti, the DRC and Myanmar, with Russia at No. 44. Ukraine, meanwhile, whilst not exactly pure in AML spirit, were below Russia at No. 55 (NB. The UK sits at No. 93 in a list of 110 nations). So, Russia, by extension, is already a massive risk, when it comes to AML activity.

There is no avoiding the fact that now more than ever, regulated businesses must shine a light on their AML processes. Businesses must deploy additional due diligence to avoid £1m fines for Russian sanction failures. 

Software to deliver AML

AML, PEPs and Sanctions software is designed specifically to be able to handle this increase in sanction requirements. By adopting technology to deliver repetitive daily tasks, the burden of compliance is eased. Automated AML and sanction monitoring is delivered through a series of bespoke rules and workflows, according to the risk appetite of any given organisation.  Businesses can have a built-in defence, against any issues arising from the fallout of the ongoing invasion of Ukraine and the subsequent economic impact on Russia.

As far as any ‘upside’ is concerned, sanctions against Russian institutions and individuals can only go to help highlight areas of concern that need more attention. The extent of the internecine involvement that these Russian entities have in UK regulated business, is yet to be determined, but suffice to say that it will be significant.

UBO Verification

UBO verification

Delivering UBO verification can be a challenge, through the very nature of complex corporate webs.  With over 3,000 estimated shell companies in the UK, businesses must ensure they understand the ownership structure of their clients. Given the situation and fast pace of sanctions change, manual processes are not conducive to implementing a robust approach to risk management. Businesses must look to use digital transformation, such as the NorthRow Ultimate Beneficial Tool.

The NorthRow UBO tool delves into the complex ownership structure of target organisations and returns a simple table containing the person(s) requiring screening. No more unnecessary or complicated corporate webs. Just the information you need to determine the risk. 

For UBO screening against sanctions lists, the NorthRow platform (as a comprehensive KYB and KYC service) can onboard entities, identify UBOs of those entity customers and verify those individuals (naturalised persons).  The check is in real-time at the point of onboarding and is extremely valuable in forming the decision at that point. This process removes the need to perform detailed manual investigations while operating at risk.  In addition we can add the individuals identified to our monitoring service to see whether those UBOs become subject to sanctions.

Beware of Crypto

NorthRow

Any UK business that uses crypto transactions, must ensure their dealings are made with known counterparts via regulated exchanges and conduct due diligence to stave off the regulators.

Delivering Efficient Compliance Processes

The current, and any future, issues that transpire, as a result of the Ukraine conflict and the resultant sanctions on Russian companies and individuals, need to be closely monitored by all UK regulated businesses.

Appropriate Onboarding, Monitoring (including PEPs and Sanctions) and Remediation processes will need to be delivered by automation, if we are to win the war on financial crime.

Remediation will be vital for one-off reviews and remediations of clients’ entire customer portfolios. NorthRow can deliver an automated solution to efficiently deliver remediation projects, by performing bulk uploads and sanction screening.

Together, these services provide ongoing security for NorthRow clients by maintaining continuous observation. Our software enables us to flag companies that are associated in any way with countries on the high-risk list, such as Russia. Not only can we identify if the company is based in Russia, we can also see who is the central owner and where they are located. It is crucial that we not only know the ultimate beneficiaries of a company, but also whether individuals have associations or major stakes in Russian companies.

At NorthRow, our software uses a red, amber, green (RAG) system to identify the risk status of a company or individual. If any connection with Russia is detected, the check will immediately flag as red, demonstrating risk. We can make instantaneous decisions on whether companies are safe to transact with, so clients don’t have to spend hours researching individual cases.

To find out how automation can deliver against the latest sanctions and avoid reputational damage to your business or a hefty fine then book a call with NorthRow.