The Sanctions Act imposes legal requirements on (financial) institutions to ensure their integrity in order to combat undesirable trade, money laundering and terrorism. On this Glossary page, we explain what the Sanctions Act is, to whom it applies and how you can comply with the Sanctions Act.
What does the Sanctions Act 1977 entail?
The Sanctions Act 1977 is often mentioned in the same breath as the Wwft. This is because the Sanctions Act imposes requirements related to CDD and integrity. The essence of the Sanctions Act 1977 is that sanction measures promulgated nationally and internationally are applicable to comply with. Sanctions measures are used in response to violations of international law or human rights by regimes that do not respect rule of law and democratic principles.
Sanctions measures may apply against countries, individuals and/or organisations. Measures range from an order to freeze assets, to make funds available to provide financial services. There are several sanctions lists including those of the US, EU and NL and the UN sanctions list.
The sanctions lists are regularly updated. It is therefore important to keep these lists up to date and apply them to clients at client acceptance and during monitoring and review. It is also recommended to keep changes in the list(s) against the client file.
To whom does the Sanctions Act apply?
The Sanctions Act 1977 must be complied with by banks and other financial companies. But natural persons, legal entities or companies acting in the course of their professional activities can also come into contact with the Sanctions Act 1977.
Thus, the Sanctions Act is not only limited to supervised (financial) institutions.
Furnishing Sanctions Act compliance
Your institution is expected to avoid doing business with parties on so-called sanctions lists. These can be countries, individuals or organisations.
To comply with sanctions regulations, you must therefore have set up an administrative organisation and internal control measures. You can determine the frequency of screening according to your type of institution and the type of customers. The Sanctions Act and the internal sanctions policy should be translated into appropriate procedures and measures. For example, you have clear policies on all sanctioned countries that are taken into account in the screening process of potential clients.
Screening sanction lists
Screening against sanctions lists involves checking all names and other relevant data of natural persons and legal entities that appear in client files (including UBO, authorised representative, beneficiary, etc.) against the EU and Dutch sanctions lists. In practice, we see that these lists are often supplemented by the US sanctions lists (OFAC) and/or other relevant foreign lists. Screening of relationships is done at customer acceptance, periodic review, event-driven review, and/or at interim changes in the customer database and sanctions lists.
What to do in case of a hit on the sanctions list?
The Sanctions Act 1977 requires you to notify the regulator if a customer appears on the sanctions lists, and freeze any assets.
Want to know more?
Want to know more about Sanctions Act compliance? Through our training institute The Ministry of Compliance, we offer a Sanctions Act Awareness course.
For more information on our training courses and support on Wwft and Sanctions Act compliance, please contact us.