Regulatory update for Insolvency Practitioners: Importance of reviewing updates to the OFSI sanctions lists

IPA Insolvency Practitioner newsletter, July 2023

Introduction

As an Insolvency Practitioner operating in the regulated sector, it is imperative to stay informed about the latest developments in regulatory compliance. This article aims to provide you with essential information and guidelines on the importance of reviewing the updated Office of Financial Sanctions Implementation (OFSI) sanctions list, its impact on your role as an Insolvency Practitioner, and the measures you should take to promote compliance. In particular, we would like to draw your attention to a recent update to the OFSI sanctions lists.

Understanding the OFSI sanctions lists

The OFSI sanctions lists record individuals, entities and countries subject to financial sanctions imposed by the United Kingdom.

These sanctions are designed to combat money laundering, terrorism financing, and other illicit activities. Insolvency Practitioners should comply with the sanctions in place in order to contribute to a safer financial system. A breach of a financial sanction can be a criminal offence punishable by imprisonment and may result in other severe consequences including civil enforcement, reputational damage and financial penalties.

Recent update and its relevance

The OFSI lists, updated 3 July 2023, are available here. This update makes 16 amendments to the OFSI sanctions lists, which contain over 48,000 entries. Insolvency Practitioners must review the updated lists as and when required as they may include new entries or changes that directly impact the Insolvency Practitioner’s work.

Key considerations for Insolvency Practitioners

Regular review

As an Insolvency Practitioner, it is your responsibility to establish a process for regularly reviewing the OFSI sanctions list updates.

OFSI notifies its subscribers by email whenever a new notice is published. To subscribe to OFSI’s e-alerts, click here.

Your internal records and due diligence procedures must demonstrate compliance with the latest sanctions and enable you to identify and mitigate risks associated with sanctioned entities effectively. It is important to be able to demonstrate that effective policies, procedures and staff training are in place, which are regularly reviewed.

Client Due Diligence

The recent update to the OFSI sanctions lists may affect your ongoing insolvency cases and engagements with creditors. Therefore, it is essential to conduct thorough due diligence on all relevant parties involved in insolvency proceedings. This includes checking their status against the updated OFSI sanctions lists to ensure compliance and mitigate any potential risks.

Reporting obligations

In cases where you discover a connection between a sanctioned entity and an insolvency case or creditor, it is essential to report this information promptly to the relevant authorities.

Training and awareness

Insolvency Practitioners should ensure that all members of their team receive regular training and updates on OFSI sanctions and their implications for insolvency proceedings. Creating a culture of compliance within your organization helps foster a strong commitment to regulatory adherence and helps reinforce the reputation of a responsible insolvency profession.

Conclusion

Reviewing and incorporating the updates to the OFSI sanctions lists is vital for Insolvency Practitioners operating in a regulated sector. The insolvency sector is deemed to be high risk under the National Risk Assessment. By remaining vigilant, conducting thorough due diligence, and promptly reporting any connections to sanctioned entities, you contribute to a transparent financial system while safeguarding the interests of creditors and stakeholders. Failure to comply with OFSI sanctions can result in severe legal and reputational consequences. We strongly advise you to carefully review the updated OFSI sanctions lists and take appropriate measures to ensure compliance in your insolvency practice, which starts with effective customer due diligence. In addition Insolvency Practitioners need to also consider the potential impact of sanctions imposed by the EU and US.

If you have any questions or require further assistance in understanding and implementing the OFSI sanctions list updates, please do not hesitate to reach out to your AML supervisor.